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high_court_of_australia:/showbyHandle/1/11205 | decision | commonwealth | high_court_of_australia | text/html | null | The Minister v Stocks & Parkes Investments Pty Ltd [1973] HCA 29 | https://eresources.hcourt.gov.au/showbyHandle/1/11205 | 2024-09-13T22:50:13.797897+10:00 | High Court of Australia
McTiernan, Menzies, Gibbs, Stephen and Mason JJ.
The Minister v Stocks & Parkes Investments Pty Ltd
[1973] HCA 29
ORDER
Order that the answer given by the Supreme Court of New South Wales (Court of Appeal Division) to question 2 of the case stated be set aside and that this matter be remitted to the Supreme Court to answer such question in accordance with the reasons for judgment herein. Otherwise appeal dismissed. Cross-appeal dismissed.
Cur. adv vult.
The Court delivered the following written judgment:—
Aug. 28
McTiernan, Menzies, Gibbs, Stephen and Mason JJ.
This is an appeal by special leave from a decision of the Court of Appeal of the Supreme Court of New South Wales upon a case stated by Else-Mitchell J. in proceedings for compensation by the respondent against the appellant for the resumption of about six acres of land in the Shire of Sutherland compulsorily acquired under the Public Works Act, 1912 N S W for the purposes of a school. His Honour awarded $1.00 as nominal compensation and the Court of Appeal held, inter alia, that compensation in excess of that sum ought to have been assessed.
What happened can be stated shortly. The respondent had in 1962, by purchase through a trustee, acquired 231 acres of land in the Shire of Sutherland for £203,500. The land had previously been in a Green Belt Zone under the provisions of the County of Cumberland planning scheme but these provisions in relation to the land had been suspended in 1961. The zoning of what may conveniently be called "the released land" was left undetermined but in a letter from the Under Secretary of the Department of Local Government dated 8th February 1961 to the Shire Secretary of the Sutherland Shire, it was said with regard to it:
A further undetermined area is located at West Jannali. While in these areas both the Cumberland County Council and the Shire Council have endorsed the open space reservation, the Minister considers that in view of the yet unresolved problems associated with the localities and having regard particularly to the absence of detailed planning or any information on the question of financing the acquisition of the lands at this stage, the proposal to leave the areas undetermined is the correct one to adopt for the time being. In administering control over these undetermined areas the Shire Council should have regard to the fact that such lands are not intended for urban use but ultimately it is anticipated that after closer examination of the situation and resolving of any anomalies, they will be incorporated as open space lands.
The Minister proposes, in respect of all undetermined areas, to direct the Council under cl. 10 (f) of Ordinance No. 105 to consult with the Cumberland County Council in determining all interim development applications and in pursuance of s. 342V (3) of the Local Government Act, 1919, to direct the Council to refer to him for decision such of the aforesaid applications where there is a difference of views between the Shire Council and the County Council following consultation.
However, Plan no. 245:475 in the Department of Local Government, which was the plan by reference to which the released land was described at the time of the suspension of the planning scheme, showed by a line, subject to survey that an area of about 61 acres, within the larger area marked "undetermined zone", had been marked "residential 2 (b)". It must, however, be taken that it was not until after the acquisition of the subject land that any part of the released land was, in fact, zoned. Upon its release and until it was re-zoned, any use of the released land was subject to the consent of the shire council.
It was in these circumstances that the respondent set about getting approval for a scheme under which the major part of the released land would be zoned "residential", but provision would be made for open spaces and special areas. In November 1962, the respondent submitted to the shire council a proposed plan for the development of the whole area showing it subdivided into blocks with "public garden and recreational space". Upon this plan there was an area of about six acres described as "school site". This plan came to the notice of the Education Department which then began an investigation which eventually resulted in the resumption of the subject land pursuant, it seems, to the following request from the respondent dated 30th September 1966:
30th September 1966.
Department of Education,
Box 33, P.O.
SYDNEY
Dear Sir,
re: JANNALI WEST: Acquisition of School Site within Development Area 8 between Soldiers Road and Woronora River. Property Lot No. 395 — D. P. 230682. In part C/T Vol. 10237 Fol. 107 and Vol. 9887 Fol. 250.
We refer to our letter dated 22nd September, 1966, and advise that we would raise no objection whatsoever to your Department resuming the property
We would appreciate if resumption proceedings could be instigated at your earliest convenience, and completed prior to 31st October 1966.
Your co-operation would be appreciated.
Yours faithfully,
PARKES DEVELOPMENTS PTY. LIMITED
(Sgd)
R. RYKO.
The notice of resumption of an area of six acres nine and a half perches or thereabouts said to be in the possession of Stocks and Parkes Investments Pty Ltd was published in the Government Gazette of 28th October 1966. The land acquired in this manner was not identical with the land marked "school site" in the respondent's plan of subdivision of November 1962, but it was in the same neighbourhood and was wholly within the area marked "residential 2 (b)" in the Local Government Plan no. 245:475.
It was as a step in the obtaining of the approval of its plans that the respondent, on 29th March 1965, reached agreement with the Council of the Sutherland Shire for the approval of the development of the whole of the released land in accordance with a plan identified as T. P. 172 which showed a school site of the size and in the situation of the subject land. This is referred to in the case stated as follows:
10. On 29th March 1965 a deed was executed by the plaintiff (therein called "the developer") and the Sutherland Shire Council which recited that the Council as responsible authority in respect of the released land under s. 342Y of the Local Government Act was prepared to grant approval to the development of that land in accordance with the plan T. P. 172 upon and subject to the conditions set out in the deed one of which was in the following terms:
The developer shall make provision for a school site in accordance with the requirements of the Department of Education.
This plan after execution of the deed was adopted by the Sutherland Shire Council and transmitted to the State Planning Authority (which in the meantime had succeeded the Cumberland County Council) for its approval and that Authority approved the plan on 10th August 1965.
Paragraph 12 of the case stated is as follows:
12. At the date of resumption the released land was still subject to interim development control under Div 7 of Pt XIIA of the Local Government Act but a draft local planning scheme had been prepared by the Sutherland Shire Council and submitted to the State Planning Authority in February 1966 pursuant to the provisions of s. 342F (1) of the Local Government Act, 1919, as amended, under which the subject land was shown zoned as "Special Uses (School)".
The second half of par. 19 of the case stated reads as follows:
I also found that the provision of the subject land as a school site was a vital factor in the approval by the Sutherland Shire Council of the subdivision of the entirety of the released land of 231 acres and the resumption of the subject land as a school site thus resulted in the enhancement in the value of the adjoining lands which were or are in the course of subdivision and sale by the plaintiff as residential allotments and which would not otherwise have been available for residential development. I found that the enhancement in the value of these adjoining lands should be set off against any value which the subject land might be proved to have had if there had been no proposal to establish a school on the subject land or if consent to the development and subdivision of the whole of the released land had not been given by the Sutherland Shire Council.
It was in the foregoing circumstances that Else-Mitchell J. stated a case which included the following questions:
(1) Whether I was obliged to determine the compensation for the resumption of the subject land upon the assumption that it could have been subdivided into residential allotments for sale to home builders.
(2) Whether I was obliged to determine the compensation for the resumption of the subject land upon the assumption that approval had been given by the Sutherland Shire Council to the development and subdivision of the released land and the opening of roads to serve such subdivision but disregarding all or any (and if so which) of the following facts—
(a) The designation on any of the plans for the development or subdivision of the released land of a "primary school site" or "school site";
(b) The provisions of the deed dated 29th March 1965 between the plaintiff and the Sutherland Shire Council;
(c) The provisions of the Sutherland Shire Council's draft planning scheme under which the subject land was proposed to be zoned as Special Uses (School).
(3) Whether, having found that the value of the subject land on the basis of a residential subdivision was inapplicable, I was obliged in the absence of any other acceptable evidence of value to determine the compensation for the resumption of the subject land at a sum in excess of $1.00.
The Court of Appeal did not answer the first question but answered question (2) as follows: (2) (a) Yes. (2) (b) Yes. (2) (c) Yes.
These answers were given on the footing of the meaning which the Court of Appeal attributed to the second question. Question (3) was answered:
"Yes" on the assumption that the figure of $1 was intended to reflect the set off under s. 124 of the Public Works Act for enhancement in the value of the interest of the plaintiff in adjoining land in the manner set forth in the second half of par. 19 of the stated case. [1]
1. [1971] 1 N.S.W.L.R. 932; (1971) 25 L.G.R.A. 243.
The appellant has appealed against the answers to questions (2) and (3) and the respondent has cross-appealed in relation to question (1).
The cross-appeal can be disposed of shortly. At the date of the resumption, the land could not be used for the purpose of residence without the consent of the Council and there was no prospect of the Council giving such consent. Accordingly, if question (1) were to be answered it would have to be answered "No".
The actual terms of the second and third questions, as the Court of Appeal observed, do give rise to difficulties that are not perhaps inherent in the real problem which faced the learned judge of first instance.
Although, at the time of the acquisition of the subject land, there had been no formal change in its zoning and it was still subject to interim development control, the council and the planning authority had approved the plan no. T. P. 172 which showed land in the situation of the subject land as a school site. For some time prior to the resumption of the land for the purposes of a school, the Education Department had conducted investigations and decided that it required the land as a school site. These facts could be ascertained by interested persons and would no doubt affect the price which the respondent might get for the land from a prospective purchaser. But in so far as any such alteration in value arose from the proposed establishment of the school on the land, it had, in accordance with s. 124 of the Public Works Act, 1912 N S W, to be disregarded. What that section required here was the assessment of the compensation to be paid for the taking of the land without regard to any alteration in its value because it was already known that the land was the site for a school. In so far as the designation of the school site on the plans of the respondent or in the provisions of the deed dated 29th March 1965, or in the draft planning scheme merely had the effect of spreading the knowledge that the land was to be a school site, s. 124 requires that any increase in value due to these matters should be disregarded. Furthermore, a reference in such plans, deed or planning scheme to the land as a school site, did not require that the land should be used for school purposes. Whether the land should be the site for a school depended upon the Education Department, regardless of what was shown in these plans and documents. Moreover, before us the appellant abandoned the contention that the provisions of the deed obliged the respondent to transfer the subject land free of cost to the appropriate person or authority for use as a school site. The affirmative answers of the Court of Appeal to question (2) were intended to mean (1) that the deed did not contain a promise by the respondent to make a school site available free of charge; (2) that the compensation must be assessed without reference to any public foreknowledge of the proposal to establish a primary school, even if the foreknowledge came from a draft planning scheme; and (3) that the fact that the respondent had suggested the proposal did not mean that it should be regarded. We consider that the answers of the Court of Appeal, understood in this way, were correct.
This, in conjunction with what has been said about the first question, means, of course, that it would have been wrong to value the land resumed as land then available for use for residential purposes. The value had to be determined as at the date of the notice on the footing that it was six acres in extent, in an unzoned area, subject to interim development control, which was ripe for subdivision but of which portion would not be used for residential purposes but for open spaces or special uses. It does not follow, however, that the six acres of land in a residential area would not be of substantial value even if it could not be predicated that it was itself residential land. Every developer would know that it would be necessary to make provision in a residential subdivision for roads and for open spaces and for special purpose use as well as for building allotments. It could fairly be asked as some measure of its value, how much more would a developer pay for the whole area of 231 acres than for the whole of that area less the six acres comprising the subject land? Furthermore, evidence of the value of the land as a school site or as open space would be relevant although not, of course, decisive to the assessment of its value.
It is at this point that it is convenient to turn to the third question. What has already been said indicates that it was wrong to fix the value of the subject land as nominal unless either (1) the respondent had failed to prove that it had any value at all, or (2) there was to be set off against the proved value of the land any enhancement in the value of the adjoining land owned by the respondent at the date of the acquisitions by reason of the proposed construction of a school upon the subject land as provided by s. 124.
So far as the first of the foregoing qualifications is concerned, counsel for the appellant expressly disclaimed it as the ground for upholding the award for $1.00. This was on the footing that if there were merely a deficiency of evidence, the Minister did not want to preclude consideration of evidence which might be adduced if the hearing were to be re-opened. As to the second qualification, it is clear that, although the learned judge at first instance seems to have had in mind enhancement as described in s. 124 as something to be taken into account, the actual assessment of $1.00 was certainly not arrived at by deducting the calculated amount of such enhancement from the value of the land as ascertained upon the evidence.
We therefore agree substantially with the answer of the Court of Appeal to the third question.
However, because we consider that the answers given to the second question, without more, could lead to an unwarranted restriction of the matters to which the court assessing compensation could properly take into account, we think we ought to allow the appeal and remit the matter to the Court of Appeal with a direction that question (2) should be answered in conformity with the following principles:
1. That the subject land was not to be valued as if it were residential land;
2. That in the valuing of the land, it was necessary to take into account that it was part of an area ripe for subdivision in a manner providing for open spaces and special purpose uses, and its value could be determined upon evidence relating to any way in which the six acres of land could contribute to the value of the land in the subdivision as a whole;
3. That in assessing compensation for the subject land, it would be appropriate to set off any enhancement of the value of the interest of the respondent in any land adjoining the subject land which existed at the date of the resumption by reason of the proposed use of the subject land for the construction of a school.
These conclusions are, we think, within the ambit of the questions, notwithstanding that if they were to be construed literally something more specific might be indicated. We are, however, conscious of the great difficulty of framing questions to elicit the assistance which a judge who states a case seeks in the event of some further hearing becoming necessary. It is such assistance that the Court of Appeal sought to provide and which this Court, in turn, seeks to provide for the learned judge who stated the case.
For these reasons we would allow the appeal to the extent indicated and dismiss the cross-appeal. We consider that in the circumstances there should be no order as to costs. |
high_court_of_australia:/showbyHandle/1/10449 | decision | commonwealth | high_court_of_australia | text/html | null | R v Spicer; Waterside Workers' Federation of Australia, Ex p [1957] HCA 96 | https://eresources.hcourt.gov.au/showbyHandle/1/10449 | 2024-09-13T22:50:28.641608+10:00 | High Court of Australia
Dixon C.J. McTiernan, Williams, Webb, Kitto and Taylor JJ.
R v Spicer; Waterside Workers' Federation of Australia, Ex p
[1957] HCA 96
ORDER
Order absolute for a writ of prohibition prohibiting further proceedings on the purported appeal of the respondent George Buchan to the Commonwealth Industrial Court numbered in the Registry of the said Court No. 73 of 1957.
Cur. adv. vult.
The following written judgments were delivered:—
Dec. 20
Dixon C.J., Williams, Kitto and Taylor JJ.
This is an order nisi for a writ of prohibition directed to the learned judges of the Commonwealth Industrial Court. The tenor of the writ sought is to restrain their Honours from proceeding further with an appeal to the Commonwealth Industrial Court instituted in purported pursuance of s. 37 of the Stevedoring Industry Act 1954-1956. Section 37 is expressed to enable a person whose registration as a waterside worker is cancelled or suspended to appeal to that court. The respondent, Buchan, is a waterside worker whose registration was suspended and on 27th November 1957 he lodged with the Registrar of the Commonwealth Industrial Court a notice of appeal supported by an affidavit. What view that court might take as to Buchan's right of appeal does not appear for the appeal has not come on before the court for hearing. Buchan is a member of the Waterside Workers' Federation of Australia, a registered organisation of employees, but that body is the prosecutor in the present proceedings to prohibit any further proceeding in the appeal. The ground simply is that s. 37 is invalid. No one has suggested that the application for prohibition is premature or that Buchan's appeal was made only for the purpose of founding a writ of prohibition so that the validity of s. 37 might be attacked, or that as the prosecutors are strangers to the appeal we should exercise our discretion against granting a remedy. We have had the advantage of the intervention in the argument, though not as parties to the cause, of the Commonwealth and of other interested bodies and all concerned seem strongly to desire that in this proceeding, notwithstanding the handicaps from which it might be found to suffer if its history were too curiously examined, we should decide the validity of s. 37. The validity of s. 37 depends upon its real nature and meaning. If it is to be interpreted as conferring upon the Commonwealth Industrial Court jurisdiction to hear and determine a matter arising under a law made by the Parliament of the Commonwealth within the meaning of s. 76 (ii.) of the Constitution, then there is nothing to be said against its constitutional validity. A matter of that description involves a claim of right depending on the ascertainment of facts and the application to the facts of some legal criterion provided by the legislature: see Barrett v. Opitz [1] ; Hooper v. Hooper [2] . The existence of some judicial discretion to apply or withhold the appointed legal remedy is not necessarily inconsistent with the determination of such a matter in the exercise of the judicial power of the Commonwealth. But it is perhaps necessary to add that the discretion must not be of an arbitrary kind and must be governed or bounded by some ascertainable tests or standards. An analysis of s. 37 (1) considered independently of the sections which precede it in the Stevedoring Industry Act 1956 shows that in reality it does nothing but say that a person whose registration as a waterside worker has been cancelled or suspended may within a limited time appeal to the Commonwealth Industrial Court and that that court may confirm, vary or set aside the cancellation or suspension. Sub-sections (2), (3) and (4) contain nothing material to the present question. The nature and scope of the authority which it is intended that the Commonwealth Industrial Court should exercise under s. 37 (1) must in truth be ascertained from the sections in the Stevedoring Industry Act which precede and so to speak lead up to it, aided no doubt by the history of these various provisions. The sections in question now form Pt. III of the Stevedoring Industry Act 1956 which is entitled "Port Quotas and Registration of Employers and Waterside Workers". Putting aside provisions that may be regarded as introductory and machinery provisions, the material sections begin with s. 28. Section 28 provides for the registration of employers, an expression defined by s. 7 (1) in terms which it is unnecessary to repeat, but which in substance mean an employer offering stevedoring work. Section 29 then provides for the registration of waterside workers. Certain conditions are laid down which an applicant for registration must satisfy. If he satisfies them the authority, which means the Australian Stevedoring Industry Authority established under the Act, is required to register the person as a waterside worker at the port in respect of which he applies. There is a limitation in s. 30 of quotas for the respective ports. Section 31 requires that the waterside worker should submit his application for registration through the union, and the expression union is limited to the Waterside Workers' Federation of Australia and the North Australian Workers' Union and organisations of employees specified in some declaration in force made by the authority. There are provisions in ss. 32, 33, 34 and 35 relating to the quotas, to a registered employer's obligations and their enforcement and to the cancellation and suspension of the registration of employers. There follows what for the present purpose is the most material provision, viz. s. 36. Sub-section (1) of s. 36 sets out the grounds upon which the authority may cancel or suspend the registration of a waterside worker. The authority may do so on any of the following grounds: namely, that the waterside worker (a) is, by reason of misconduct in or about an employment bureau, or a wharf or ship, unfit to be a registered waterside worker; (b) is, by reason of his physical or mental condition or his incompetence or inefficiency, not capable of properly carrying out the duties of a waterside worker or may be a danger to others; (c) has acted in a manner whereby the expeditious, safe or efficient performance of stevedoring operations has been prejudiced or interfered with; (d) has not attended regularly for employment as a waterside worker; (e) has failed (i) to offer for or accept employment as a waterside worker; (ii) to commence, continue or complete an engagement for employment as a waterside worker; or (iii) to perform any stevedoring operations which he was lawfully required to perform; (f) has been convicted of an offence against this Act; or (g) has failed to comply with an order or direction of the authority under this Act or an award of the commission. Before exercising the power to suspend or cancel registration the authority must make such inquiries as it thinks fit, but sub-s. (4) makes it possible to suspend the registration before the inquiry is held. Sub-section (5) provides that in considering whether the registration of a waterside worker should be cancelled or suspended under s. 36 the authority may take into account any disciplinary action which has been taken against the waterside worker by a union of which he is a member. Sub-section (2) provides that the suspension of the registration of a waterside worker at a port is to have effect until the expiration of such period, or of such number of working days at the port, as the authority directs. It would seem that s. 37 intends that the Commonwealth Industrial Court should exercise by way of review or revision all the powers which are conferred upon the authority under s. 36. The Commonwealth Industrial Court is of course a court established for the exercise of part of the judicial power of the Commonwealth. We have recently upheld the validity of the provisions which established the court on the specific ground that the main overriding intention was to establish a court qualified to exercise the judicial power of the Commonwealth for the purpose of exercising that judicial power. Any provisions which may chance to confer some other power on the court must be considered severable and void: see Seamen's Union of Australia v. Matthews [1] . If s. 37 had been framed in such a way as to invest the Commonwealth Industrial Court with power to hear and determine issues defined with more or less precision as to the infringement by waterside workers of prescribed standards of conduct or as to the fulfilment of other definite conditions upon which the cancellation or suspension of registration was to depend, there might have been little difficulty in treating the duty or authority thus imposed or conferred upon the court as part of the judicial power of the Commonwealth. And if a discretion had been added to remove or reduce the suspension or cancellation if the real merits appeared so to require, notwithstanding that an infringement had occurred, that would not necessarily have been inconsistent with a grant of judicial power.
1. (1945) 70 C.L.R. 141, at pp. 166-169.
2. (1955) 91 C.L.R. 529.
3. (1957) 96 C.L.R. 529.
Provisions very similar to those now found in Pt. III of the Stevedoring Industry Act 1956, although by no means entirely the same, were contained in Pt. III of the Stevedoring Industry Act 1949. Section 25 of that Act, which was a provision of Pt. III, corresponded sufficiently with s. 37 of the Stevedoring Industry Act 1956, but the power there given was to the Commonwealth Court of Conciliation and Arbitration. Clearly enough it was not part of the judicial power of the Commonwealth. It formed part of the general industrial powers of that court although it was exercisable by way of review or revision of the decisions of the Australian Stevedoring Industry Board. The differences between s. 25 of the Act of 1949 and s. 37 of the Act of 1956 are of no significance with reference to the character of the power as judicial or industrial. It seems reasonably plain that the real intention was that the Commonwealth Industrial Court should exercise the same power as theretofore had been reposed in the Commonwealth Court of Conciliation and Arbitration in entertaining appeals against the suspension or cancellation of the registration of a waterside worker. There can be little doubt that it was intended as an industrial power, or if you like an administrative power, the exercise of which should be governed by a consideration not only of the specific matters set out in s. 24, which roughly correspond with those enumerated in the present s. 36, but also of all matters which might seem relevant to a sound and wise administrative control over the stevedoring industry. This Court took the view in Reg. v. The Commonwealth Court of Conciliation and Arbitration: Ex parte Ellis [1] that s. 25 of the Act of 1949 conferred upon the waterside worker, by the remedy which s. 25 called an appeal, a right to a review of the action of an administrative body by the Court of Conciliation and Arbitration exercising a special authority. That court as a revisory tribunal was placed in the same position as the Stevedoring Industry Board; it must be satisfied of the existence of the necessary conditions prescribed by the provision, but once so satisfied the same discretion arose in the court for exercise on the same considerations. It is difficult to believe that as s. 37 of the Act of 1956 the provision, unaltered in substance, is based on any other principles or expresses any other intention. The same legislative intention is apparent in s. 5 of the recently enacted Stevedoring Industry Act 1957. Section 5 is expressed to repeal the present s. 37 and replace it with a provision in almost identical terms conferring the power which it describes upon the Commonwealth Conciliation and Arbitration Commission. Section 5, however, is not to go into operation until such date as is fixed by proclamation and it therefore has no present effect. We were informed that only in the event of the present s. 37 being held invalid was it intended to proclaim the new one. Nevertheless, it represents the expression of a legislative intention and does nothing to dispel the notion that the words used in s. 37 were not intended to be read in any limited fashion so as to accommodate them to the judicial power and restrain their operation within the limits of that power; on the contrary it tends, if anything, to confirm the contrary view. It seems clear enough that the power in the hands of the Commonwealth Industrial Court was intended to be of the same scope and have the same purpose as that given to the Court of Conciliation and Arbitration by s. 25 of the Act of 1949 and when in the Act of 1957 the same words are used so that they may be applied to the Commonwealth Conciliation and Arbitration Commission, no change of meaning is intended. The argument in support of the validity of s. 37 was simply that once the power was conferred on a court established for the exercise of the judicial power of the Commonwealth the provision should be restrained by construction to the limits required for the exercise of jurisdiction falling within the judicial power of the Commonwealth. For this argument much might be said were it not for the history of the provisions and were there not so much evidence of the fact that the true intent of the legislation is that the exercise of power arising under s. 37, wherever it might reside, should be governed by what might broadly be called administrative and industrial considerations and should not be restricted to purely legal criteria. If what may be described as a realistic approach is made to s. 37, there can be no escape from the conclusion that it can have no validity as a provision purporting to confer jurisdiction on the Commonwealth Industrial Court.
1. (1954) 90 C.L.R. 55.
The order nisi should therefore be made absolute for a writ of prohibition restraining their Honours of the Commonwealth Industrial Court from further proceeding with Buchan's appeal.
McTiernan J.
An order cancelling or suspending the registration of a waterside worker is an administrative order. The order is the exercise of a discretionary power given to the authority by s. 36 of the Stevedoring Industry Act 1956. The authority is not bound to cancel or suspend the registration of a waterside worker even though it has found adversely to him in an inquiry under sub-s. (1) of s. 36. If the authority is not acting under sub-s. (4), it is a condition precedent to the exercise of its discretion that the result of the inquiry is adverse to the worker. The question whether the authority has made a sound exercise of the discretion to cancel or suspend registration cannot be completely determined by judicial standards. For it is clear from the provisions of the Act that it would be proper for the authority to take into account matters purely of public policy. The Industrial Court, therefore, would in the proceeding which s. 37 calls an appeal, have the duty of reviewing an order founded upon a finding of fact and involving the resolution against the waterside worker of a question of policy. The court could, of course, consistently with the exercise of judicial power, decide whether the finding of fact was correct. But if it found that it was correct, it could not consistently with the exercise of judicial power decide that there was no ground of policy to be drawn from the Act which ought to preclude the waterside worker from retaining his registration. If the court confined itself simply to the issue whether the waterside worker fell within any of the express grounds of disqualification enumerated in s. 36 (1) and determined the "appeal" on that basis, its method of proceeding might be consistent with an exercise of the judicial power, but it would not be consistent with the intention which s. 37 manifests. That intention is to determine whether the authority has correctly applied s. 36. That would, in part, involve the exercise of the judicial power but it would also involve the consideration of the questions of policy. These lie outside the realm of judicial power. I am of the opinion that the jurisdiction which s. 37 defines is not strictly judicial power in the constitutional sense. If this opinion is right s. 37 is not valid, because, as the Industrial Court is created under Chap. III of the Constitution, it is contrary to the Constitution for Parliament to confer upon it any power or function not belonging or incidental to the judicial power.
For these reasons I would make the order nisi absolute.
Webb J.
I would make absolute the order nisi for prohibition.
In Reg. v. The Commonwealth Court of Conciliation and Arbitration: Ex parte Ellis [1] I expressed the view that s. 25 of the Stevedoring Industry Act 1949, which in material respects was in the same terms as s. 37 of the Stevedoring Industry Act 1956, conferred administrative power and not judicial power on the Court of Conciliation and Arbitration established by the Conciliation and Arbitration Act 1904-1952. But I indicated that if the same power were conferred on a court having only judicial power it would become judicial power. However, that would have necessitated a modification of the terms in which the power was granted by resort to s. 15A of the Acts Interpretation Act 1901-1950, which a majority of this Court held in Reg. v. Spicer: Ex parte Australian Builders' Labourers' Federation [2] was not available for the purpose of converting a non-judicial power into a judicial power. I dissented in the last-mentioned case, but I am not warranted in persisting in dissenting as to the effect of s. 15A.
1. (1954) 90 C.L.R., at p. 67.
2. (1957) 100 C.L.R. 277. |
high_court_of_australia:/showbyHandle/1/10136 | decision | commonwealth | high_court_of_australia | text/html | null | Burton v Honan [1952] HCA 30 | https://eresources.hcourt.gov.au/showbyHandle/1/10136 | 2024-09-13T22:50:31.901686+10:00 | High Court of Australia
Dixon C.J. McTiernan, Webb and Kitto JJ.
Burton v Honan
[1952] HCA 30
ORDER
Declaration that ss. 203, 229 (b), 229 (i) and 262 of the Customs Act 1901-1950 are valid. Declaration that the Customs Act operates so as to empower an officer of Customs to seize forfeited goods although they have passed into the hands of a bona-fide purchaser for value. Cause remitted to Supreme Court of Queensland for final judgment. Defendant to pay costs of all proceedings in this court, other than those of intervenor.
Dixon C.J.
This matter is a reference from a judge sitting in the original jurisdiction dealing with a matter coming before him in consequence of ss. 38A and 40A of the Judiciary Act 1903-1950.
The matter came before his Honour, Mr. Justice McTiernan, who, having heard some argument, made an order that it be referred to the Full Court to consider all inter se questions arising upon the evidence adduced at the hearing of the case before the Supreme Court. The proceeding is an action instituted in the Supreme Court in the ordinary way by writ of summons. The action was by the purchaser of a motor car against the vendor and the cause of action was based on The Sale of Goods Act of 1896 Q.. The provision of The Sale of Goods Act upon which the cause of action arose was the familiar one which entitles the buyer of goods to an implied warranty that he shall have and enjoy quiet possession of the goods he takes under the sale. The motor car was seized in the hands of the purchaser by the Customs as goods forfeited to the Crown pursuant to s. 229 of the Customs Act 1901-1950. The car was an American automobile which was imported in 1950. It was actually landed on or about 24th April 1950, by one Doyle. It would appear that Doyle had not at that time a licence for the importation of the goods and under the Customs (Import Licensing) Regulations such a licence was necessary. He did, however, obtain one, and the goods after entry for home consumption, pursuant to the licence, were delivered out of the control of the Customs. It would seem that in obtaining the licence he made a representation which subsequently the Customs authorities came to regard as untrue. At all events, he was prosecuted under three informations upon which he was convicted.
The first conviction was for that on 2nd May 1950, he, Doyle, did mislead an officer in a particular likely to affect the discharge of his duty, in that in relation to an application for a licence, pursuant to the Customs (Import Licensing) Regulations, he did represent to such officer that a certain Buick 1949 second-hand car was a bona-fide gift to him from a certain person, whereas the fact was that the motor car was not a bona-fide gift to him from that person.
The second information was for that he did make on the same date in a document produced to an officer, to wit an application for a licence pursuant to the Customs (Import Licensing) Regulations, a statement which was untrue in a particular, in that he did state therein that the same car was a gift from a consignor, whereas it was not. Lastly, the third information was for that he did import the car when it was a prohibited import.
Section 229 (b) of the Act says that the following goods shall be forfeited to the Crown—all goods imported which are prohibited imports—subject to certain exceptions. Section 229 (i) says that all goods in respect of which any entry, invoice, declaration, answer, statement or report which is false in any particular has been delivered, made or produced are forfeited to the Crown.
On the basis of that conviction, so far as Doyle was concerned, the car was then to be regarded as a prohibited import forfeited to the Crown.
But s. 262 of the Act provides that where the committal of any offence causes a forfeiture of any goods the conviction of any person for such an offence shall have effect as a condemnation of the goods in respect of which the offence is committed.
The convictions, therefore, would have under that provision, the effect of condemning the goods, the car, as goods in respect of which an offence had been committed.
Now the history of the car after it was introduced into the country by the importation on 24th April 1950, is this. It was released to Doyle by the Customs. Doyle sold it to the defendant, one Honan, on 30th June 1950. The defendant Honan thereupon sold it to the plaintiff Burton on 14th July 1950, and in the plaintiff Burton's hands it was seized by the Customs on 22nd December 1950. The convictions took place on 23rd April 1951.
On authority it is clear that under the provisions of s. 229, provided the facts exist which justify a forfeiture, the title to the goods vests in the Crown when the forfeiture takes place in consequence of the occurrence of the facts. No further proceedings are requisite to make title, although of course further proceedings may be necessary either to vindicate the title of the Crown or to exclude the claim of some person asserting a right to the goods.
In point of fact elaborate provisions are made in the Customs Act for the seizure of the goods, for lodging a claim when the goods are seized, and for a notice requiring the claimant to proceed to establish his title to the goods. Those provisions, which for the purposes of this case it is unnecessary to discuss, are s. 203 to s. 207. The plaintiff Burton in fact gave notice under s. 205 but we are not informed whether he was required to pursue his notice by entering an action under s. 207.
In the proceedings in the Supreme Court the facts which I have stated were ascertained and the purchaser of the goods relied upon the provisions to which I have referred as provisions showing that he had lost title to the goods. He relied upon the seizure as disturbing his peaceful possession of the goods and he contended that the implied warranty under The Sale of Goods Act therefore gave him a right to damages. The vendor, however, answered him by saying that the relevant provisions of the Customs Act under which all this was done were invalid as being beyond the powers of the Commonwealth. That allegation necessarily raised a question as to the limits inter se of the constitutional powers of the Commonwealth and the constitutional powers of the State. Upon that arising, s. 38A of the Judiciary Act, as it has been construed and upheld in this Court, put an end to the jurisdiction of the Supreme Court to proceed with the matter, and s. 40A of the Judiciary Act ipso jure transferred the proceedings into this Court. It was in that manner that they were brought before McTiernan J.
It will be seen that the residual question upon which the rights of the parties appear to depend is the validity of the material provisions of the Customs Act. Now s. 229 upon which the forfeiture rests contains a list of goods which are forfeit to the Crown when the conditions which the earlier paragraphs of that section contain are fulfilled. Section 229 rests in part upon par. (i.) of s. 51 of the Constitution and in part upon par. (ii.) of s. 51 of the Constitution. For example, par. (a) of s. 229 makes forfeit all goods which are smuggled or unlawfully imported, exported or conveyed. Smuggling is an offence under provisions which are for the protection of the duties, and may therefore be referred to the power with respect to taxation. The words "unlawfully imported" include the importation of imports which are absolutely prohibited irrespective of their dutiable character, and it may therefore be referred to par. (i.) of s. 51 of the Constitution, that is to say the power over trade and commerce with other countries and among the States.
The authority of the Commonwealth Government to impose forfeitures may be said to arise directly from the respective powers to which I have referred as a matter fairly within the scope of the substantive power to deal with, on the one hand, Customs duties, and, on the other, importation under the commerce power. But another view of the matter is to treat the power to impose a forfeiture in the case of offences as something which is incidental to the main power. There has in this Court been some discussion as to the use of par. (xxxix.) of s. 51 in cases where the extent of the subject matter of a substantive power of the Commonwealth is involved, and the question is whether a provision in a statute may be supported as directed to carrying out the main power by providing for a matter incidental to the subject matter. The view which I personally have expressed is that everything which is incidental to the main purpose of a power is contained within the power itself so that it extends to matters which are necessary for the reasonable fulfilment of the legislative power over the subject matter in accordance with the maxim quando lex aliquid alicui concedit, concedere et illud videtur sine quo res ipsa valere non potest. But it has appeared to me that par. (xxxix.) of s. 51 is related not so much to matters incidental to the subjects placed under the legislative power of the Commonwealth but rather to matters which arise in the execution of the various powers reposed in the Legislature, the Judiciary and the Executive. But the distinction is for present purposes immaterial because it produces the same result, namely, that the Parliament may in the exercise of any of the substantive powers given by s. 51 make all laws which are directed to the end of those powers and which are reasonably incidental to their complete fulfilment.
In the present case the question at issue depends upon the operation of the forfeiture and seizure provisions (ss. 229 and 203 of the Customs Act) and the operation of s. 262.
The operation of the power of forfeiture is not restrained either in point of person or, except in a qualified manner, in point of time. It is said that goods which might be forfeited under the words of the provision to which I have referred are exposed to forfeiture notwithstanding that they go into home consumption and are released from the control of the Customs for that purpose, and that they may be found in the hands of persons who have dealt with them quite honestly and have acquired apparent title to them as the last of a line of successive people all dealing in perfect bona fides and for value.
As to s. 262, it is said that a forfeiture may result, from the operation of that section, of goods which are in the hands of a person who has obtained them innocently after they have gone into home consumption, and that by the conviction of the offender who imported them unlawfully into the country the innocent purchaser is left with no right to contest the legality of the forfeiture but has lost his goods in consequence of a proceeding to which he is not a party.
The preliminary question with which we are concerned is whether those two features of the operation of the provisions drive it beyond the application of the incidental power. On that subject, which is one of degree, we have had the advantage of a discussion on both sides, which has drawn our attention to the material considerations. On one side it is pointed out that injustice may occur to individuals who are innocent, and that they may be involved in the loss of property for which they can only have a recompense by recourse to the person who has sold it, who may, of course, not be able to restore the purchase money. On the other side it is pointed out that in the history of English and Australian Customs legislation forfeiture provisions are common, drastic and far-reaching, and that they have been considered a necessary measure to vindicate the right of the Crown and to ensure the strict and complete observance of the Customs laws, which are notoriously difficult of complete enforcement in the absence of strong provisions supporting their administration. These matters of incidental powers are largely questions of degree, but in considering them we must not lose sight of the fact that once the subject matter is fairly within the province of the Federal legislature the justice and wisdom of the provisions which it makes in the exercise of its powers over the subject matter are matters entirely for the Legislature and not for the Judiciary.
In the administration of the judicial power in relation to the Constitution there are points at which matters of degree seem sometimes to bring forth arguments in relation to justice, fairness, morality and propriety, but those are not matters for the judiciary to decide upon. The reason why this appears to be so is simply because a reasonable connection between the law which is challenged and the subject of the power under which the legislature purported to enact it must be shown before the law can be sustained under the incidental power.
In the present case it appears to us that these are Customs provisions which are of a standard pattern, with the possible exception of s. 262, and that they would all be regarded as fairly and reasonably representing laws in relation to Customs and matters arising thereout, and that is so whether they are regarded as under the trade and commerce power or under the taxation power. As I have explained, they are in part referable to the one and in part referable to the other, and in some cases referable indifferently to both. Section 262 is, however, a provision, which, according to the passage cited from Dr. Wollaston's book, was new in the Customs legislation of 1901. Its purpose is to make the conviction of the offender decisive on all matters of fact upon which the forfeiture of the goods depends. In the absence of that provision, if there was a contest as to the occurrence of the matters of fact upon which the forfeiture depended, it would be necessary to have the issue of fact decided, either in a proceeding which results from s. 207 of the Act or in an independent action for trespass brought by the supposed owner of the goods against a Customs authority in which he asserted that the seizure was unlawful. Such a proceeding would, of course, meet with difficulties if the officers pleaded the provisions of the Act which protect them in the case of a bona-fide exercise of their powers on reasonable grounds (cf. s. 220).
Section 262 takes a course which brings such an issue speedily to a final conclusion. So far as the powers to make laws on matters incidental to trade and commerce, or to taxation, are concerned, it appears to us that it is fairly within the legislative power they confer to provide that conviction shall operate as a condemnation of the goods involved.
But still another objection to s. 262 has been advanced. It is an objection which relates to s. 262 in its application to s. 229. The objection is made under par. (xxxi.) of s. 51 of the Constitution. That provision empowers the Commonwealth Parliament to make laws with respect to the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws. The question whether provisions for the forfeiture of property for an offence committed in connection with that property come within that legislative power, guarded as it is by the requirement that just terms must be afforded, has been adverted to in this Court on more than one occasion, but we have not found it necessary to give any decision on the question. But, in the course of the arguments in which it has been referred to, it has always been treated as obvious that if the purpose of the forfeiture is to bring a penalty upon the offender it could not come within s. 51 (xxxi.), it not being an acquisition of property for any purpose in respect of which the Parliament has power to make laws within that provision. Alternatively it has been said that even if it was within s. 51 (xxxi.) there is nothing unjust in a provision forfeiting the property of the offender as part of the punishment for the offence.
But in the present case s. 262 brings about these further consequences. Facts having occurred, as the Crown alleges, giving rise to forfeiture and the goods having passed out of the hands of the Customs, they may be found in the possession of an innocent person. He has possession of the goods, and, as against everybody but the true owner—who, if the forfeiture has taken place, will be the Crown—he has a possessory title.
It is argued that, as a consequence, s. 262 of the Customs Act dispossesses him, or at least seizures may have dispossessed him and then s. 262 makes conclusive the right so to dispossess him; he is thus left without his goods and without any title to his goods, because s. 262 purports to make the conviction of the offender conclusive on the subject. It leaves the innocent purchaser without any right to contest the forfeiture. It is said that that does not give him just terms, because just terms require that he should have a right to contest a forfeiture.
The short answer to this contention is that the whole matter lies outside the power given by s. 51 (xxxi.). It is not an acquisition of property for any purpose in respect of which Parliament has power to make laws. It is nothing but forfeiture imposed on all persons in derogation of any rights such persons might otherwise have in relation to the goods, a forfeiture imposed as part of the incidental power for the purpose of vindicating the Customs laws. It has no more to do with the acquisition of property for a purpose in respect of which the Parliament has power to make laws within s. 51 (xxxi.) than has the imposition of taxation itself, or the forfeiture of goods in the hands of the actual offender.
For these reasons I am of opinion that the inter se questions referred to the Full Court should be answered that the provisions are valid.
That, then, leads to the further question what should be done with the proceedings transferred to this Court from the Supreme Court of Queensland.
Having disposed of the validity of the provisions, we have removed the sole question which appeared to the learned Chief Justice of Queensland to stand in the way of his giving a decision, and it would be competent for this Court to decide the proceeding completely. That, however, does not appear to be altogether a desirable proceeding, because the assessment of damages is a matter outstanding. And it may indeed be possible that the learned Chief Justice of Queensland may not regard other questions as having been covered by the interim reasons that he gave.
It is open to us to remit any part of the cause that we think may require further trial; and in my opinion that is the proper course to take so that final judgment may be given in the Supreme Court of Queensland.
In the order made by McTiernan J. referring the matter to this Court, his Honour included the question whether the Customs Act operates so as to empower an officer to seize forfeited goods after they have passed into the hands of the bona-fide purchaser for value. That, of course, depends not only on the validity of the provisions, but in some degree upon their interpretation. No argument has been advanced to us which would justify our giving an interpretation to them which would exclude bona-fide purchasers for value. There is no language in any of the provisions which would justify such a form of construction, and it could only be arrived at by a very violent implication based only upon general considerations. We do not think that such an implication can be made.
McTiernan J.
I agree entirely with the reasons of the Chief Justice. I have nothing to add.
Webb J.
I agree.
Kitto J.
I agree. |
high_court_of_australia:/showbyHandle/1/9570 | decision | commonwealth | high_court_of_australia | text/html | null | PCS Operations Pty Ltd v Maritime Union of Australia [1998] HCA 29 | https://eresources.hcourt.gov.au/showbyHandle/1/9570 | 2024-09-13T22:50:34.534042+10:00 | High Court of Australia
Gaudron J
PCS Operations Pty Ltd v Maritime Union of Australia
[1998] HCA 29
ORDER
Matter 1 Application dismissed with costs Matter 2
1. The whole of Federal Court of Australia Matter No VG 152 of 1998 be removed into this Court pursuant to s 40(1) of the Judiciary Act 1903 Cth .
2. Federal Court of Australia Matter No VG 152 of 1998 be remitted to that Court save for the following question:
Are s 4(1) of the Jurisdiction of Courts (Cross-vesting) Act 1987 Vic and s 9 of the Jurisdiction of Courts (Cross-vesting) Act 1987 Cth invalid in their application to the cause of action for inducing breach of contract pleaded in pars 136-139 inclusive of the applicants' Statement of Claim in the Federal Court?
3. Costs of this application to abide the outcome of the proceedings in this Court.
Matter 3 Application dismissed with costs.
Gaudron J.
1. These applications under s 40(1) of the Judiciary Act 1903 Cth were heard in Brisbane on 17 April 1998. They concern proceedings in the Federal Court of Australia between, on the one hand, the Maritime Union of Australia (MUA) and three of its members who sue in a representative capacity (collectively, "the MUA parties"), and, on the other hand, Patrick Stevedores No 1 Pty Ltd and other companies and individuals associated with that company (collectively, "the Patrick parties"), the National Farmers Federation (NFF) and companies and individuals associated with the NFF (collectively, "the NFF parties") and the Commonwealth of Australia and the Honourable Peter Keaston Reith, the Minister for Workplace Relations and Small Business (collectively, "the Commonwealth parties"). The proceedings arise out of a dispute in the stevedoring industry.
2. In the Federal Court proceedings, the MUA parties allege, and seek various remedies for, breaches of the Stevedoring Industry Award 1991, breach of the Patrick-Melbourne Enterprise Agreement 1996, breach of certain contracts of employment, contravention of the Workplace Relations Act 1996 Cth and contraventions of the Corporations Law. Those allegations are made against some of the Patrick parties, but not others. They are not made against any of the NFF or Commonwealth parties. It is not in issue that, to the extent that the proceedings involve the breaches and contraventions thus alleged, they are within the jurisdiction of the Federal Court.
3. As well as alleging the various breaches and contraventions set out above, the proceedings in the Federal Court involve two common law causes of action for conspiracy, it being alleged, respectively, that the Patrick parties, the NFF parties and the Commonwealth parties conspired together to injure the MUA and various of its members and, also, that they conspired to injure them by unlawful means. So far as concerns those two causes of action, the MUA pleads the various breaches and contraventions to which reference has already been made as overt acts in the first conspiracy and as the unlawful means involved in the second. The MUA parties have also pleaded that the Patrick parties and the NFF parties induced certain of the Patrick parties to breach contracts of employment with the MUA members on whose behalf the proceedings were brought. That cause of action is not pleaded against either of the Commonwealth parties.
4. It is contended by the applicants that a question arises as to the jurisdiction of the Federal Court to entertain the causes of action for conspiracy and for inducing breach of contract. It is further said that that is a question arising under the Constitution or involving its interpretation and, thus, the proceedings should be removed into this Court pursuant to s 40(1) of the Judiciary Act. That subsection confers a right on parties to apply for the removal of proceedings and a right on an Attorney-General to have proceedings removed into this Court in these terms:
Any cause or part of a cause arising under the Constitution or involving its interpretation that is at any time pending in a federal court other than the High Court or in a court of a State or Territory may, at any stage of the proceedings before final judgment, be removed into the High Court under an order of the High Court, which may, upon application of a party for sufficient cause shown, be made on such terms as the Court thinks fit, and shall be made as of course upon application by or on behalf of the Attorney-General of the Commonwealth, the Attorney-General of a State, the Attorney-General of the Australian Capital Territory or the Attorney-General of the Northern Territory.
5. To understand the contentions of the applicants, it is necessary to say something of the sources of the Federal Court's jurisdiction. In general terms, there are three distinct sources of jurisdiction. The first is specific statutory provision, such as that which confers jurisdiction with respect to the claimed breaches of Award and contravention of the Workplace Relations Act. [1] It is well settled that that jurisdiction may extend to the determination of the entire matter or controversy and, thus, include non-federal claims which involve the same transactions and facts. [2] However, it does not extend to "a "completely disparate claim constituting in substance a separate proceeding" , a non-federal matter which is "completely separate and distinct from the matter which attracted federal jurisdiction" or "some distinct and unrelated non-federal claim" ". [3]
1. See, eg, s 412(1) of the Workplace Relations Act.
2. See Fencott v Muller (1983) 152 CLR 570 at 607, per Mason, Murphy, Brennan and Deane JJ.
3. Fencott v Muller (1983) 152 CLR 570 at 607-608 referring to Felton v Mulligan (1971) 124 CLR 367 at 373, per Barwick CJ, Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 at 521, per Murphy J, Moorgate Tobacco Co Ltd v Philip Morris Ltd (1980) 145 CLR 457 at 482, per Stephen, Mason, Aickin and Wilson JJ.
6. The second source of jurisdiction is s 32(1) of the Federal Court of Australia Act 1976 Cth (the Federal Court Act). That subsection confers additional jurisdiction in these terms:
To the extent that the Constitution permits, jurisdiction is conferred on the Court in respect of matters not otherwise within its jurisdiction that are associated with matters in which the jurisdiction of the Court is invoked.
In Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd, Barwick CJ expressed the view that "the word "associated" [in s 32] embraces matters which may be disparate from each other", [4] a view which is implicit in other judgments in that case. [5]
1. Philip Morris (1981) 148 CLR 457 at 476.
2. Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 at 494-495, per Gibbs J; at 518, per Mason J; at 521-522, per Murphy J.
7. The third source of jurisdiction is to be found in cross-vesting legislation. For present purposes, it is sufficient to refer to the Jurisdiction of Courts (Cross-vesting) Act 1987 Vic and the Jurisdiction of Courts (Cross-vesting) Act 1987 Cth (collectively, "the Cross-vesting Acts"). Subject to an exception which is not presently relevant, s 4(1) of the former Act, which has counterparts in each of the other States, provides:
The Federal Court has and may exercise original and appellate jurisdiction with respect to State matters. [6]
And s 9(2) of the Jurisdiction of Courts (Cross-vesting) Act 1987 Cth relevantly provides:
The Federal Court may:
(a) exercise jurisdiction (whether original or appellate) conferred on that court by a provision of a law of a State relating to cross-vesting of jurisdiction;
1. "State matter" is defined in s 3 of that Act to mean, inter alia, a matter "in which the Supreme Court has jurisdiction otherwise than by reason of a law of the Commonwealth or of another State".
8. The three sources of the Federal Court's jurisdiction so mesh together that its jurisdiction to hear and determine the causes of action for conspiracy and for inducing breach of contract can be challenged only by challenging all three. That challenge is made by the NFF parties, but not, apparently, by any of the Patrick or Commonwealth parties. [7] The precise details of that challenge emerged only in this Court, no attempt having been made to obtain any ruling by the Federal Court on any of the issues thus raised. That is significant because of the nature of the exercise involved in determining whether the various claims are part of the one matter and, thus, within jurisdiction in accordance with the principles in Fencott v Muller [8] and, if not, whether they are "associated" matters for the purposes of s 32(1) of the Federal Court Act.
1. Counsel for the Patrick parties who are the applicants in Matter No B7 of 1998 informed the Court that he had no instructions on this matter, as did counsel for the Commonwealth. Counsel for the Attorney-General for the Commonwealth was not able to indicate what position would be taken by the Attorney-General if the matter were removed into this Court or, even, whether the Attorney-General would intervene in the proceedings pursuant to s 78A of the Judiciary Act.
2. (1983) 152 CLR 570.
9. It was said by Mason, Murphy, Brennan and Deane JJ in Fencott v Muller that "[w]hat is and what is not part of the one controversy depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships". [9] Their Honours added:
The scope of a controversy which constitutes a matter is not ascertained merely by reference to the proceedings which a party may institute, but may be illuminated by the conduct of those proceedings and especially by the pleadings in which the issues in controversy are defined and the claims for relief are set out. But in the end, it is a matter of impression and of practical judgment whether a non-federal claim and a federal claim joined in a proceeding are within the scope of one controversy and thus within the ambit of a matter. [10]
1. Fencott v Muller (1983) 152 CLR 570 at 608.
2. Fencott v Muller (1983) 152 CLR 570 at 608.
10. The question whether different claims constitute a single matter is clearly a question arising under ss 75, 76 and 77 of the Constitution or involving the interpretation of those provisions. Since Fencott v Muller, [11] however, that is not a question that involves any contentious question of principle. Rather, it is simply a question of "practical judgment" and one which should be determined, at least in the first instance, by the Federal Court. So, too, is the question whether a federal matter is associated with another federal matter for the purposes of s 32(1) of the Federal Court Act.
1. (1983) 152 CLR 570.
11. The causes of action for conspiracy are pleaded against the Patrick interests, the NFF parties and the Commonwealth parties and, if they constitute disparate claims, they are matters "[i]n which the Commonwealth, or a person being sued on behalf of the Commonwealth, is a party" and are, thus, federal matters within s 75(iii) of the Constitution. It was contended on behalf of the NFF interests that, so far as jurisdiction is concerned, it is not merely a question of practical judgment whether the conspiracy claims are associated with the alleged breaches and contraventions earlier referred to. Rather, it was put, by reference to a statement by Gibbs J in Philip Morris, that s 32(1) has no application because it applies only to "matters which arise under other laws made by the Parliament". [12]
1. Philip Morris (1981) 148 CLR 457 at 494.
12. The question whether s 32(1) of the Federal Court Act is confined to matters arising under other federal laws is simply a question of construction, not a constitutional question. It is one which might appropriately be determined, at least in the first instance, by the Federal Court. However, as the issue bears on the outcome of these applications, it is appropriate to observe that the view that s 32(1) is confined to matters arising under federal laws is at odds with the wording of s 32(1), with statements in the judgments of Aickin J and Wilson J in Philip Morris to the effect that s 32(1) extends jurisdiction to associated matters falling within ss 75 and 76 of the Constitution, [13] and with the decision of the Federal Court in Turner v Owen . [14] Thus, in my view, s 32(1) cannot be confined in the manner for which the NFF interests contend. Accordingly, the question whether, if the conspiracy claims are not part of the one controversy, they fall within s 32(1) of the Federal Court Act involves no more than a question of practical judgment as to whether they are associated with the claims alleging the breaches and contraventions earlier referred to.
1. Philip Morris (1981) 148 CLR 457 at 535, per Aickin J; at 547, per Wilson J.
2. (1990) 26 FCR 366. See also Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499 at 500-501, per Gummow J.
13. There is nothing in this case to suggest that the jurisdictional questions which arise pursuant to the principles in Fencott v Muller [15] or pursuant to s 32(1) of the Federal Court Act should not be determined, in the first instance, by the Federal Court. On the contrary, there is much to suggest that it would be inappropriate for them to be determined without the benefit of relevant factual findings by that Court. The same is not, however, true of the challenge to the validity of the Cross-vesting Acts. That question can be decided without regard to the factual issues involved in this case. However, it is a question which, in practical terms, will only fall for decision in this matter if it is held that the Federal Court otherwise lacks jurisdiction with respect to one or more of the causes of action which are not the subject of a specific grant of jurisdiction. Moreover, it is a question which will only arise if this Court grants leave to re-open the decision in Gould v Brown , [16] a decision delivered as recently as February of this year.
1. (1983) 152 CLR 570.
2. (1998) 72 ALJR 375.
14. For the reasons given, there is little, if anything, to commend any of the applications for removal, applications which, if granted, have the potential to delay or disrupt the proceedings presently before the Federal Court. Accordingly, the applications by the NFF parties and by those Patrick parties who have sought removal under s 40(1) of the Judiciary Act should be dismissed with costs.
15. The application by the Attorney-General stands in a somewhat different position in that s 40(1) provides for removal "as of course" in the case of his application. That notwithstanding, the only jurisdictional issue which is appropriately dealt with by this Court is that relating to the validity of the Cross-vesting Acts. That is a constitutional question and it is a question that has arisen in the sense that, so far as concerns the three causes of action in issue, the NFF interests have advanced a challenge to all possible sources of jurisdiction. As already explained, however, it is not a question that will necessarily fall for decision. For the reasons given with respect to s 32(1) of the Federal Court Act, it is a question more likely to arise with respect to the action for inducing breach of contract, than in relation to the conspiracy claims.
16. The appropriate course with respect to the Attorney-General's application is to remove the whole of the cause pending in the Federal Court but to remit the proceedings back to that Court save for the question whether s 4(1) of the Jurisdiction of Courts (Cross-vesting) Act 1987 Vic and s 9(2) of the Jurisdiction of Courts (Cross-vesting) Act 1987 Cth are invalid in their application to the claim by the MUA interests that the Patrick interests and the NFF interests induced a breach of contracts relating to the employment of certain MUA members. The determination of that question should await a determination by the Federal Court of the question whether it otherwise has jurisdiction with respect to that cause of action. The costs of the Attorney-General's application should abide the outcome of the proceedings in this Court. |
high_court_of_australia:/showbyHandle/1/8604 | decision | commonwealth | high_court_of_australia | text/html | null | ICI Alkali (Australia) Pty Ltd v Commissioner of Taxation (Cth) | https://eresources.hcourt.gov.au/showbyHandle/1/8604 | 2024-09-13T22:50:41.192514+10:00 | High Court of Australia
BARWICK CJ Gibbs and Mason JJ
ICI Alkali (Australia) Pty Ltd v Commissioner of Taxation (Cth)
ORDER
Order Questions referred to be answered as follows:— Question 1: Do s 85 and s 88B of the Income Tax Assessment Act 1936-1966 and of the Income Tax Assessment Act 1936-1967 apply to a lease within the meaning of those sections granted before 6 November 1954? A— Sections 85and 88B(2)and (3) so apply, but s 88B(1) does not so apply. Question 2: i (a) Did the taxpayer acquire by assignment on or about 17 August 1937 a lease of area no 234 within the meaning of the said sections? (b) Did the taxpayer acquire by grant on 1 April 1949 (or in the month of August 1949) a lease of area no 234 within the meaning of those sections? (c) If part (a) is answered affirmatively, did the lease of area no 234 that the taxpayer acquired on or about 17 August 1937 subsist for the purposes of the said sections after 1 April 1949? Answer: (a) Yes. (b) Yes. (c) No. Question 3: (a) Did the taxpayer acquire by assignment or grant in or about the year 1937 a lease of area no 389 within the meaning of the said sections? (b) Did the taxpayer acquire by grant on or about 1 January 1957 a lease of area no 389 within the meaning of the said sections? (c) If part (a) be answered affirmatively did the lease of area no 389 that the taxpayer acquired in or about the year 1937 subsist for the purposes of the said sections after 1 January 1957? Answer: (a) Yes, by grant. (b) Yes, by grant. (c) No. Question 4: Did the taxpayer acquire by grant in or about the month of April 1956 a lease of area no 600 within the meaning of the said sections? A—Yes. Question 5: (a) Does s 85(1) allow the deduction of an amount which was paid by a taxpayer in effecting improvements upon land which is the subject of a lease assigned by the taxpayer when improvements were effected and paid for by the taxpayer before the commencement of the lease assigned by the taxpayer? (b) If part (a) be answered affirmatively, should any of the amounts claimed by the taxpayer be allowable deductions in respect of improvements effected upon: (i) area no 234; (ii) area no 389; be disallowed on the ground that they were effected and paid for by the taxpayer before the commencement of leases assigned by the taxpayer on or about 27 August 1966? Answer: (a) Yes. (b) Unnecessary to answer. Question 6: (a) Does s 88B of the said Acts require that an election under subs (5) must be made not only by the parties to the assignment of a lease but also:— (i) where the assignor acquired the lease by assignments by the parties to the previous assignment at or about the date of that assignment; (ii) where the assignor acquired the lease by grant by the parties to the grant at or about the date thereof? (b) Should any of the amounts claimed by the taxpayer as allowable deductions as aforesaid be disallowed on the ground that at or about the date the taxpayer acquired leases of area no 234, area no 389 and area no 600 no election was made under s 88B(5) of the said Acts in respect of the said leases? Answer: (a) The election must be made by the parties to the grant of a lease if s 85 is to apply to an assignment or surrender by the person to whom the lease was granted. Where the claim to deduct is by a person to whom the lease has been assigned, the election must have been made by that person and the person who assigned the lease to him within the time calculated under s 88B(5) in relation to the time of the transactions between those persons. (b) (i) In the case of area no 234, No. (ii) In the case of areas nos 389 and 600, Yes, the whole amount so claimed should be disallowed. Question 7: Where an application was made under the Mining Act 1930 of the State of South Australia, as amended, for a miscellaneous (salt) lease and the Minister approved of the grant of the lease but no document in the form or to the effect of Form I in Sch C to the Regulations made under the said Act was issued by the Governor of the said State in respect of the land for which approval was given, is there a mining lease in respect of the said land within the meaning of s 88B(7) of the said Act? A—Yes. Question 8: Should any of the amounts claimed by the taxpayer as allowable deductions as aforesaid be disallowed on the ground that the taxpayer did not on or about 27 August 1966:— (a) assign a lease of area no 234; (b) assign a lease of area no 389; (c) assign a lease of area no 600; within the meaning of s 85(1) of the said Acts? A—No. Question 9: (a) Is the whole or any part and what part of the sum of $26,540 specified in para 16 of the statement of facts an allowable deduction from the assessable income of the taxpayer for the year of income ended 30 September 1966? (b) Is the whole or any and what part of the sum of $35,250 specified in para 23 of the statement of facts an allowable deduction from the assessable income of the taxpayer for the year of income ended 30 September 1966? (c) Is the whole or any and what part of the sum of $159,288 specified in para 29 of the statement of facts an allowable deduction from the assessable income of the taxpayer for the year of income ended 30 September 1966? Answer: (a) Yes, the whole sum. (b) and (c) No; no part of the sum is an allowable deduction. Appeal No 58 of 1976 dismissed. Appeal No 59 of 1976 allowed in part, in accordance with the answers given to the questions referred.
Barwick CJ
These are appeals from a judgment of the Supreme Court of Victoria (McInerney J) which concern the claim of the appellant taxpayer to deduct $1,347,070 from its assessable income for the year ended 30 September 1966, that being its conventional income tax year, and the sum of $618,536 from its assessable income for the year ended 30 September 1967. Although the deduction claimed in respect of the latter year was sought to be made pursuant to s 80 of the Income Tax Assessment Act 1936-1966 (the Act), the deductibility of both the sums depend upon the taxpayer bringing the circumstances of the expenditure of those amounts of money within the provisions of s 85 of the Act.
The taxpayer had for many years engaged in the production of salt in South Australia, partly on freehold land and partly on Crown land. Three particular parcels of land in that State upon which salt mining by the taxpayer has been conducted have been selected to test the propriety of the Commissioner's rejection of the taxpayer's claim to make deductions. The amounts I have mentioned were spent by the taxpayer in effecting improvements upon those lands.
Two principal questions were debated. The first is the question whether, in respect of two of the parcels, the appellant ever had a lease of the land within the meaning of the Mining Act 1930 (SA), as amended, (the Mining Act); the second is whether an election given by s 88B(5) had been duly made in respect of each of the three areas so as to make s 85 applicable to the expenditure of the money which the taxpayer sought to deduct from its assessable income. Two additional questions were argued which may be disposed of quite shortly.
The taxpayer had obtained and had exercised the right under the Mining Act to mine salt on each of these parcels of land. The circumstances attending the acquisition of the right to mine on these lands vary: the following important considerations must be set out in respect of each parcel. I shall use the numbers to describe the parcels which were used in the evidence given in the Supreme Court of Victoria.
Area No 234
A Crown lease under the Mining Act was duly executed by the Governor of that State and by the lessee, the Australian Salt Co Ltd, of this area for a term of 21 years from 1 April 1928. That lease was duly registered in the office of the Registrar-General of South Australia. The lease was transferred by the lessee to the taxpayer on 17 August 1937. The Minister for Mines of the State of South Australia duly consented to that transfer and the necessary memorial thereof was registered in the office of the Registrar-General.
On 5 August 1949, pursuant to s 114 of the Mining Act, the lease was renewed for a term of 21 years from 1 April 1949. A memorandum of renewal was duly registered with the Registrar-General.
On 26 August 1966, by an indenture of that date, the taxpayer then being in liquidation, the lease of this area was transferred by the liquidator of the taxpayer to its sole shareholder by way of a distribution in specie of the assets of the taxpayer. The taxpayer, as assignor of the lease, and the shareholder, as assignee, executed on 18 January 1967, a notice of election under s 88B(5) of the Act. The election was that s 88B should not apply in relation to the assignment of the lease from the taxpayer to the shareholder. If that election were effective, s 85 would entitle the taxpayer to a deduction for such expenditure made in improvements of the lease as fell under the terms of that section: otherwise there was no right to the deduction of any sum of money so expended.
The learned primary judge held that the election of 18 January 1967, was effective to make s 85 applicable and he further held that the taxpayer was entitled to a deduction for certain expenditure upon the improvement of the land comprised in this area.
Area No 389
In 1935 or 1936 the nominee of the taxpayer applied to the Minister for Mines of South Australia for a miscellaneous (salt) lease under the provisions of s 59(1) of the Mining Act. The Minister for Mines approved the application and notified the applicant in writing of his approval. That writing informed the applicant that his claim for a miscellaneous (salt) lease had been approved, that "the lease is numbered 389 and it has been granted for the term of twenty-one (21) years" with a stated commencing date. The writing continued: "Before the lease document can be issued a survey plan of the ground made by a duly qualified surveyor must be lodged in this office. After acceptance by the Surveyor-General the lease will be prepared and registered. … During the period between the receipt of this notification and the actual issue of the lease you are deemed to be the lessee of the land in respect of which this lease has been applied of."
At the time of the receipt of this notification in respect of area no 389, s 23c had not been inserted in the Mining Act. It was inserted by No 40 of 1953 and is in the following terms:—
"23c. (1) Where a person has applied for a mining lease and has been notified in writing by or on behalf of the Minister that the Minister has approved the application, that person shall be liable for payment of rent and any other sum payable by a lessee of a mining lease of the kind applied for pursuant to this Act and shall be deemed to hold the land the lease of which he applied for as though he were a lessee under a mining lease of the kind applied for granted at the time mentioned in the written notification.
"(2) Where a person holding land under sub section (1) of this section is granted a mining lease of the kind applied for, that lease shall not be granted for a longer term than the balance of the term prescribed by this Act for a lease of the kind applied for after deduction therefrom the period for which that person has held the land pursuant to subsection (1) of this section.
"(3) This section shall apply notwithstanding any other provision of this Act and whether the application for a mining lease was made, or the notification of approval was received, before or after the commencing of the Mining Act Amendment Act, 1953 ."
In April 1937, the taxpayer's nominee requested the Minister to issue a miscellaneous (salt) lease in respect of area no 389 in the name of the taxpayer. The taxpayer consented to that request and agreed to hold that lease upon the terms thereof. The Minister approved that request and the necessary entries to give effect to it were duly made in the records of the Department of Mines. No instrument of lease, however, was signed by the Governor of South Australia. On 27 August 1956, the taxpayer applied to the Minister for the renewal of miscellaneous (salt) lease no 389 and on 25 January 1957, the Minister informed the taxpayer that miscellaneous (salt) lease no 389 had been renewed for a further term of 21 years from 1 January 1957.
By the indenture of 26 August 1966, the taxpayer duly transferred to its shareholder all its estate and interest in the area no 389. On 18 January 1967, the taxpayer as assignor and its shareholder as assignee executed a notice of election under s 88B(5) to the effect that s 88B should not apply in relation to the assignment of the estate or interest of the taxpayer in area no 389.
Area No 600
On 28 March 1956, the taxpayer duly applied to the Minister for a miscellaneous (salt) lease in respect of this area. The Minister approved the application on 30 April 1956, and duly notified the taxpayer of that approval by a document which contained the statement which I have already quoted in relation to area no 389, with the additional statement: "The number of the lease must now be shown on each peg in lieu of the miner's rights number and the date of the pegging". No instrument of lease signed by the Governor of South Australia in respect of this area was ever executed or issued. By the said indenture of 26 August 1966, the taxpayer transferred to its shareholder all its estate and interest in area no 600.
On 18 January 1967, the taxpayer and the shareholder executed a notice of election under s 88B(5) in respect of the assignment of the taxpayer to its shareholder of its estate and interest in area no 600.
There are two material differences between the circumstances that pertain to area no 389 and those that pertain to area no 600. First, the lease of the former area was granted in 1937, before s 88B came into operation on 6 November 1954 and was renewed in 1957; the lease of the latter area was granted after 6 November 1954. Second, part of the expenditure incurred in effecting improvements to area no 389 was made during the currency of the initial lease and part during the currency of the renewed lease, whereas the expenditure incurred in effecting improvements to area no 600 was all made during the currency of the second lease granted after 6 November 1954. In this respect area no 234 differed from area no 600 because all the expenditure on improvements to area no 234 was incurred during the currency of the initial lease before it was renewed in 1949.
The primary judge decided that the elections made on 18 January 1967, were effective under s 88B(5). But he held that the transfer by the taxpayer to its shareholder on 26 August 1966, of its interest in areas no 389 and no 600 was not the assignment of a lease within the meaning of s 85(1) , for the reason that no mining lease had been executed by the Governor of South Australia in respect of those areas. He was of opinion that the Mining Act documents and the Mining Act, in deeming the approved applicant for a miscellaneous (salt) lease to be a lessee, emphasized a radical distinction between the situation which arose from the documents and activities pursuant to them and a duly executed mining lease. In his view, the fact that the taxpayer was deemed to be a lessee denied that it was a lessee for the purposes of s 85. He held in substance that only a formal instrument signed by the Governor would be sufficient in the circumstances to satisfy the provisions of that section. Consequently, he held that expenditure whenever made on the land in effecting improvements upon areas no 389 and no 600 was not an allowable deduction from the taxpayer's assessable income.
In my opinion, the conclusion that miscellaneous mining lease no 234 was relevantly a lease was so clearly right that no elaboration or, indeed, any discussion of that matter is required. But the conclusion that the taxpayer did not relevantly have a lease of the areas no 389 and no 600 was, in my opinion, erroneous. But it is quite true that the Mining Act contemplated that there should be a formal instrument of lease of the land to be mined: but, as I think, it did not deny the possibility of the relationship of landlord and tenant otherwise arising between the Crown and an approved applicant for a mining lease.
Section 23 of the Mining Act provides:—
"23. Prospecting and mining shall be permitted pursuant to this Act by virtue of—
(a) a miner's right;
(b) a gold lease;
(c) a mineral lease;
(d) a coal lease;
…
(f) a miscellaneous lease; or (g)
a special mining lease.
And in addition to the rights of occupation conferred by the foregoing; occupation shall be permitted pursuant to this Act by virtue of—
(i) a business licence; or
(ii) an occupation licence."
Like other Mining Acts, the Mining Act provides for the issue of a miner's right which authorizes the holder to prospect, amongst other things, for salt and to peg out in a prescribed manner land of a prescribed shape and dimension whereon salt may, or may be supposed to, be. Having pegged out the land, the holder of a miner's right becomes the owner of the claim thus pegged out: see s 28. But the pegging of the claim does not give a right to mine. Section 59 in Div VII of the Mining Act empowers the Governor to grant to the holder of a miner's right a lease of mineral land for any term not exceeding 21 years upon which the rent payable annually in advance shall be reserved. No form of a mining lease is scheduled to the Mining Act. No doubt a formal document is expected. But nothing in the Mining Act would preclude, in my opinion, the granting of a yearly tenancy which did not by its terms endure beyond 21 years from the date of its creation.
Section 23c makes it plain that the absence of a formal instrument does not prevent the creation of an obligation to pay rent. Rent, of course, issues out of the land and the obligation to pay it presupposes the relationship of landlord and tenant. The notification of the Minister's approval introduces into the relationship which entry and payment of rent upon the terms of the approval would create, all the other obligations which by the Mining Act a mining lease should contain. Although the notification of the Minister's approval of the applications for miscellaneous mining leases indicated that the formal document would not be issued until there had been a survey of the area, s 125a, introduced into the Mining Act in 1953, makes it clear that an approved application for a mining lease imported an obligation by the approved applicant to pay rent. Whilst the Minister's approval referred to the need for survey of the area, there was no lack of identification of the land to which the approval related. It had been pegged and described in the application for the mining lease. The survey was required for a more formal description of the area. Further, s 121 of the Mining Act, in any event, limited the occasion for a survey.
The taxpayer in fact entered into possession of the two areas in question, paid the appropriate rent and observed the obligations appropriate to a miscellaneous (salt) lease. Further, s 114 was treated as applicable to the taxpayer's circumstances. That section gave to the holder of any mining lease, other than a special mining lease, the right to the renewal of the lease from time to time, each renewal not exceeding 21 years from the expiration of the lease or of any renewal thereof, subject, of course, to the holder having duly performed and observed the covenants, provisions and provisos of the lease. It is quite apparent that the Minister for Mines through his Department throughout treated the taxpayer and, in the case of area no 389, its predecessor as the holder of a mining lease.
It may well be that, as a result of the approved applications, the terms of the Mining Act and the acts of the taxpayer in reliance on the Minister's approval, it could be concluded that there was an agreement between the Crown and the taxpayer for the execution of a formal lease; or it may be that by reason of these facts a statutory duty to issue a formal lease arose. It may be said that the matter rested in statutory obligation or statutory right rather than in the area of agreement; and in relation to the question of statutory duty the position of the Governor as representing the Crown would need to be considered. But I find it unnecessary to answer those questions. It suffices, in my opinion, that the taxpayer entered the areas of land with the assent of the Crown and paid an annual rent to the Crown. The terms of the Crown's assent to that entry, and upon which the rent was paid and received, were rendered certain by the Minister's approval and the provisions of the Mining Act. I have already set out s 23c which, by reason of subs (3) of that section, was applicable to the Minister's approval of each of the areas no 389 and no 600. In effect, that section in relation to approved applications whether made before or after its insertion into the Act in 1953 meant that approved applicants should be deemed to hold since the date of the approval to hold a lease of the described parcels of land. At the very lowest, this provision indicated that the entry and payment of rent by the approved applicant occurred with the assent of the Crown and that the Crown was authorized by the Mining Act to give that assent and to create such legal rights in the areas as that entry and payment of rent would involve.
Here, then, the successful applicant for the miscellaneous (salt) lease with the concurrence of the Minister entered upon the land pursuant to the approval of the application for a mining lease and the terms in which that approval was notified. The successful applicant paid rent and, in fact, observed the terms and conditions which the Mining Act required a mining lease to contain. The position, therefore, at law was that the successful applicant became a tenant from year to year, the rent being payable yearly, that tenancy continuing from year to year as a continuous tenancy until brought to an end by a lawful act of the Minister. I see no difficulty arising from the fact that the land was Crown land — as, in my opinion, it was — and that the power to deal with it was circumscribed by statute. The combined operation of s 59 and s 23c is enough to authorize the creation of a yearly tenancy of such land for the purpose of mining salt upon it. Entry and payment of rent with the concurrence of the Crown and upon the terms of the miscellaneous (salt) lease of the area created the relationship of landlord and tenant between the taxpayer and the Crown in right of South Australia. I am unable to agree that, because the Mining Act deemed the approved applicant to hold the land as if it were a lessee, it is impossible to conclude that it was a lessee of the land within the meaning of s 85 of the Act. It is clear that, for the purposes of that section, it is not necessary that the taxpayer should be a lessee for a term of years. Nor is it necessary that the relationship of landlord and tenant should derive from a written instrument. It is sufficient, in my opinion, that the taxpayer stands in the relation of tenant to the owner of land.
It may be, but I have no need presently to decide, that upon entry and payment of rent, the successful applicant became a lessee in equity for the designated term of years — the doctrines of equity treating as done that which ought to have been done, the courts, whether of Common Law or of Equity, having the necessary power to compel the execution of the instrument of lease. To decide this question would require a close examination of the basis of equitable doctrines illustrated but not necessarily exhaustively explored in Walsh v Lonsdale (1882) 21 Ch D 9, and of the power of the courts to issue mandamus to the Crown, if indeed a statutory duty to execute a formal lease had arisen.
I am, therefore, of opinion that the appellant was in the respective years of income a lessee within the meaning of s 85 of the Act of all three areas to which I have referred, and that an assignment of its rights and interest in the areas with the consent of the Crown was an assignment of a lease within the operation of s 35.
In relation to area no 234 a question arose in the Supreme Court of Victoria and in the argument before this court as to whether the amount to be deducted must be limited to an amount spent during the currency of the most recent term of the lease or whether it covered expenditure on improvements upon the land made by the taxpayer during an antecedent term of the lease. The language of s 85(1)(b) does not confine the amount of the deduction to the amount expended in effecting improvements during the currency of the lease which is assigned or surrendered. Indeed, it would be rather surprising if the subsection sought to distinguish between money expended in effectuating improvements before the commencement of that lease and money so expended during the currency of the lease. Once it is accepted that the lessee should obtain the benefit of a deduction of expenditure made during the currency of the lease there seems to be no persuasive reason for denying him a deduction for expenditure incurred in effecting improvements in anticipation of obtaining the lease or, more particularly, for expenditure incurred for that purpose during the currency of a lease which has been renewed. The expenditure on area no 234 accordingly falls within s 85(1)(b) and is allowable unless it is excluded by the operation of s 88B.
It was submitted by counsel for the taxpayer that, on its proper construction, s 88B(5) allowed an election to be made at the time of assignment or surrender, an election which would exclude the operation of s 88B in respect of the grant as well as of the assignment of the lease. It was said that the subsection operated "distributively". The Supreme Court of Victoria accepted this view and held that the elections of January 1967 were effective to bring s 85 into operation in relation to grant and assignment.
But, in my opinion, particularly having regard to the structure of s 88B, subs (5) on its proper construction requires the election to be made at the time of the grant if the subsequent assignment by the lessee is to fall within s 85. Where an election had not been made at the time of grant, an election at the time of the assignment by the lessee will be ineffective. This is also the case where the interest in the lease is acquired by assignment. The election to be effective must be made at the time of the acquisition of that interest, if the subsequent assignment is to fall within s 88B(2) .
The structure of s 88B is critically important to the construction of its subs (5). Section 88B precludes the relevant operation of, amongst other sections, s 85 unless an election under subs (5) of s 88B is made in respect of the grant. In such a case, subs (5) sets the time at which the election should be made and notified as being on or before 31 August next succeeding the end of the financial year in which the lease was granted. Of course, subs (5) will be read and applied "distributively" in the sense that its terms will be applied as appropriate to the situation under consideration ie, it will be read as if the words "as the case may be" were present. But, in my opinion, to read its terms distributively does not mean that an election made at the time of the ultimate assignment will be effective. In the case of s 88B(1), quite clearly the only one of the three words "grant", "assignment" or "surrender" or of the words "granted", "assigned" or "surrendered" which could apply is the word "grant". The words "assignment" and "surrender" in subpara (ii) of para (b) are both controlled by the opening portion of the subsection and by the qualification of the words "by the lessee".
This paragraph of subs (1) deals with the disposal by the lessor of goodwill or a licence and the assignment or surrender of the lease by the lessee. This subsection is governed by the opening words of subs (1). Thus, so far as relevant s 85 shall not apply unless there was an election under subs (5) in respect of the grant of the lease.
Section 88B(2) deals, so far as presently relevant, with the case of the acquisition of a lease by assignment. In such a case, s 85 is not to apply to an assignment by the assignee of the lease unless there has been an election under subs (5) "in respect of the assignment", ie the assignment by which the assignor of the subsequent assignment obtained title to the lease. Sub section (2)(b)(ii) makes it clear that the assignment or surrender there indicated is an assignment or surrender by "the assignee", ie the assignee under the assignment indicated in the opening words of subs (2). Again, the appropriate word in subs (5) is the word "assignment". Thus, an election which would make s 85 applicable to the subsequent assignment or surrender by the person who has taken title to the lease by assignment must be made within the specified time calculated by reference to the assignment by which that title was obtained.
Subsection (3) deals with the case of a premium paid or received in respect of a surrender of a lease, and in the case of the disposal of the goodwill of, or the grant of a licence in connection with a business carried on on the leased land. It does not deal with expenditure on improvements on such land. Subsection (3) thus makes an election by the person surrendering or the person to whom the surrender is made under subs (5) a condition of the applicability of s 85. Section 88B(5) requires that election to be made within a time calculated by reference to the date of the surrender.
It is clear that if a lease is surrendered by the lessee to whom it was granted or by the assignee to whom it has been assigned, s 85 will only apply if an election is made as required by subs (5)(1)(b)or (2)(b) as the case may be.
Having regard to the terms of s 88B as a whole, it is evident to my mind that in order that expenditure on improvements by the lessee to whom the lease was granted may be deductible by virtue of s 85 on assignment or surrender by the lessee, an election under and in conformity with s 88B(5) must have been made "in respect of the grant" of the lease, ie at the time calculated under subs (5) in relation to the date of such grant.
Equally, it is clear, in my opinion, that expenditure on improvements by an assignee of the lease may only be deductible on assignment or surrender by the assignee if such election had been made in respect of the assignment by which the assignor or surrenderer obtained title to the leases.
As I am clearly of this opinion, the election by the taxpayer in January 1967 was, in my opinion, outside the scope of subs (5) and ineffective to make s 85 applicable to the assignment of August 1966. As to two of the areas, nos 389 and 600, the taxpayer was the lessee to whom a grant was made or to whom it must be treated as having been made, having regard to my expressed opinion as to the effect under the Mining Act of the approval of the application for the miscellaneous (salt) leases and the entry and payment of rent by the applicant. There was no election within the time limited by subs (5) in relation to the grant of area no 600 which applied to exclude the operation of s 88B and so result in the application of s 85. The expenditure on area no 600 is therefore not deductible.
In relation to area no 234 there is the question whether s 88B has any application to the lease of that area. The original grant of the lease, the renewal and the assignment were all made before 6 November 1954 when the Income Tax and Social Services Contribution Assessment Act 1954 came into operation. Section 10 of that Act introduced s 88B. Section 13(4) of the Act provided that s 88B "applies in respect of a grant, assignment or surrender of a lease made after the commencement of this Act". It is plain enough that s 88B applies not only to a grant made after that date but also to an assignment or a surrender made after that date even if the lease the subject of the assignment or surrender was granted before that day. However, the section has no application to the lease of area no 234 as all the relevant transactions took place before 6 November 1954. Consequently, in relation to this area the operation of s 85 is left undisturbed.
It might be mentioned, incidentally, that by way of contrast with s 85(1) my analysis of s 88B, turning as it does on the time election is made, would rather indicate that the amount to be allowed as a deduction when that section applies should be the amount expended by the lessee between the grant of the lease and its assignment. So in the case of the assignee, it would be the expenditure made between the period during which the assignee had held the lease. If each renewal is a regrant, it would follow that the deduction would be limited to expenditure during the period from regrant to surrender. Further, although the assignor in the ultimate assignment obtained its interest by assignment from the lessee a subsequent renewal may place that assignee in the position of a lessee by grant. If that be so, the election would need to be made in respect of the renewal. It would also follow that an election would need to be made in respect of the regrant by way of renewal.
In relation to area no 389 it is therefore necessary to decide whether the renewal in 1957 was a regrant for the purposes of the Mining Act. In my opinion, the renewal of a lease under s 114 of the Mining Act operates as a new grant. This is the usual consequence of the renewal of a lease at law and I can find nothing in the provisions of the Mining Act which is intended to give the statutory lease a different operation. It was the assignment in 1967 that brings s 88B into play. As there was no election at the date of the regrant in 1957 of area no 389, s 88B operates to exclude the deduction otherwise allowable under s 85.
In my opinion, the taxpayer's appeals against the judgment of the Supreme Court fail and the appeal to the Commissioner should succeed to the extent which my answers to the questions in the stated case indicate. The questions asked by the Board of Review should be answered as follows:—
1. Sections 85and 88B(2)and (3) so apply, but s 88B(1) does not so apply.
2.
(a) Yes.
(b) Yes.
(c) No.
3.
(a) Yes, by grant.
(b) Yes, by grant.
(c) No.
4. Yes.
5.
(a) Yes.
(b) Unnecessary to answer.
6.
(a) The election must be made by the parties to the grant of a lease if s 85 is to apply to an assignment or surrender by the person to whom the lease was granted. Where the claim to deduct is by a person to whom the lease has been assigned, the election must have been made by that person and the person who assigned the lease to him within the time calculated under s 88B(5) in relation to the time of the transaction between those persons.
(b) (i) In the case of area no 234, No. (ii) In the case of areas nos 389 and 600. Yes, the whole amount so claimed should be disallowed.
7. Yes.
8. No.
9.
(a) Yes, the whole sum.
(b) and
(c) No; no part of the sum is an allowable deduction.
Gibbs J
I have had the advantage of reading the reasons for judgment prepared by the Chief Justice and can in consequence deal with the questions that arise more shortly than would otherwise have been the case.
The taxpayer claims that the amount of moneys which it paid in effecting improvements upon certain land in each of the income years 1966 and 1967 is an allowable deduction under s 85(1)(b) of the Income Tax Assessment Act 1936 (Com), as amended. The claims in respect of three areas, nos 234, 389 and 600, typify all the taxpayer's claims. In order to succeed in full the taxpayer must establish:—
(1) that each of the areas was "the subject of the lease", within the meaning of s 85(1)(b);
(2) that under s 85(1)(b) a taxpayer who assigns a lease is entitled to a deduction in respect of moneys paid in effecting improvements upon land which is the subject of the lease, notwithstanding that the moneys were paid before that lease was granted; and
(3) that s 85 is not rendered inapplicable by the provisions of s 88B.
The learned primary judge held that area 234 was subject to a lease. This part of his decision was not challenged and it was in my opinion correct. However he held that neither area 389 nor area 600 was subject to a lease. For reasons which will appear I need not decide this question, but will, where necessary, assume in favour of the taxpayer that each of those areas was subject to a lease.
The second question that I have mentioned arises in respect of areas 234 and 389. A lease of area 234 was granted to another company for a term of 21 years from 1 April 1928, and was assigned to the taxpayer on 17 August 1937. In 1949 the lease was renewed for a further term of 21 years. The expenditure claimed as a deduction in respect of area 234 was made by the taxpayer during the term of the original lease; there was no expenditure on improvements during the period of the renewed lease. A "lease" of area 389 for a term of 21 years from 1 April 1938 was renewed in 1957 for a further term of 21 years. Of the expenditure claimed in respect of this area some was made before and some after the renewal. In the case of area 600 there was no renewal and all the expenditure was made after the "lease" was granted. The taxpayer assigned the "leases" of all three areas on 26 August 1966.
It may in my opinion be accepted that a renewal of a lease is "a new lease, a new demise": see Gerraty v McGavin (1914) 18 CLR 152 at 163-4; Friedman v Barrett; Ex parte Friedman [1962] Qd R 498 at 507-8. It was contended on behalf of the Commissioner that s 85 allowed a deduction for an amount paid in effecting improvements only if the payment was made during the term of the lease current at the time of the assignment. The learned primary judge rejected this contention and in my opinion he was correct in doing so. The relevant words of s 85(1) are as follows:—
"Where, in the year of income, a taxpayer assigns or surrenders a lease, any amount which has been paid by him—
…
(b) in effecting improvements upon land which is the subject of the lease;
… shall, subject to this section, be an allowable deduction."
There is nothing in the subsection that says that the money is to be spent upon the land while it is subject to the lease. The words "which is the subject of the lease" describe the land by reference to the situation at the time of the assignment or surrender. "The lease" in para (b) means the lease which the taxpayer assigns or surrenders. But if the land is subject to a lease which the taxpayer assigns or surrenders in the year of income it answers the description contained in the subsection, and there is no reason to import an additional requirement, not there expressed, that the expenditure should be made during the currency of the lease assigned or surrendered. It may be assumed that s 85(1)(b) was enacted to provide for the situation where a taxpayer who has expended money on land in the expectation that he will have the benefit of a lease for a particular length of time is defeated in that expectation. However such a situation may arise when the money is spent on the land before the lease is actually granted, as of course is clearly the position under s 85(1)(a) which refers to money paid by a taxpayer to acquire the lease. In any case, in a taxing statute it is impermissible to restrict the ordinary meaning of plain words which give a benefit to a taxpayer where this is not necessary to render those words harmonious with other provisions of the statute or to avoid an obvious absurdity or injustice.
The third question is whether s 85 applies to the present case. The provisions of that section, and of certain other provisions of Div 4 of Pt III of the Act, are rendered inapplicable to mining leases, or leases of land for mining purposes, by s 88B, unless an election is made under s 88B(5). It should, I think, be emphasized that s 88B does not entitle a taxpayer to a deduction. That is the effect of s 85. The provisions of s 88B, in their application to deductions, are disentitling; where they apply, they deprive the taxpayer of a deduction to which s 85 would otherwise entitle him; they take cases out of s 85, rather than bring them within it.
In the present case it can hardly be doubted that if there were leases in respect of each of the three areas they were mining leases or leases for mining purposes, or that there were documents which satisfied the requirements of s 88B(4). However there are two matters to be considered in relation to the possible application of s 88B . One of those matters is whether, on the proper construction of s 88B, the election that is necessary to be made in order to prevent the operation of s 88B(1)(b), and thus to prevent s 85 from being rendered inapplicable, is an election made in respect of the grant. If that is the true construction of the section, the elections in the present case, which were made on 18 January 1967, and which stated that the taxpayer elected that s 88B "shall not apply in relation to the said assignment", were ineffective to prevent the operation of s 88B(1).
The learned primary judge was of the opinion that s 88B(5) should be construed distributively, and in a sense that is correct. But it does not follow that a notice made and lodged within the prescribed time after the assignment of a lease, and expressing an election that the section should not apply in respect of the assignment, is sufficient to prevent the operation of s 88B(1). The words of that subsection lead to the contrary conclusion. So far as is relevant they provide:—
"Where a mining lease is granted, or a lease of land other than a mining lease is granted for mining purposes, and an election is not made under subsection (5) of this section in respect of the grant—
…
(b) section eighty-five of this Act shall not apply— …
(ii) in relation to an assignment or surrender of the lease by the lessee or the disposal by the lessee of goodwill or a licence in respect of a business carried on upon the leased land; …."
To repeat those words is to show that read alone they are plain and unambiguous: where a mining lease is granted, or a lease of land other than a mining lease is granted for mining purposes, and an election is not made in respect of the grant, s 85 shall not apply in relation to an assignment of the lease by the lessee. To ensure that s 85 will not be rendered inapplicable in such a case it is necessary to make an election in respect of the grant. The taxpayer relied on the fact that s 88B(5) speaks of an election that "this section shall not apply in relation to the grant, assignment or surrender", and submitted that these words refer to an election to exclude the operation of the whole section. But subs (5) is distributive in the sense that the words "as the case may be" need to be implied. The operative words of s 88B are to be found in subss (1), (2)and (3), which deal respectively with the grant, the assignment and the surrender of mining leases or leases of land for mining purposes. If an election is not made in respect of the grant, the effect of subs (1) is that s 85 shall not apply in relation to an assignment of the lease by the lessee. That subsection has the effect of excluding the application of s 85 in the present case (assuming that s 88B applies where the lease was granted before the section came into force, a question with which I am about to deal). Sub section (2) does not detract from the force of subs (1). Paragraph (b) of that subsection provides that where a mining lease is assigned, or a lease of land other than a mining lease is assigned for mining purposes, and an election is not made in respect of the assignment, s 85 shall not apply:—
"(i) in relation to the assignment of the lease by the assignor …; or
(ii) in relation to an assignment or surrender of the lease by the assignee …."
Thus if a mining lease is assigned by the lessee, s 85 will not apply in relation to that assignment unless an election is made in respect of the grant ( s 88B(1)(b)(ii)) and in respect of the assignment ( s 88B(2)(b)(i)). On the other hand, if a mining lease is assigned, and no election was made in respect of the grant, but an election is made in respect of the assignment, s 85 will not be rendered inapplicable in respect of a subsequent assignment by the assignee.
No election was made in respect of the grant of the "lease" of any of the three areas in the present case. In the case of areas 389 and 600, it follows that the taxpayer is not entitled to the deduction claimed. If those areas were not the subject of leases, of course s 85 does not apply. But assuming that they were the subject of leases, s 88B(1)(b) has the effect that s 85 still does not apply because no election was made in respect of the grant of either lease. There is no doubt that s 88B(1)(b) applies in respect of the grant of those "leases", both of which were made after 6 November 1954; in the case of the area 389 the original "lease" was granted before 6 November 1954, but the renewal, which as I have said was a new "lease", was made before that date.
The position is however different in respect of area 234. Both the lease and the renewal were made years before 6 November 1954. The question that then falls for decision is whether s 88B has any application to the case of area 234. That section was inserted in the Act by s 10 of the Income Tax and Social Services Contribution Assessment Act 1954. By s 13(4) of that Act it was provided as follows: "The amendment effected by section ten of this Act applies in respect of a grant, assignment or surrender of a lease made after the commencement of this Act." The Act commenced on 6 November 1954. I agree with the conclusion of the learned primary judge that in s 13(4) the word "made" qualifies the words "grant", "assignment" and "surrender" rather than the words "a lease". The amendments apply not only in respect of a grant made after 6 November 1954, but also in respect of an assignment or surrender made after that date. However it does not follow that where the amendment applies in respect of an assignment, made after 6 November 1954, of a lease granted before that date, it applies also in respect of the grant of that lease. I have already set out the commencing words of s 88B(1): "Where a mining lease is granted, or a lease of land other than a mining lease is granted for mining purposes …". Those words in their natural sense are prospective; they refer to the case where a lease of the kind referred to is granted after the section comes into operation. On the other hand, s 88B(2) commences as follows: "Where a mining lease is assigned, or a lease of land other than a mining lease is assigned for mining purposes …". That subsection applies where the assignment takes place after 6 November 1954, even though the lease was granted before that date. The same is true of subs (3) which deals with surrenders. The natural meaning of these words is confirmed by s 13(4). Section 88B(1) applies in respect of a grant made after 6 November 1954. Section 88B(2) applies in respect of an assignment made after 6 November 1954, even though the lease was granted before that date. However s 88B(1) does not apply in respect of a grant made before 6 November 1954 of a lease which was assigned after that date. If s 88B(1) applied to leases made before 6 November 1954, it would have an unfair and capricious operation: it would exclude s 85, because no notice of election had been given at a time when the section requiring the giving of the notice had not been enacted. That however is not the meaning or effect of the provision.
For these reasons, in my opinion, s 88B(1) did not apply in respect of the grant of the lease of area 234; for that matter, s 88B(2) did not apply in respect of the assignment of that lease to the taxpayer. The provisions of s 85 were therefore not rendered inapplicable in respect of area 234. It appears from two passages in the judgment of the learned primary judge that this was indeed conceded by the Commissioner at the hearing of the matter at first instance, that is, of course, on the hypothesis that there was a lease, which the Commissioner disputed.
For these reasons I would answer the questions asked as follows:—
1. Sections 85and 88B(2)and (3) so apply, but s 88B(1) does not so apply.
2.
(a) Yes.
(b) Yes.
(c) Unnecessary to answer.
3. Unnecessary to answer.
4. Unnecessary to answer.
5.
(a) Yes.
(b) Unnecessary to answer.
6. (a)(i) and (ii) Yes. (b)(i) In the case of area no 234, No. (ii) In the case of areas nos 389 and 600, Yes, the whole amount so claimed should be disallowed.
7. Unnecessary to answer.
8. No.
9.
(a) Yes, the whole sum.
(b) No.
(c) No. The practical result will be the same as that flowing from the order made by the learned primary judge, although for different reasons. I would therefore dismiss both appeals, but would vary the order by substituting the answers shown above.
Mason J
I am in agreement with the reasons for judgment which have been prepared by the Chief Justice and I would, accordingly, dismiss the taxpayer's appeal and allow the Commissioner's appeal.
I would answer the questions of law asked in the reference in the manner proposed by the Chief Justice. |
high_court_of_australia:/showbyHandle/1/9137 | decision | commonwealth | high_court_of_australia | text/html | null | Balcombe v De Simoni [1972] HCA 9 | https://eresources.hcourt.gov.au/showbyHandle/1/9137 | 2024-09-13T22:50:46.451079+10:00 | High Court of Australia
Barwick C.J. McTiernan, Menzies, Walsh and Gibbs JJ.
Balcombe v De Simoni
[1972] HCA 9
ORDER
Special leave granted. Appeal allowed. Order of the Supreme Court set aside and in lieu thereof order that the order nisi to review be discharged.
Cur. adv. vult.
The following written judgments were delivered:—
1972, Feb. 24
Barwick C.J.
The respondent was charged on the appellant's complaint under the Justices Act, 1902 W.A. (as amended) that "by falsely pretending that he was a student from South Australia selected in a contest for $1,000 and an overseas trip to represent the youth of Australia on a goodwill tour obtained from" (the representee) "$6.50 in money with intent thereby then to defraud, contrary to s. 409 of the Criminal Code ".
The magistrate convicted the respondent. He was satisfied of the making of the pretence and that it was false. Having found that there was a false pretence within s. 408 of the Criminal Code, the magistrate said that he accepted the evidence "that it was this false pretence which was the substantial cause which induced her" (the representee) "to part with $6.50 in money and this creates the offence with which the defendant is charged notwithstanding that " (the representee) "was to get something of real value for her money".
Upon an order to review this decision the Supreme Court set aside the conviction. The Court [1] rejected a submission that the magistrate had failed to give attention to the need to find an intent to defraud by obtaining the property in order to constitute the offence and held that in fact the magistrate had found such an intent. For myself, I would have preferred the view that the magistrate did make the error of concluding that once he found the inducement of the transaction by the false pretence, he was justified, in the circumstances, in convicting the respondent. A like mistake is illustrated in the summing up with which R. v. O'Sullivan [2] deals. That it was an error so to conclude is to my mind manifest. The crime is that of obtaining property by false pretences and with intent thereby, i.e. by the obtaining, to defraud. The insistence on the need for there to be such an intent appears throughout the reported cases on this particular offence. It is sufficient to cite R. v. O'Sullivan [2] as an example.
1. [1971] W.A.R. 147.
2. [1925] V.L.R. 514.
3. [1925] V.L.R. 514.
It seems to me that the Supreme Court was entitled to take the magistrate at his own word and to conclude that he meant what he so clearly said. As spoken by him, his judgment was in my opinion in fundamental error; as expressed, it was that the inducement of the representee's agreement to purchase the book by the false pretence constituted the offence.
However, we have heard argument on the footing that the Supreme Court rightly treated the magistrate's decision as including a finding that the respondent not merely induced the purchase of the book by a false pretence but that he obtained the price of the book with intent to defraud. On that footing the Supreme Court discharged the magistrate's order, being of opinion that the intent to defraud had not been made out. See s. 197 and s. 205 of the Justices Act.
The respondent, as the magistrate found, falsely pretended that he was a student from South Australia selected as a participant in a contest for $1,000 and a trip abroad, a competition in which points were earned by sales effected of certain books offered for purchase. Whether the evidence showed that all the facts of the representation were false is to my mind unclear. But clearly the respondent was not a student and the representation was not wholly true. His story seemingly excited the representee's sympathy for, so moved, she purchased through him a cooking book, which she otherwise would not have done, paying him what appears to have been its value in anticipation of its subsequent delivery by the respondent's employers. The representee having decided to purchase the book selected by her intended in passing over the price of the book that the respondent should in turn pass the money to his employers as the price of the book she had agreed to buy. It was not suggested that the respondent did not think the book to be really worth the asking price, or that he did not intend when he received the money to pass it to the proper destination to procure delivery of that book, or that he did not believe that the book would be duly delivered.
One can feel quite strongly about the lack of honesty in this form of salesmanship, reflecting no credit whatever on the respondent and none on those who employed him. But however much to be condemned and deplored, the question remains whether the conduct of the respondent made out the offence with which he was charged.
The section creating the offence, s. 409 (1) of the Criminal Code W.A., is in the following terms:
219. (1)
Any person who by any false pretence or by any wilfully false promise or partly by a false pretence and partly by a wilfully false promise, and with intent to defraud, obtains from any other person anything capable of being stolen, or induces any other person to deliver to any person anything capable of being stolen, is guilty of a crime, and is liable to imprisonment with hard labour for three years.
It is immaterial that the thing is obtained or its delivery is induced through the medium of a contract induced by the false pretence or the wilfully false promise or partly by a false pretence and partly by a wilfully false promise.
The clearest and most authoritative statement of the necessary elements of this offence is to be found in the summing up of Channell J. in R. v. Carpenter [1] .
1. (1911) 22 Cox C.C. 618, at p. 624.
If the defendant made statements of fact which he knew to be untrue, and made them for the purpose of inducing persons to deposit with him money which he knew they would not deposit but for their belief in the truth of his statements, and if he was intending to use the money so obtained for purposes different from those for which he knew the depositors understood from his statements that he intended to use it, then we have the intent to defraud
This lucid explanation of what is requisite to make out a charge under such a provision as s. 409 (1) is, in my opinion, both applicable to and definitive of the present case. It emphasizes that the intent to obtain the money by a false pretence does not necessarily provide evidence of the intent to defraud.
The property will not be obtained by false pretence unless the pretence induces the representee to act upon it. Nor will there be a false pretence unless it can be concluded that the accused intended his representation to be acted upon. See Russell on Crime, 12th ed. (1964) vol. 2, p. 1176. Thus the intent to induce and the inducement in fact are necessary elements of that part of the offence which consists in the obtaining by a false pretence. But in addition to the false pretence there must be an intent to defraud by the obtaining of the property. To treat the intended inducement by the false pretence as in itself of necessity proof of an intent to defraud is in effect to dispense with the need for an intent to defraud. In other words the intent to obtain is treated as itself the intent to defraud. No doubt there are occasions when the nature of the representation, the circumstances in which it was made, and the nature of the property obtained thereby may furnish material upon which an intent to defraud may be found. But it does not necessarily follow in my opinion that obtaining property by a false pretence is an obtaining with intent thereby to defraud within the requirement of s. 409.
But the appellant, conceding the need for an intent to defraud by the obtaining of the price of the book, insists that the Supreme Court was in error in concluding that there was no evidence of an intent to defraud over and above the intent to obtain by the false pretence.
The expression "with intent to defraud" does not seem to have any universal connotation applicable in all statutory contexts. Their Lordships in Welham v. Director of Public Prosecutions [2] gave the expression as found in s. 4 of the Forgery Act 1913 U.K. a meaning which did not require an intention to inflict economic loss on another person. They seem to have been assisted in this view by decisions illustrative of convictions for forgery prior to the passing of the statute they were construing. No universally valid conclusion as to the connotation of the expression can be drawn in my opinion from their Lordships' speeches in that case. But I notice in passing that Lord Radcliffe agreed that "to defraud must involve something more than the mere inducing of a course of action by deceit" [1] . The question remains as to the meaning of the expression in the context of the Western Australian Criminal Code.
1. [1961] A.C. 103.
2. [1961] A.C., at p. 127.
The language of the section clearly requires in terms that there be both an intent to obtain the property by false pretence and in addition an intent by that obtaining to defraud. The pretence must of necessity be made to a person or body: in general one would expect the property to be intended to be obtained from the representee, though perhaps this may not always be so. Also, in general, the intent will be to defraud the representee from whom the property is obtained: though again this may not be universally so. But in this case, the property was intended to be and was obtained from the representee and there is no suggestion of any intent to defraud except a suggestion of an intent to defraud the representee.
Whilst in other contexts it may possibly be said that to defraud is by deceit to cause another to take a course of action to his injury, this connotation of the word cannot, in my opinion, be applicable in the case of this section of the Criminal Code. The obtaining by false pretence essentially involves inducing the representee by deceit to take a course of action which otherwise the representee would not have taken. In so far as that course of action is the delivery of property, it can be said that that delivery is a relevant injury to the representee. Unless the requirement of an intent to defraud is treated as tautological, as I think the magistrate did, it calls for something more than the obtaining of the property by the false pretence, that is, for something more than an inducement by deceit to take a course of action. Again, in so far as the intent must be to defraud by the obtaining of the property, it would seem that the intent must be to do something to or with that property which the representee in handing it over did not intend, contemplate or understand should be done with it. This does not mean that of necessity economic loss by the representee is intended to be caused. But it does mean in my opinion that there must be an intent to divert or use the property obtained in a dishonest way. In other words, the dishonesty involved in the false pretence does not necessarily involve the achievement or intended achievement of a dishonest purpose by the obtaining of the property. So much in my opinion the statute properly construed contemplates.
The question, which in a sense was the real question for the Supreme Court, as it viewed the magistrate's decision, is whether there was any material upon which the magistrate properly understanding all the elements of the offence, could have found beyond reasonable doubt that the respondent had an intent by obtaining the price of the book to defraud the representee. I agree with the Supreme Court that the magistrate was not justified in doing so. The whole facts of the transaction are known and unless the intention dishonestly to induce the agreement to purchase necessarily establishes the intention to defraud the representee by obtaining the price of the book from her, there is no evidence at all of an intention to defraud the representee by taking the price from her.
Whilst the intervention of a contract between the false pretence and the passing of money or property to the defendant does not prevent it being held that the accused obtained the money or property, the existence of that contract cannot be ignored when questions of an intent to defraud are being considered. Further, although the fact that value was, or was to be, obtained for the money with which the representee parted, does not negative or preclude the existence of an intent to defraud, the fact that the money is paid over for a contractual purpose cannot be ignored when deciding whether the requisite intent to defraud is present. Here, though the agreement was induced by deceit, there was no evidence on which it could be held that the respondent intended to do anything with the money other than that which the representee intended when passing it to him that he should do with it. In relation to an intent to defraud what the parties intended should be done with the property or money obtained can never, in my opinion, be immaterial.
The case is an unusual one for in general the overall dishonesty of purpose of the accused as evidenced by his conduct will furnish evidence of the requisite intent to defraud. That really was the case for example in R. v. Hammerson [1] and R. v. O'Sullivan [2] . Here, there was no evidence of that pervasive dishonesty which so often runs throughout a case of obtaining money or property by false pretences with intent to defraud.
1. (1914) 10 Cr. App. R. 121.
2. [1925] V.L.R. 514.
Consequently, upon what I conceive to be the construction of the Statutory provision and the state of the evidence, I am of opinion that the complaint ought to have been dismissed.
However, because much reliance was placed upon certain decisions by the Solicitor-General in his vigorous argument in support of the appeal, I should briefly discuss some of them.
In R. v. Hammerson [1] there was evidence of conduct on the part of the accused from which it could have been concluded that there was what I have referred to as pervasive dishonesty which coloured all the incidents of the transaction in question and gave warrant for inferring an intent to defraud. But judging by counsel's argument, as reported, there was no specific direction by the trial judge as to the need for an intent to defraud. The Court of Criminal Appeal apparently thought that on a general purview of the summing up the "real question" was properly put to the jury. In dealing with another submission, however, that there could be no intent to defraud if something of real value was obtained by the representee for the money with which he parted—a proposition clearly insupportable—Bankes J. said [2] , "where money is obtained by pretences that are false, prima facie there is an intent to defraud". I find the use of the expression "prima facie" difficult, carrying as it may some impression that it rests upon an accused to negative the implication. Equally I find unsatisfactory a summation of R. v. Williams [3] which attributes to it the proposition that "the circumstances may negative an intent to defraud, although the goods are obtained by a false pretence". (Hamilton and Addison: Criminal Law and Procedure New South Wales, 6th ed. (1956), p. 222). R. v. Williams [3] in my opinion decides that the obtaining of the goods by a false pretence does not necessarily import an intention to defraud. Whether or not there is such an intent depends on all the circumstances. Of course, the onus of satisfying the jury as to the existence of such an intent rests upon the Crown. But if no more is meant by the statement in R. v. Hammerson [1] and in R. v. Porter [4] that where money is obtained by pretences that are false prima facie there is an intent to defraud, such an intent may be inferred if no more is known than that the accused obtained money by false pretences, I feel I could accept the statement. But that is not the case here. Consequently I obtain no assistance from these statements in resolving the present case. In addition the decision in R. v. O'Sullivan [1] places, and I think rightly, much more emphasis on the need for a specific and unambiguous direction as to the need for the presence of an intent to defraud than was done in R. v. Hammerson [2] . Cf. also Reg. v. Potger [3] , a case disposed of by the use of the proviso to s. 2 (1) of the Criminal Appeal Act, 1968 U.K..
1. (1914) 10 Cr. App. R. 121.
2. (1914) 10 Cr. App. R., at p. 122.
3. (1836) 7 C. & P. 354 [173 E.R. 158].
4. (1836) 7 C. & P. 354 [173 E.R. 158].
5. (1914) 10 Cr. App. R. 121.
6. (1935) 25 Cr. App. R. 59, at p. 62.
7. [1925] V.L.R. 514.
8. (1914) 10 Cr. App. R. 121.
9. (1970) 55 Cr. App. R. 42.
I have already indicated that the connotation of the expression "intent to defraud" as found in the Forgery Act is in my opinion inapplicable in the case of s. 409 of the Criminal Code. So are many of the general statements contained in decided cases and text books dealing with forgery.
I have already referred to the language of Channell J. in R. v. Carpenter [4] . In dealing with his Lordship's summing up in that case it must be remembered that the defrauding consisted in the representee getting something different from what he thought he was getting. There does not seem to have been any contest that that was so. Consequently, the case boiled down as Channell J. said to the question whether the false pretence was made or not.
1. (1911) 22 Cox C.C., at p. 624.
I do not pause to discuss cases with respect to other and different offences such as asporting property fraudulently under the Larceny Act, 1916 U.K., or the making of a false entry with intent to defraud, or obtaining credit by false statements because statements as to what is sufficient to satisfy the notion of fraud, or an intent to defraud in those instances cannot in my opinion be transferred into the context of the present appeal.
There remains the judgment of the Supreme Court of Victoria in R. v. O'Sullivan [1] . I have already indicated my acceptance of the decision that an express direction is necessary as to the need for an intent to defraud by the obtaining of the money or property. I also agree that this is so notwithstanding the presence of abundant evidence of such an intent. For my own part, though the possibility of such cases must be conceded, I would regard the course taken in R. v. Carr [5] and in R. v. Ferguson [6] as exceptional and as in general unsatisfactory.
1. [1925] V.L.R. 514.
2. (1916) 12 Cr. App. R. 140.
3. (1913) 9 Cr. App. R. 113.
But, there is a dictum made in the course of the judgment of the Chief Justice in R. v. O'Sullivan [1] which, with due respect, I am unable to accept. His Honour said:
It is an essential element of the offence that the goods should have been obtained by false pretences with intent to defraud. The intent to defraud includes in every case an intention on the part of the accused that the owner of the goods shall be by such false statements induced to do what he otherwise would not do—namely, part with the goods in question. There is abundant evidence in this case on which the jury might find such an intention in the accused [1] .
1. [1925] V.L.R. 514.
2. [1925] V.L.R., at p. 518.
It seems to me that in this passage the intent to defraud is identified with the intent to obtain. But in that event, the reference in the section to an intent to defraud becomes otiose for the intent to obtain is an indispensable element of the obtaining by false pretence. No doubt in other contexts a person induced by deceit to a course of action which he otherwise would not take may be held to be defrauded. But, as I have already said, such a concept is inadequate in the context of this section which requires an obtaining by false pretence and an intention by the obtaining to defraud. However, in my opinion, there was evidence of conduct in R. v. O'Sullivan [2] from which an intent to defraud the representee of the goods or their value could have been inferred.
1. [1925] V.L.R. 514.
For the reasons I have expressed, the conclusion at which the Supreme Court of Western Australia arrived in this case, in my opinion, was correct. I would dismiss the appeal both for that reason and also because I think the magistrate wrongly decided that the inducement of the contract of purchase by a false pretence was enough to establish the offence.
McTiernan J.
The respondent was convicted by a Court of Petty Sessions under s. 409 (1) of the Criminal Code, 1913-1969 W.A.. That section in so far as it is material, reads as follows:
(1)
Any person who by any false pretence or by any wilfully false promise or partly by a false pretence and partly by a wilfully false promise, and with intent to defraud, obtains from any other person anything capable of being stolen, or induces any other person to deliver to any person anything capable of being stolen, is guilty of a crime, and is liable to imprisonment with hard labour for three years.
It is immaterial that the thing is obtained or its delivery is induced through the medium of a contract induced by the false pretence or the wilfully false promise or partly by a false pretence and partly by a wilfully false promise.
The learned magistrate had found that the defendant had falsely and knowingly represented that he was a student selected in a contest for a monetary prize and an overseas goodwill trip to represent the youth of Australia and had thereby induced a purchaser to give him $6.50 for a cookery book which was to be delivered at a later date. The learned magistrate held the offence was made out notwithstanding his finding that the purchaser was to get something of real value for her money. In my opinion this entailed a finding that the defendant had obtained $6.50 from the purchaser by a false pretence and with intent to defraud.
It was contended before this Court however that there was no evidence on which a finding of intent to defraud could have been made beyond a reasonable doubt for the reason that the intent was no more than to secure an agreement supported by a genuine and adequate consideration.
In my opinion the crucial characteristic of an intention to defraud is not the economic loss which may or may not result to the purchaser but the element of dishonesty. In R. v. Kritz [1] , the Court of Criminal Appeal quoted with approval the direction given by Channell J. as to intent to defraud in R. v. Carpenter [2] . The concluding words of the passage quoted read: " this question as to the intent to defraud substantially comes to this: whether or not the statements were honestly made". This question was also considered by the Supreme Court of Victoria in R. v. O'Sullivan [3] where the Court said [4] :
It is an essential element of the offence that the goods should have been obtained by false pretences with intent to defraud. The intent to defraud includes in every case an intention on the part of the accused that the owner of the goods shall be by such false statements induced to do what he otherwise would not do—namely, part with the goods in question.
It is the fraud involved in obtaining the property which supplies the intention demanded by the statute and that intent is not negatived by the fact that the purchaser received or was to receive an object of value: see also R. v. Hammerson [5] and Welham v. Director of Public Prosecutions [6] , per Lord Denning.
1. [1950] 1 K.B. 82, at pp. 86-87.
2. (1911) 22 Cox C.C., at p. 624.
3. [1925] V.L.R. 514.
4. [1925] V.L.R., at p. 518.
5. (1914) 10 Cr. App. R. 121.
6. [1961] A.C. 103, at p. 131.
In my judgment there was ample evidence on which the learned magistrate might have made a finding that there was an intent to defraud on the part of the defendant, a finding which he did, in my opinion, make.
I would therefore grant special leave, allow the appeal and discharge the order to review.
Menzies J.
I have had the advantage of reading the reasons for judgment to be delivered by Gibbs J. I agree entirely with these reasons and consider that the order of the Court should be as he proposes.
Walsh J.
The questions raised by this application for special leave to appeal are explained in judgments prepared by other members of the Court. The principal question that has to be decided depends upon the proper construction of s. 409 (1) of the Criminal Code W.A.. With regard to the cases to which we were referred in argument, in which there are judicial statements dealing with the offence of obtaining property by false pretences and with the meaning of the expression "with intent to defraud", it is not easy to reconcile all those statements or to extract a principle of construction that can be regarded as well established and as applicable to the statute now under consideration. These authorities are discussed in the judgments of other members of this Court, as well as in that of the learned primary judge. I need not refer again to the passages in them upon which reliance has been placed in argument.
My consideration of the questions raised by the application has brought me to the conclusion, in agreement with that of the Chief Justice, that the orders made by the Supreme Court of Western Australia [1] should not be disturbed. I agree with his Honour's reasons and do not wish to add anything to them except to make some observations upon one question, upon which different views have been taken in this Court.
1. [1971] W.A.R. 147.
In the Supreme Court of Western Australia, Wickham J., after referring to ss. 408 and 409 of the Criminal Code, said [2] :
There is therefore an element of intent in the obtaining of the thing by the false pretence in that the false pretence which is itself necessarily dishonest is intentionally used by the accused as an inducement for the obtaining, or, more accurately as an inducement to the victim to allow him to obtain.
1. [1971] W.A.R., at p. 149.
In his reasons for judgment the Chief Justice has written that the intent to induce and inducement in fact are necessary elements of that part of the offence which consists in the obtaining of property by a false pretence and that in addition there must be an intent to defraud by the obtaining of the property. The contrary view is that in the description of the offence there is not included, apart from the words "with intent to defraud", any element of intention at all. According to that view all that is necessary in order to establish that a person has obtained property by a "false pretence" (as defined in s. 408 of the Criminal Code) is to show that he obtained it by means of a representation of a matter of fact which representation was false in fact and that he knew that it was false or did not believe it to be true and in this no intention to obtain the property is involved.
I am of opinion that the view of the Chief Justice is correct. If s. 409 (1) had been enacted without the inclusion therein of the words "and with intent to defraud", it would not have been proper in my opinion to construe it in such a way that an offence would be committed even if it appeared that the accused, although he made a false statement known by him to be false by which in fact he obtained property from another person, had no intention that that person would be induced by the statement to part with any property. I do not think that s. 23 of the Criminal Code would require that it should be so construed. I do not think that the word "obtains", as used in s. 409 (1), includes in its meaning a reference to an unintended and unexpected acquisition of property. The same provision refers to a person who "obtains" something from another person and to a person who "induces" another person to deliver something. In the first case there is required, in my opinion, an intention that the other person will be induced by the false pretence to part with the property so that the maker of the representation may obtain it, just as in the second case it is plain that there must be an intention that the other person will be induced to deliver the property.
In my opinion, special leave to appeal should be granted but the appeal dismissed.
Gibbs J.
The respondent was employed as a salesman to go from house to house through the suburbs of Perth in an endeavour either to sell books or to obtain subscriptions for periodicals for which his employer had the agency. He was not scrupulous in the methods he employed to effect a sale, but used both deceit and importunities to that end. As a result of complaints concerning his activities he was charged that on 17th August 1970 at Wexcombe by falsely pretending to one Jina Hasluck that he was a student from South Australia selected in a contest for $1,000 and an overseas trip to represent the youth of Australia on a goodwill tour he obtained from the said Jina Hasluck $6.50 in money with intent thereby then to defraud, contrary to s. 409 of the Criminal Code W.A.. The magistrate who constituted the Court of Petty Sessions before which the charge was brought found that the false pretence alleged was made and that it induced Jina Hasluck to part with $6.50 and went on to convict the respondent. The magistrate did not, however, make a finding that the respondent had an intent to defraud. The respondent obtained an order nisi to review the decision of the magistrate upon two grounds, viz., (a) that the magistrate had made no finding that the respondent had made the false pretence alleged with intent to defraud and (b) that there was no evidence of an intent to defraud on the part of the respondent and that he should therefore have been acquitted. The learned judge of the Supreme Court of Western Australia [1] before whom the order nisi was returned took the view that the magistrate must have been satisfied that there was an intent to defraud, so that the first ground failed, but that there was no evidence on which such a finding could have been made and he accordingly made absolute the order nisi and quashed the conviction. The complainant now seeks special leave to appeal against this judgment.
1. [1971] W.A.R. 147.
It is convenient to proceed immediately to the question of substance involved in the application, which is whether on the evidence the magistrate should have found an intent to defraud, a question which depends upon the true view of the substantive law on the point. By means of the false pretence alleged the respondent induced Jina Hasluck to agree to buy a cookery book which she did not want and to pay the respondent $6.50 as the price of the book. She was given a receipt and was apparently told that the book would be delivered to her at a later date. Her money was subsequently refunded as a result of a suggestion made to the respondent by the police, but it must be assumed in favour of the respondent, since the contrary was not proved, that at the time the false pretences were made and the money was obtained the respondent intended that his employer would arrange for the delivery of the book and that the book would have been delivered and that its normal price was not less than $6.50. The case is therefore one in which there was no misrepresentation as to the nature or quality of the thing to be supplied in exchange for the money or as to the use to which the money would be put when it was paid over; the false pretence was made with intent to induce the representee to part with her money but it was intended to use the money in exactly the manner represented, that is, as the purchase price of the book which it was intended to deliver and which it must be supposed would, in fact, have been delivered, in accordance with the representation.
Section 409 of the Criminal Code W.A. reads as follows:
(1)
Any person who by any false pretence or by any wilfully false promise or partly by a false pretence and partly by a wilfully false promise, and with intent to defraud, obtains from any other person anything capable of being stolen, or induces any other person to deliver to any person anything capable of being stolen, is guilty of a crime, and is liable to imprisonment with hard labour for three years.
It is immaterial that the thing is obtained or its delivery is induced through the medium of a contract induced by the false pretence or the wilfully false promise or partly by a false pretence and partly by a wilfully false promise.
(2) Any person incurring any debt or liability who obtains credit by any false pretence or by any wilfully false promise or partly by a false pretence and partly by a wilfully false promise or by any other fraud is guilty of a misdemeanour, and is liable to imprisonment with hard labour for one year.
The term "false pretence" is defined in s. 408 of the Criminal Code as follows:
Any representation made by words or otherwise of a matter of fact, either past or present, which representation is false in fact, and which the person making it knows to be false or does not believe to be true, is a false pretence.
The words of these sections make it plain that to establish that the respondent committed the crime with which he was charged it must be proved, first, that he obtained from another person property capable of being stolen; secondly, that he obtained such property by means of a representation of a matter of fact which representation was false in fact and which he either knew to be false or did not believe to be true and, thirdly, that he obtained such property with intent to defraud. The learned primary judge took the view that there is "an element of intent in the obtaining of the thing by the false pretence in that the false pretence which is itself necessarily dishonest is intentionally used by the accused as an inducement for the obtaining, or, more accurately as an inducement to the victim to allow him to obtain" (the property) and that " "intent to defraud" connotes something additional to the intention dishonestly to obtain" [1] . With all respect I cannot agree that this is the effect of the section. Section 23 of the Criminal Code provides, inter alia, that:
Unless the intention to cause a particular result is expressly declared to be an element of the offence constituted, in whole or part, by an act or omission, the result intended to be caused by an act or omission is immaterial.
The only intention which is an element of the offence created by s. 409 is that expressly provided—an intent to defraud. To constitute the false pretence there must have been a representation which was made by the accused person with knowledge of its falsity or lack of belief in its truth but such a representation will not necessarily have been dishonestly made—it may, for example, have been made in jest. To succeed in obtaining a conviction the prosecution must prove that the accused had the specific intent to defraud but it need not prove that he had any other intention.
1. [1971] W.A.R., at p. 149.
The learned primary judge found some support for the view which he took, and which I feel obliged to reject, in a comparison which he drew between sub-s. (1) of s. 409 and sub-s. (2), which he seemed to think did not make an intent to defraud an element of the offence created by the latter subsection. It is unnecessary for present purposes to express any final view as to the effect of sub-s. (2), but it should be mentioned that it has been held that s. 13 (1) of the Debtors Act, 1869 U.K., and s. 253 of the Crimes Act 1908 N.Z., which appear indistinguishable in any material respect from s. 409 (2), require the prosecution to prove an intent to defraud: R. v. Brownlow [1] ; Reg. v. McKay [2] .
1. (1910) 4 Cr. App. R. 131.
2. [1961] N.Z.L.R. 256.
The crucial question then is what constitutes an intent to defraud. The expression is not defined in the Criminal Code but some assistance may be derived from the discussion of the meaning of the words in other contexts. In In re London and Globe Finance Corporation Ltd. [3] , Buckley J. said:
To deceive is, I apprehend, to induce a man to believe that a thing is true which is false, and which the person practising the deceit knows or believes to be false. To defraud is to deprive by deceit: it is by deceit to induce a man to act to his injury. More tersely it may be put, that to deceive is by falsehood to induce a state of mind; to defraud is by deceit to induce a course of action.
These words, which "ever since they were reported have been accepted and used in the criminal courts as providing a satisfactory account of the essentials of "defrauding" on the one hand and "deceiving" on the other" (Welham v. Director of Public Prosecutions [4] ), and have been cited with apparent approval in this Court (R. v. Kidman [5] ), have been regarded as applicable to a charge of the present kind: R. v. Bennett and Newton [6] . It must, however, be observed that as Buckley J. expounded his definition of "to defraud" he expanded its scope, and not all of his words are apposite to a charge of obtaining by false pretences with intent to defraud. It is of the essence of such a charge that property be obtained and, therefore, on such a charge it cannot be held, as has been held in relation to other offences, such as forgery (Welham v. Director of Prosecutions [1] ), that an intent to bring about a course of action which does not involve the obtaining of property may amount to an intent to defraud. In relation to the present charge an intent to defraud must mean an intent to deprive another of property by deceit. Such an intent may exist notwithstanding that an offender who obtains goods by false pretences intends ultimately to pay for them if he can (Reg. v. Hamilton [2] ) or, if he obtains money, intends to pay it back (Reg. v. Naylor [3] ; R. v. Carpenter [4] ; R. v. Kritz [5] ; Reg. v. Denning [6] ). The intent to defraud need not be an intention permanently to deprive the victim of his property or to inflict permanent loss upon him; the fraud, as was said in R. v. Carpenter, [7] , is in the mode of getting the property. In my opinion, the principle was correctly stated in the judgment of the Full Court of the Supreme Court of Victoria in R. v. O'Sullivan [8] ;
The intent to defraud includes in every case an intention on the part of the accused that the owner of the goods shall be by such false statements induced to do what he otherwise would not do—namely, part with the goods in question.
1. [1903] 1 Ch. 728, at pp. 732-733.
2. [1961] A.C., at p. 127.
3. (1915) 20 C.L.R. 425, at p. 447.
4. (1913) 9 Cr. App. R. 146, at p. 154.
5. [1961] A.C. 103.
6. (1845) 1 Cox C.C. 244.
7. (1865) 1 C.C.R. 4.
8. (1911) 22 Cox C.C. 618.
9. [1950] 1 K.B. 82.
10. [1962] N.S.W.R. 173.
11. (1911) 22 Cox C.C., at p. 624.
12. [1925] V.L.R., at p. 518.
However, in R. v. Carpenter [4] in a passage described in R. v. Kritz [9] as the locus classicus on the subject, Channell J. said [7] :
If the defendant made statements of fact which he knew to be untrue, and made them for the purpose of inducing persons to deposit with him money which he knew they would not deposit but for their belief in the truth of his statements, and if he was intending to use the money so obtained for purposes different from those for which he knew the depositors understood from his statements that he intended to use it, then we have the intent to defraud
That passage mentions an element which is not found in the present case, namely, an intention to use the property obtained for purposes different from those for which the representee understood from the representations made by the accused that he intended to use it, and the question arises whether these words ought to be regarded as expressing a general principle applicable to all cases. In R. v. Kritz [5] where R. v. Carpenter [4] was emphatically approved, this question was not discussed, but the decision in that case does suggest that this additional element need not always be established, for the court there approved as sufficient a summing up in the following words, which were treated as satisfying the statement of the law in R. v. Carpenter [1] :
If a false statement, false to the knowledge of the person making it, is made, and by this means money or credit is obtained, and the person who gives that money or credit does so in reliance on the false statements that have been made—well, that is sufficient and you need not go any further. The fact that the man may, and undoubtedly would if he got the chance, repay the money is, to my mind, quite immaterial, even if, in fact, it can be said that he did repay the money but it is immaterial what he intended to do with the money if he obtained it by means of pretences that are false, with intent to defraud. And to defraud, as I say, means by deceit to get other people to take a certain course of action that is harmful to them [2] .
This summing up made no mention of any additional requirement of an intention to use the property for a purpose different from that for which the person handing it over intended it to be used, but suggests that it is immaterial how the accused intended to use the property. However, R. v. Kritz [3] cannot be regarded as deciding the question now under consideration. R. v. Kritz [3] is discussed in R. v. Denning [4] but the judgment in the latter case may prove misleading, first, because in setting out [5] the direction approved as correct in R. v. Kritz [3] the words relating to intent to defraud are omitted, thus wrongly suggesting that a direction which failed to mention intent would be sufficient, and, secondly, because it applies [6] the decision in Director of Public Prosecutions v. Smith [7] which cannot be regarded as authoritative in Australia—see Parker v. The Queen [8] .
1. (1911) 22 Cox C.C. 618.
2. [1950] 1 K.B., at p. 87.
3. (1911) 22 Cox C.C., at p. 624.
4. [1950] 1 K.B. 82.
5. (1911) 22 Cox C.C. 618.
6. (1911) 22 Cox C.C. 618.
7. [1950] 1 K.B., at p. 86.
8. [1950] 1 K.B. 82.
9. [1950] 1 K.B. 82.
10. [1962] N.S.W.R. 173.
11. [1962] N.S.W.R., at p. 179.
12. [1950] 1 K.B. 82.
13. [1962] N.S.W.R., at p. 178.
14. [1961] A.C. 290.
15. (1963) 111 C.L.R. 610, at p. 632.
Considering the matter on principle I am of opinion that it is not necessary that an accused person should have intended to use the property for purposes different from those for which the victim of his deceit understood he would use it before he can be held to have had an intent to defraud. What is essential is that he should have intended to obtain the property by means of a deception. To say this is not to fail to give proper weight to the words "with intent to defraud". If those words did not appear in the section it would be enough if the accused made a statement which was false to his knowledge and if the person to whom the statement was made was induced to part with property by reason of such false pretence, and it would be immaterial whether the statement was intended to have that effect. What the inclusion of the words "with intent to defraud" makes necessary is that the accused should have made the false pretence with the intention of inducing another person to part with property. Therefore, if a beggar obtains money by pretending to be blind, and with the intention that the person to whom the pretence is made should be induced by that pretence to give him alms, the offence is committed notwithstanding that the money is used exactly as the person who gave it intended that it should be used, for the relief of the beggar. Similarly, if a man, by pretending to hold a certain position, or to possess certain assets, intentionally induces another to lend him money which he would not otherwise have lent, the former has an intent to defraud, notwithstanding that he intends to use the money for the very purpose for which he says he wants to borrow it.
In the present case, as I have said, the magistrate made no specific finding that there was an intent to defraud. If a judge summing up to a jury omitted to direct them that an actual intent to defraud is a necessary element of the crime, I would be of opinion that the direction was insufficient. However in the present case the magistrate, after refusing to accept the denials of the respondent that the representations alleged were made, proceeded to convict the accused and if, consistently with the view which he took of the respondent's credibility, the magistrate was bound to find an intent to defraud, his conviction ought to be sustained. In my opinion, the only possible conclusion from the evidence is that the respondent made false pretences with the intention of inducing Jina Hasluck to part with her money; in other words, the respondent had the intention of depriving her of her money by deceit and, therefore, had an intent to defraud. The magistrate's conclusion was in my opinion correct.
I would grant special leave to appeal, and would allow the appeal and discharge the order to review. |
high_court_of_australia:/showbyHandle/1/8841 | decision | commonwealth | high_court_of_australia | text/html | null | R v Rogerson [1992] HCA 25 | https://eresources.hcourt.gov.au/showbyHandle/1/8841 | 2024-09-13T22:50:49.483708+10:00 | High Court of Australia
Mason C.J. Brennan, Deane, Toohey and McHugh JJ.
R v Rogerson
[1992] HCA 25
ORDER
Reg. v Rogerson Application for special leave to appeal granted. Appeal allowed. Set aside the order of the Court of Criminal Appeal of New South Wales. Remit the matter to the Court of Criminal Appeal to hear and determine the appeal to that Court in accordance with the judgment of this Court. Reg. v Nowytarger Application for special leave to appeal granted. Appeal dismissed. Reg. v Paltos Application for special leave to appeal granted. Appeal allowed. Set aside the order of the Court of Criminal Appeal of New South Wales. Remit the matter to the Court of Criminal Appeal to hear and determine the appeal to that Court in accordance with the judgment of this Court.
Cur. adv vult.
The following written judgments were delivered:—
1992, June 17
Mason C.J.
McHugh J. has set out the facts and the circumstances in which this application for special leave to appeal comes before the Court. The Crown brings the application in order to challenge the statement of principle formulated and applied by the New South Wales Court of Criminal Appeal which resulted in that Court quashing the convictions of the three respondents of the offence of conspiring to pervert the course of justice between 1 May 1985 and 31 July 1986. The charge of conspiracy arose out of an alleged agreement to fabricate evidence which had as its object the frustration or diversion of a police investigation into the possible commission of a crime. The Court of Criminal Appeal (Lee C.J. at C.L., with whose judgment Grove and Loveday JJ. agreed) held that the offence of attempting to pervert the course of justice by action of the kind allegedly agreed upon cannot be established in the absence of proof by the Crown of "the general nature of the charge, which the accused had in his contemplation when he engaged in the conduct which resulted in his being charged" [1] . According to the Court of Criminal Appeal, except in the case where the accused asserts a bogus crime, the Crown must lead evidence that an identifiable crime has been committed or evidence that the investigating officers have evidence that raises a suspicion or belief that such a crime has been committed.
1. Reg. v Rogerson, Nowytarger & Paltos (1991), 51 A. Crim. R. 359, at p. 369.
Conspiracy to pervert the course of justice, like an attempt to pervert the course of justice, is a punishable misdemeanour [2] . An attempt to pervert the course of justice consists in "the doing of some act which has a tendency and is intended to pervert the administration of public justice", to repeat the words of Pollock B. in Reg. v Vreones [3] . As the decision in that case indicates, the course of justice is not confined to justice as it is administered by the orthodox court system. In Vreones , the offence consisted in the accused adulterating samples to be used by arbitrators who were "to be considered as a tribunal administering public justice", to quote once again the words of Pollock B. [3] . The course of justice relevantly includes the proceedings of judicial tribunals, that is, tribunals having authority to determine the rights and obligations of parties and having a duty to act judicially.
1. Reg. v Vreones [1891] 1 QB. 360, at pp. 366-367; James v Robinson (1963), 109 C.L.R. 593, at p. 618; Reg. v Murphy (1985), 158 C.L.R. 596, at p. 609.
2. [1891] 1 Q.B., at p. 369.
3. [1891] 1 Q.B., at p. 369.
It has been suggested that "the course of justice" and "the administration of justice" include police investigations as such. True it is that some judicial comments are capable of being understood as lending support to that bald proposition [4] . These comments have been made for the most part in cases in which a person has been convicted of an attempt to pervert the course of justice by misleading police in their investigation of a crime or suspected crime.
1. See Reg. v Bailey [1956] NI. 15, at p. 26; Reg. v Field (1964), 48 Cr. App. R. 335, at p. 340; Reg. v Kane [1967] NZ.L.R. 60, at p. 63; Reg. v Thomas [1979] QB. 326, at pp. 330-331; and esp. Reg. v Selvage [1982] QB. 372, at p. 381.
But police investigations do not themselves form part of the course of justice. The course of justice begins with the filing or issue of process invoking the jurisdiction of a court or judicial tribunal or the taking of a step that marks the commencement of criminal proceedings. In James v Robinson [5] , Kitto, Taylor, Menzies and Owen JJ. stated: "The proposition that proceedings are pending in criminal cases after a person has been arrested and charged is firmly established." I therefore agree with the rejection by the Full Court of the Supreme Court of South Australia in Reg. v Todd [6] of the proposition that the course of justice under consideration includes the investigation by the police of facts for the purpose of ascertaining whether or not a crime has been committed.
1. (1963) 109 C.L.R., at p. 606.
2. [1957] S.A.S.R. 305, at p. 331.
In this respect, it is important to note that the expression "the course of justice" is synonymous with the expression "the administration of justice". In no relevant sense do the police administer justice, notwithstanding that they investigate crime, institute prosecutions (where appropriate) and assist in bringing prosecutions. As Lord Blackburn pointed out in Coomber v Justices of Berks [7] "the administration of justice, both civil and criminal, and the preservation of order and prevention of crime by means of what is now called police" are separate functions and not one single function. It follows that I do not accept the contrary view which was expressed by Lord MacDermott in Reg. v Bailey [8] , and followed by the New Zealand Court of Appeal in Reg. v Kane [9] :
But the administration of public justice, particularly in the criminal sphere, cannot well be confined to the processes of adjudication. In point of principle we think it comprehends functions that nowadays belong, in practice almost exclusively, to the police, such as the investigation of offences and the arrest of suspected persons; and we see no good reason for regarding these preliminaries as beyond the scope of the category we are now considering.
1. (1883) 9 App. Cas. 61, at p. 67.
2. [1956] N.I. 15, at p. 26.
3. [1967] N.Z.L.R., at p. 64.
Accordingly, I would also reject the view which may be implicit in the judgment of du Parcq J. in R. v Sharpe [10] that the course of justice begins to run as soon as a crime is committed. But his Lordship was there concerned principally to rebut the suggestion that there could be no offence of conspiracy to pervert the course of justice unless proceedings are pending or have commenced. And he was quite right in doing so. The fact that police investigation stands outside the concept of the course of justice does not mean that, in appropriate circumstances, interference with a police investigation does not constitute an attempt or a conspiracy to pervert the course of justice.
1. [1938] 1 All E.R. 48, at p. 51.
It is well established at common law and under cognate statutory provisions that the offence of attempting or conspiring to pervert the course of justice at a time when no curial proceedings are on foot can be committed [11] . That is because action taken before curial or tribunal proceedings commence may have a tendency and be intended to frustrate or deflect the course of curial or tribunal proceedings which are imminent, probable or even possible. In other words, it is enough that an act has a tendency to frustrate or deflect a prosecution or disciplinary proceeding before a judicial tribunal which the accused contemplates may possibly be instituted, even though the possibility of instituting that prosecution or disciplinary proceeding has not been considered by the police or the relevant law enforcement agency [12] . So, in Kalick v The King [13] , it did not matter whether the police officer intended to institute a prosecution; it was sufficient that, being apprehensive of a prosecution, the accused gave a bribe to prevent it. Action taken to prevent the institution of a prosecution is as much an interference with, or impairment of, the administration of justice as action taken to obstruct the conduct of a prosecution after it has been commenced.
1. Reg. v Murphy (1985), 158 C.L.R., at p. 609; Vreones ; Sharpe ; Kane ; Reg. v Spezzano (1977), 76 D.L.R. (3d) 160; Thomas .
2. Reg. v Spezzano (1977), 76 D.L.R. (3d), at p. 163.
3. (1920) 55 D.L.R. 104, at p. 109.
Accordingly, I agree with Brennan and Toohey JJ. that an act which has a tendency to deflect the police from prosecuting a criminal offence or instituting disciplinary proceedings before a judicial tribunal, or from adducing evidence of the true facts, is an act which tends to pervert the course of justice and, if done with intent to achieve that result, constitutes an attempt to pervert the course of justice and can ground the offence of conspiring to pervert the course of justice.
It was not suggested in argument, nor could it be suggested, that it was necessary for the Crown to prove as an element of the offence charged that the respondents had committed a specific crime, that crime being the subject of a possible prosecution. Indeed, counsel for the respondents did not in terms contend that it was necessary for the Crown to lead evidence, as the Court of Criminal Appeal held, that an identifiable crime had been committed or that the investigating officers believed or suspected that such a crime had been committed. However, counsel for the respondent Paltos did argue that evidence was required to show that the investigation being undertaken would "in the ordinary course lead to an identifiable course of justice" and that may amount to much the same thing. For my part, I would reject both the proposition stated by the Court of Criminal Appeal and the variation of it suggested by counsel. The necessity of proving that an act has a tendency to pervert the course of justice by frustrating or deflecting a possible criminal prosecution and that the act was intended to have that effect does not require evidence that a prosecution for a particular or identifiable offence was in contemplation either by the accused or by investigating officers. In this respect, in a case such as the present, it is enough that there is evidence that an investigation into the relevant transaction or transactions could lead to a prosecution for some offence. Then, it will be a question of determining whether, in the light of that and any other material evidence, the act or acts done by the accused had a tendency to pervert the course of justice and was or were intended to have that effect. If the proposition formulated by the Court of Criminal Appeal were to prevail, persons admittedly guilty of serious criminal activity in circumstances where the particular offences were not identified could not be convicted of an attempt or conspiracy to pervert the course of justice by misleading police investigators or by taking other action having the effect and with the intention of frustrating a prosecution.
However, absence of evidence pointing to the commission or possible commission of a particular or an identifiable offence may make it more difficult to establish that the act done by the accused has a tendency to pervert the course of justice by deflecting the bringing of a prosecution for some offence or that it was done with intent to bring about that result. That may be so in a case where, as here, the act or acts relied upon were intended to deceive the police in the course of an investigation.
I agree with the comments of Brennan and Toohey JJ. concerning proof of intent to pervert the course of justice and their Honours' reasons with respect to the sufficiency of the trial judge's directions to the jury and the sufficiency of the evidence to support an inference of intent on the part of the respondents Rogerson and Paltos to deflect the possible institution of criminal proceedings, and thus to support their convictions.
I would grant special leave to appeal for the reasons given by their Honours and I would allow the appeals in the case of Rogerson and Paltos, but dismiss the appeal in the case of Nowytarger. In the cases of Rogerson and Paltos, I agree with the consequential order proposed by Brennan and Toohey JJ.
Brennan and Toohey JJ.
McHugh J. has recited the relevant facts giving rise to this appeal. The principles which, in our opinion, apply to those facts are as follows:
At common law, attempting to pervert the course of justice, like perverting the course of justice, is a substantive offence [14] . It consists in the doing of an act which has a tendency to pervert the course of justice with an intent to pervert the course of justice [15] . A conspiracy to pervert the course of justice, like any other conspiracy to commit an offence, is an inchoate offence in the sense that it is complete without the doing of any act save the act of agreeing to pervert the course of justice [16] . Such an agreement imports a common intention among the conspirators that an act be done by somebody which will have the effect of perverting the course of justice. To describe these offences in that way is to leave without definition the terms "the course of justice" and "pervert". These terms have not been exhaustively defined in the cases [17] . Although it would be as unwise to attempt to define these terms exhaustively as it is impossible to do so, it is necessary to indicate the nature of these concepts in order to resolve the present case.
1. Reg. v Andrews [1973] QB. 422, at p. 425; Reg. v Rowell [1978] 1 WL.R. 132, at p. 138; [1978] 1 All E.R. 665, at p. 671; Reg. v Machin (1980), 71 Cr. App. R. 166, at p. 170; [1980] 1 W.L.R. 763, at p. 767.
2. Reg. v Vreones [1891] 1 QB. 360, at p. 369; Reg. v Rowell [1978] 1 WL.R., at p. 138; [1978] 1 All E.R., at p. 671; Reg. v Machin (1980), 71 Cr. App. R., at p. 170; [1980] 1 W.L.R., at p. 767.
3. Reg. v Kamara [1974] AC. 104, at p. 119; Reg. v Panayiotou [1973] 1 WL.R. 1032, at p. 1036; [1973] 3 All E.R. 112, at pp. 115-116.
4. Reg. v Todd [1957] SA.S.R. 305, at p. 328; Gillies, Law of Criminal Conspiracy, 2nd ed. (1990), p. 133.
Justice, as the law understands it, consists in the enjoyment of rights and the suffering of liabilities by persons who are subject to the law to an extent and in a manner which accords with the law applicable to the actual circumstances of the case. The course of justice consists in the due exercise by a court or competent judicial authority of its jurisdiction to enforce, adjust or declare the rights and liabilities of persons subject to the law in accordance with the law and the actual circumstances of the case [18] . The course of justice is perverted (or obstructed) by impairing (or preventing the exercise of) the capacity of a court or competent judicial authority to do justice. The ways in which a court or competent judicial authority may be impaired in (or prevented from exercising) its capacity to do justice are various. Those ways comprehend, in our opinion, erosion of the integrity of the court or competent judicial authority, hindering of access to it, deflecting applications that would be made to it, denying it knowledge of the relevant law or of the true circumstances of the case, and impeding the free exercise of its jurisdiction and powers including the powers of executing its decisions. An act which has a tendency to effect any such impairment is the actus reus of an attempt to pervert the course of justice [19] . An act which effects any such impairment is the actus reus of a perversion of the course of justice. An agreement that an act be done which has such an effect and which is not otherwise justified in law is the actus reus of a conspiracy to pervert the course of justice. Each of these offences requires a specific intent. In the case of an attempt to pervert the course of justice, and in the case of perverting the course of justice, the intent which must accompany the relevant actus reus is that the course of justice should be perverted in one of the ways mentioned. To define the intent required in a case of a conspiracy to pervert the course of justice, the law of conspiracy must be examined.
1. Reg. v Todd [1957] SA.S.R., at p. 328.
2. It seems that the act, though otherwise lawful, may be unlawful by reason of the intent to pervert the course of justice: Reg. v Kellett [1976] QB. 372, at p. 391.
What makes a conspiracy unlawful is the unlawfulness of its intended object or the unlawfulness of the means intended to effect its object, as Willes J., delivering the opinion of the judges in Mulcahy v The Queen [20] , said:
A conspiracy consists not merely in the intention of two or more, but in the agreement of two or more to do an unlawful act, or to do a lawful act by unlawful means. So long as such a design rests in intention only, it is not indictable. When two agree to carry it into effect, the very plot is an act in itself, and the act of each of the parties, promise against promise, actus contra actum, capable of being enforced, if lawful, punishable if for a criminal object or for the use of criminal means.
As the "very plot" is the actus reus of the offence, the offence is complete before any further unlawful act is done or any further lawful act is done to carry the unlawful object into effect. When Willes J. spoke of an "unlawful act", he was speaking of an act which has not occurred when the conspiracy is formed. He must have meant an act which, if done in circumstances contemplated by the conspirators, would be unlawful. Although acts done in pursuance of an apparent agreement often furnish the evidentiary foundation for inferring that a criminal conspiracy was formed, those acts are not themselves elements of the offence. In that sense, it is immaterial whether an act done in pursuance of a criminal conspiracy is, in the event, unlawful, provided the act was intended to be done in circumstances which, had they eventuated, would have made the act unlawful. In the present case, we are concerned with an alleged conspiracy to do an unlawful act, namely, an act that would have the effect of perverting the course of justice. The prosecution had to prove that the conspirators intended that, if the relevant act was done pursuant to the conspiracy and in the circumstances contemplated by the conspirators, it would have the effect of perverting the course of justice.
1. (1868) L.R. 3 H.L. 306, at p. 317.
A conspiracy to pervert the course of justice may be entered into though no proceedings before a court or before any other competent judicial authority are then pending [21] or are even contemplated by anyone other than the conspirators. A coven of criminals who agree to commit a crime and to mislead the subsequent investigation so that an innocent person will be prosecuted for the crime-to-be-committed are guilty not only of a conspiracy to commit the crime but also of a conspiracy to pervert the course of justice by inducing the institution of a false prosecution. At the time of such a conspiracy, no prosecution for the yet-to-be-committed crime could be pending and no prosecution for that crime would be contemplated by anyone other than the conspirators, yet the conspiracy to pervert the course of justice would be complete.
1. See R. v Sharpe [1938] 1 All ER. 48, at p. 51.
In R. v Porter [22] , it was said that no specific intent was required on a charge of conspiracy to produce a public mischief consisting in an agreement to indemnify a bail against his liability. To an argument that it was necessary to find an intent to obstruct and pervert the course of justice, Lord Alverstone C.J. replied [23] that it was "difficult to conceive any act more likely to tend to produce a public mischief" than an agreement to indemnify a bail. In R. v Boston [24] , Knox C.J. put an even broader proposition:
It is settled law that an agreement or combination to do an act which tends to produce a public mischief amounts to a criminal conspiracy. In such a case the tendency of the agreement is a conclusion of law and there is no necessity for a finding by the jury of intent (R. v Porter ).
1. [1910] 1 K.B. 369.
2. ibid., at p. 373.
3. (1923) 33 C.L.R. 386, at p. 392.
Of course, where there is an agreement to do an act that has a manifest tendency to pervert the course of justice, proof of an agreement to do the act may suffice to prove the intent thereby to pervert the course of justice. But, if the act to be done is of such a nature that its tendency to pervert the course of justice is not manifest, proof of an agreement that the act be done does not, without more, amount to proof of a conspiracy to pervert the course of justice: in such a case, there has to be proof of an intent to do an act that will have the effect of perverting the course of justice. The state of an alleged conspirator's knowledge of the nature of the relevant act is of critical importance [25] . An act which is not known to have the tendency or is not intended to have the effect of perverting the course of justice is not an act the doing of which attracts a liability to punishment as for an attempt to pervert, or a perverting of, the course of justice. An agreement that such an act be done made among persons who do not know that the act has such a tendency and who do not intend it to have that effect is not a conspiracy to do an unlawful act. To establish a conspiracy to pervert the course of justice, it is necessary to prove an agreement to do an act which the conspirators either know will have a manifest tendency to pervert the course of justice or which the conspirators intend to have such an effect. In this context, knowledge and intent relate to the acts and circumstances contemplated by the conspirators; the legal complexion of those acts and circumstances is a question of law.
1. Reg. v Churchill [1967] 2 AC. 224; see also Thomson (1965), 50 Cr. App. R. 1, at p. 2.
Although it is well established that an attempt to pervert the course of justice can be committed at a time when no curial proceedings of any kind have been instituted [26] , the reasoning which has led to this conclusion in some cases does not accord with the principles above expressed. In some cases, where the scope of the offence of an attempt to pervert the course of justice has been held to extend to misleading the police in the course of their investigations into a crime, police investigations have themselves been treated as a part of the "course of justice" [27] . Though we agree with the result in those cases, we are respectfully unable to accept that reasoning. The course of justice does not begin until the jurisdiction of some court or competent judicial authority is invoked. As McHugh J. shows, there is no historical support for an extension of the "course of justice" in the way which commended itself to the English Court of Appeal in Reg. v Selvage [28] where it was said that "a course of justice must have been embarked upon in the sense that proceedings of some kind are in being or are imminent or investigations which could or might bring proceedings about are in progress " (our emphasis). Neither the police nor other investigative agencies administer justice in any relevant sense. However, it is their function to bring or to assist in bringing prosecutions as part of their duty to enforce the law [29] and, sometimes, to institute proceedings of a disciplinary nature before an appropriate tribunal under an applicable disciplinary code [30] . A tribunal whose jurisdiction extends to the enforcing or adjusting of rights and liabilities in accordance with law and whose procedure is judicial in character is engaged, when exercising that jurisdiction, in administering justice so that the commencement of proceedings invoking that jurisdiction may set in train a relevant course of justice. The offence of perverting or attempting to pervert the course of justice may be committed with respect to such proceedings before a tribunal as well as with respect to proceedings before a court.
1. Reg. v Murphy (1985) 158 CL.R. 596, at p. 609.
2. R. v Sharpe ; Reg. v Bailey [1956] NI. 15; Reg. v Kane [1967] NZ.L.R. 60; Reg. v Thomas [1979] QB. 326.
3. [1982] Q.B. 372, at p. 381.
4. See Reg. v Commissioner of Police of the Metropolis; Ex parte Blackburn [1968] 2 QB. 118.
5. As to misconduct by police officers, see Police Regulation (Allegations of Misconduct) Act 1978 N.S.W., s. 22.
Although police investigations into possible offences against the criminal law or a disciplinary code do not form part of the course of justice, an act calculated to mislead the police during investigations may amount to an attempt to pervert the course of justice. An act which has a tendency to deflect the police from prosecuting a criminal offence or instituting disciplinary proceedings before a judicial tribunal or from adducing evidence of the true facts is an act which tends to pervert the course of justice and, if done with intent to achieve that result, amounts to an attempt to pervert the course of justice. It impairs the court's capacity to do justice in the actual circumstances of the case. In Kalick v The King , a bribe to a policeman to induce him not to prosecute for an offence against the Saskatchewan Temperance Act was held to be a corrupt interference with the due "administration of justice" for the purposes of s. 157 of the Canadian Criminal Code. Anglin J. said [31] :
It is quite immaterial whether the police officer actually intended or contemplated instituting a prosecution. It suffices that the appellant gave the bribe with intent to head off such a proceeding. The due administration of justice is interfered with quite as much by improperly preventing the institution of a prosecution as by corruptly burking one already begun.
We respectfully agree. The gravamen of the offence of an attempt to pervert the course of justice is an interference with the due exercise of jurisdiction by courts and other competent judicial authorities. As the courts exercise their necessary and salutary jurisdiction to hear and determine charges of offences against the criminal law only when their jurisdiction is invoked, an act which has a tendency to deflect the police from invoking that jurisdiction when it is their duty to do so is an act which tends to pervert the course of justice. Subject to a limited discretion not to prosecute, it is the duty of the police to prosecute when offences are committed.
1. (1920) 55 D.L.R. 104, at p. 109.
When the Crown must rely on inference to prove the intent of alleged conspirators to pervert the course of justice by the doing of an act which tends to mislead the police in their conduct of an investigation into a possible offence, the evidence must be capable of supporting at least — (1) an inference that the conspirators believed that the police might invoke the jurisdiction of a court or of some competent judicial authority or might invoke that jurisdiction unless the relevant act deflected them; and (2) a further inference that the conspirators either knew that the relevant act would have a manifest tendency to pervert the course of justice in a relevant respect or intended that the act should have that effect. It is not sufficient for the Crown to prove merely an intention to deceive the police.
These principles were carried fully into the directions given by the learned trial judge when he directed the jury as follows:
The Crown says that the conspiracy to fabricate the source of the moneys deposited in the National Australia Bank accounts occurred at a time when police investigations were inevitable and that such investigations could lead only to criminal proceedings against Rogerson and/or Nowytarger — that is, criminal proceedings were imminent or threatened. To establish its case the Crown must show that what was done pursuant to the agreement — that is the conspiratorial agreement to pervert the administration of justice — would have that tendency and was so intended by those who are parties to the conspiracy. The Crown says that the acts of Rogerson, Nowytarger and Karp in pursuance of the agreement were intended to foil the police inquiry and clearly had that effect — that is the fabrication of the false agreement, of the receipts and the accounts given to the police by those three persons. And, of course, on the Crown case all of those events occurred after the police inquiry had commenced, if you accept that it commenced on 16 July.
And later:
Members of the jury, when I was summarizing the Crown case, I said words to this effect, that in the Crown case the conspiracy to fabricate a false account of the moneys deposited in the National Australia Bank account occurred at a time when the police investigations were inevitable and that such investigations could lead to criminal proceedings against either the accused Nowytarger or Rogerson or both. I think it is implicit in what I said to you there , you would have to be satisfied beyond a reasonable doubt that the accused that you were considering believed that a police inquiry would take place in that context at that time.
His Honour did not direct the jury that the offence charged could have been committed if the alleged conspirators intended, by fabricating the agreement, to foil a police investigation which could have led to proceedings against Rogerson before the Police Tribunal [32] . The prosecution pitched its case on the level of criminal proceedings and his Honour directed the jury accordingly, that is, he directed them that there must be an agreement to do something which would have a tendency to foil a police inquiry into the circumstances of the deposit in the Bank, and thereby deflect the police from instituting criminal proceedings against Rogerson and, perhaps, Nowytarger.
1. Police Regulation (Allegations of Misconduct) Act 1978 N.S.W., ss. 36, 41.
Although the direction given by his Honour was correct, the question remains whether the evidence in the case was capable of supporting a conviction. The Court of Criminal Appeal held that it was not. Lee C.J. at C.L., speaking for the Court, pointed out [33] that:
At no time in the summing up did the learned trial judge specify or define the nature of the illegality giving rise to the deposit of $110,000. The nearest he got to dealing with it was to say that the Crown suggested that the likely source of the money was the Miss Jones incident.
His Honour distinguished the present case where no specific crime was proved to be the source of the $110,000 from a case in which the evidence proved the commission of a crime. In a case of the latter kind, his Honour pointed out, an offender who lied to police investigating his crime in order to protect himself would "at least know the general nature of the proceedings that will be faced if proceedings are to be taken" [34] . Similarly, in such a case, a friend of the offender who lied to the police in order to protect the offender would contemplate proceedings arising from evidence establishing the commission of the offence. After referring to Selvage , his Honour said [34] :
it is not sufficient merely to say of the appellants that, by telling lies to the police, they indicate that they have done something unlawful which could, if it were known, result in proceedings brought against them; there must, when attempting to pervert the course of justice is charged, be positive evidence put forward to point to the kind of proceedings, in the sense of the general nature of the charge, which the accused had in his contemplation when he engaged in the conduct which resulted in his being charged with attempting to pervert the course of justice. (Emphasis added.)
With respect, proof that an offence has been committed or that a charge of a given nature is to be laid is not — at least in theory — necessary to prove that an agreement to deceive police conducting an investigation is an unlawful conspiracy. However, absence of proof that a particular offence has been committed may make it more difficult to prove that an act which has been done to deceive the police has a tendency to pervert the course of justice by deflecting them from bringing a prosecution for some offence and that the act was intended to have that result.
1. Reg. v Rogerson, Nowytarger & Paltos (1990), 51 A. Crim. R. 359, at p. 365.
2. ibid., at p. 369.
3. ibid., at p. 369.
In the present case, there was ample evidence that Rogerson, Nowytarger, Paltos and Karp agreed that a contract be produced purporting to evidence a sale to Karp by Rogerson and Nowytarger of a Bentley car and that that contract should be used to provide Rogerson and Nowytarger with an explanation of the source of $60,000 being part of the $110,000 withdrawn from the National Australia Bank by Rogerson and Nowytarger on 1 July 1985. There was evidence on which the jury was entitled to find that the purported sale of the Bentley car was fictitious, as each of Rogerson, Nowytarger, Paltos and Karp knew. As the evidence showed that the arrangement to produce the contract was made between the four of them at a meeting in a Kings Cross restaurant in mid-July 1985 which followed the discovery by Rogerson and Nowytarger that they had been photographed withdrawing the $110,000 from accounts they had opened in false names at the Bank, the inference could be drawn that the purpose of producing the contract was to fabricate evidence in support of a story which would deceive anybody who inquired of Rogerson and Nowytarger as to the source of $60,000 which was part of the amount withdrawn. Police officers, alerted to the fact of the photographed withdrawal, did inquire of Rogerson and Nowytarger as to the source of the amount withdrawn. Rogerson and Nowytarger gave the police the explanation as to $60,000 that it was the purchase price of a Bentley car sold to Karp. Karp, who gave evidence for the Crown, admitted that the ostensible purchase was a sham. Thus the chief issue in contention on this appeal — though the question did not loom large at the trial — is whether there was sufficient evidence, in the cases against the respective respondents, to support a finding that the particular respondent had the intent that, by producing the contract in support of a false story, the police would be deflected from instituting a prosecution for some offence — not, of course, for the offence of conspiracy. It is in this context that the absence of proof of a specific offence assumes significance.
The fact that Rogerson, who was then a Detective Sergeant of police, and Nowytarger had together withdrawn $110,000 from bank accounts opened by them under false names, though engendering suspicion, was freely admitted by Rogerson in his interview with the investigating police. By asserting the false story of the sale of a Bentley car, the inference can be drawn that he intended to deceive the police and that the contract was produced for that purpose. But did he intend to deflect the police from instituting either a prosecution for a criminal offence or disciplinary proceedings? There was evidence that Rogerson had handed over a bag containing packets of a white powder to a Miss Jones — the pseudonym of a witness who was an admitted drug courier and drug addict — at the Kingsford Smith Airport on or about 14 May 1985 and had received in exchange a large sum of money in $50 notes in a black red-trimmed travel bag. Next, Rogerson enlisted assistance from Paltos and then from Karp (who attended at the restaurant at Paltos' request to assist Rogerson) to produce a deceptive account which he, Rogerson, might use to conceal the true source of $60,000. Then, on 24 July 1985, Rogerson rang Detective Inspector Strong to say that he believed that certain police officers would like to be able to prove that Rogerson was involved in criminal activities and to say that the money withdrawn from the Bank came from legitimate sources. Later, when Mr. Strong (by then Detective Chief Superintendent) interviewed him on the subject of the withdrawal of the money from the Bank, he sought the customary warning before answering because he had heard that the police believed that he "had committed a criminal offence". He understood at the time of the police interview that the police held the belief that a prima facie case existed that he had obtained the money withdrawn from the Bank unlawfully or that the money was stolen. In our opinion, this evidence is sufficient to support a finding that Rogerson used the fabricated sale to explain the source of $60,000 with the intention of deceiving the police and thereby deflecting the police from instituting criminal proceedings based on their belief (as Rogerson understood) that the money withdrawn from the Bank had been unlawfully obtained. Rogerson gave evidence asserting that the Bentley car had in fact been sold to Karp whom he had met socially with Nowytarger and that Karp had paid for the car in cash by instalments which Rogerson put into a biscuit tin in a friend's safe. He said that the instalments had been paid as work on repairing the car proceeded. Rogerson said that nearly the whole of the price had been paid by November 1984 although Karp did not see the car until after July 1985, when the contract had been signed. The jury, if satisfied that Rogerson's evidence was false, were entitled to conclude beyond reasonable doubt that Rogerson entered into the conspiracy to produce the fictitious contract for the purpose of deceiving the police as to the circumstances in which the money in the Bank was obtained and deflecting them from instituting criminal proceedings in relation to that money and for the purpose of causing the fabricated contract to be given in evidence in any proceedings that were instituted against him. Accordingly, there was sufficient evidence to support the conviction of Rogerson.
The respondent Paltos secured the attendance of Karp at the Kings Cross restaurant meeting where the arrangement was made to produce the contract of sale. According to Karp, Paltos introduced him to Rogerson and Nowytarger at that meeting. The case against Paltos in the material respect rests upon a recording of a conversation between himself, Karp and one Palmer. Karp commented or might reasonably have been understood by the jury as having commented that "they" recognized Rogerson as the person withdrawing the money from the Bank and "think now that this money is from ill-gotten". That comment elicited from Paltos the observation: "Drugs, from drugs, tell the truth, drugs." Karp accepted the correction: "Well, he said drugs right okay " This evidence showed that Paltos knew that the contract was to be produced to deflect an investigation into some drug-related activity by Rogerson. Accordingly, the evidence was sufficient to support his conviction.
The case against Nowytarger established his participation in the production of the false contract of sale, for he signed that document as a seller. Moreover, after Karp had pleaded guilty to the charge of conspiring with the three respondents to pervert the course of justice, Nowytarger visited Karp in the remand centre at Long Bay to obtain his assurance that he, Karp, would "stick to the story as agreed". But there is no evidence against Nowytarger that the deception which was to be practised as to the source of $60,000 was expected or intended by him to deflect the police from instituting proceedings of any kind against Rogerson. The circumstances are heavy with suspicion but the proof is insufficient to support a conviction.
It follows that the Court of Criminal Appeal was in error in quashing the convictions of Rogerson and Paltos but correct in quashing the conviction of Nowytarger.
The question remains whether special leave should be granted to canvass the issues in this case. The nature of the offences of attempting to pervert the course of justice and conspiracy to pervert the course of justice is a matter of sufficient importance to justify the grant of special leave. To allow the decision of the Court of Criminal Appeal to stand would be to allow a misunderstanding of these offences, which are important in protecting the integrity of the criminal process, to be perpetuated in other cases. Although we would not have granted special leave merely to review an application of the correct principles to the facts of the case, this case is a significant illustration of the operation of the relevant principles. Adopting the approach stated by the majority of this Court in Reg. v Glennon [35] , we would grant special leave to appeal. Having done so, we would allow the appeals in the case of Rogerson and Paltos and dismiss the appeal in the case of Nowytarger. In the cases of Rogerson and Paltos, the order of the Court of Criminal Appeal should be set aside and the matter remitted to that Court to hear and determine the appeals by Rogerson and Paltos in accordance with the judgment of this Court.
1. (1992) 173 C.L.R. 592.
Deane J.
The detailed facts involved in these applications for special leave to appeal are set out in the judgment of McHugh J. It is unnecessary that I repeat them.
Special leave should be granted to the Crown to appeal to this Court from a verdict of acquittal entered by a Court of Criminal Appeal "only in very exceptional circumstances" [36] . As I pointed out in Benz [37] , that broad proposition should not be seen as empty rhetoric which can be formally acknowledged and effectively ignored. It is dictated by considerations to which regard must be had in determining what is in the interests of justice both "generally" and "in the particular case" [38] .
1. See R. v Lee (1950), 82 C.L.R. 133, at p. 138; Reg. v Benz (1989), 168 C.L.R. 110, at pp. 119-120, 127, 146.
2. ibid., at p. 120.
3. Judiciary Act 1903 Cth, s. 35A(b).
It is true that Davern v Messel [39] establishes that the common law doctrine against double jeopardy is not infringed by a Crown appeal against a verdict of acquittal entered by an intermediate appellate court. Nonetheless, the main considerations which support that doctrine also militate against the grant of special leave for a Crown appeal against an acquittal by a Court of Criminal Appeal in other than very exceptional circumstances. The ordinary citizen who is told in unqualified terms by a court of a State constituted by three of the State's senior judges that he or she is acquitted for the reason that, as a matter of law, he or she was entitled to be adjudged not guilty of the crime with which he or she was charged is scarcely likely to comprehend that the acquittal is not as authoritative or binding as it would have been if he or she had been acquitted at first instance by a judge or magistrate of an inferior court or by a jury of lay persons. Moreover, in a context where both the prosecution and the court in a criminal case are likely to be seen by the ordinary citizen as emanations of governmental authority and where the costs of private legal representation are oppressively high, there is an undeniable element of harshness in a situation where a citizen who has been told by a competent court of a State that the criminal proceedings which the State has brought against him or her are resolved in his or her favour is subjected to the renewed jeopardy of an appeal by the State [40] . To say, in that context, that the acquitted person cannot complain if the State subjects him or her to a further appeal since he or she enlivened the appellate process by appealing to the intermediate appellate court may have some validity as a debating point. It is, however, somewhat removed from reality. Indeed, in a context where the overwhelming balance of power and resources will ordinarily favour the State, the proposition that a person is fair game for a further appeal by the Crown by reason of the fact that he or she was acquitted by a Court of Criminal Appeal after being subjected to what the Court of Criminal Appeal has held to be a miscarriage of justice resulting in a wrong conviction seems to me to be singularly unpersuasive.
1. (1984) 155 C.L.R. 21.
2. See, generally, ibid., at pp. 67-68.
A further consideration which militates against the grant to the Crown of special leave to appeal to this Court from an acquittal entered by an intermediate appellate court arises from the nature of this Court's special leave process. The number of cases in which there can be a grant of special leave to appeal to this Court in criminal matters is necessarily limited. Consequently, in the overwhelming majority of cases, a verdict of acquittal entered by an ultimate State appellate court is final. That means that the considerations of justice and fairness which militate against a grant to the Crown of special leave to appeal against an acquittal operate in a context where, from the point of view of an individual accused, the grant or refusal of such leave is likely to have a somewhat arbitrary character in the sense that it is influenced by considerations other than the merits of the particular case. Inevitably, an accused person whose acquittal by a Court of Criminal Appeal is singled out for a comparatively rare grant of special leave to appeal to this Court is likely to feel, with some justification, that he or she has been singled out for adverse treatment.
The above general considerations which militate against a grant of special leave to appeal to the Crown from a verdict of acquittal entered by a Court of Criminal Appeal are at their strongest in a case where, as in two of the present applications, the respondent to the application for special leave to appeal to this Court has served a substantial period in custody and has then been released pursuant to the verdict of acquittal entered by the Court of Criminal Appeal. They are also heightened in a case where the members of a Court of Criminal Appeal were unanimous in entering a verdict of acquittal and this Court is closely divided about the outcome of an appeal from that verdict. Thus, the appearance (from the point of view of an individual accused) of a degree of arbitrariness which is inevitable in any case in which special leave is granted to appeal to this Court from a verdict of acquittal is underlined in the present case by the fact that, in the two cases in which appeals from verdicts of acquittal are being upheld, five of the eight judges who have dealt with the cases at an appellate level have concluded that verdicts of acquittal should be entered or should stand.
In the course of argument of the present applications, there was some discussion of what was meant by the expression "very exceptional circumstances" as used in past cases. In my view, nothing would be served by an attempt at further definition by synonym, description or example. The most that can be said is that special leave to appeal to this Court from a verdict of acquittal entered by a Court of Criminal Appeal plainly should not be granted unless the appeal will resolve some important issue of fundamental legal principle.
It is arguable that the decision of the Court of Criminal Appeal in the present case involves a question of principle of considerable general importance in that there are some passages in the judgment of Lee C.J. at C.L. (with whom Grove and Loveday JJ. agreed) which can, particularly if read in isolation, be construed as propounding a general rule to the effect that the offence of conspiring to pervert the course of justice in future criminal proceedings by deflecting or frustrating police investigations cannot be established unless the Crown prove "the general nature" of some criminal charge "which the accused had in his contemplation when he engaged in the conduct which resulted in his being charged" [41] with the consequence that "(except where the accused asserts a bogus crime) either there must be evidence that an identifiable crime has been committed, or evidence that the police conducting the investigation have before them some evidence which raises a suspicion or belief that an identifiable crime has been committed" [42] . Such a general rule would, for example, involve the surprising consequence that a person who was proved (by, e.g., confessional statements) to have obtained large sums of money from serious criminal activity and to have conspired with others to pervert the course of anticipated criminal proceedings in respect of that activity by bribing potential witnesses to give false evidence, could only be convicted of conspiracy to pervert the course of justice if it were possible not only to prove that he had engaged in serious criminal activity but also to identify particular crimes which he had committed. As I followed the argument, however, none of the respondents sought to sustain such a broad and unqualified rule. More importantly, careful examination of the judgment of Lee J., particularly of its decisive final six paragraphs, discloses that the actual decision of the Court of Criminal Appeal did not depend upon acceptance of any such rule. To the contrary, the actual decision turned upon the particular circumstances of the case, including the prosecution's conduct of the trial, and upon the rejection of a proposition framed in narrow terms to fit those circumstances.
1. Reg. v Rogerson, Nowytarger & Paltos (1990), 51 A. Crim. R. 359, at p. 369, per Lee C.J. at C.L.
2. ibid., at p. 374.
The alleged conspiracy in the present case involved the concoction of a false story to deflect or frustrate a likely police investigation (which in fact eventuated) of the source of a large sum of money which the respondent Rogerson, a police officer, had deposited to the credit of a bank account which he had opened in a fictitious name. At the time of the actual concoction of the false story, no relevant curial proceedings were in train or in the contemplation of the authorities and no relevant police investigation had commenced. In Lee J.'s view, the prosecution had neither alleged nor proved that the moneys were the proceeds of some past criminal activity or, for that matter, that any past crime had been committed. Nor was there, at that time, police suspicion that an offence had been committed. In particular, the prosecution case against the respondents had not been "presented on the basis that Rogerson received the moneys which were subsequently deposited, from Miss Jones as the price of the "white powder" which he gave her, i.e. by an illegal drug deal" [43] . While the circumstances gave rise to a strong suspicion "that the moneys [had] most likely come from an illegal source" [43] , the prosecution had failed — indeed, had not sought — to establish that that was so. As Lee J. said [44] :
And, of course, the fact that the story was proved false did not necessarily relieve the Crown of negativing that the moneys may have come from some other legitimate source, e.g. gambling, before the jury could bring in a verdict of guilty. No such considerations were ever mentioned to the jury and there was a very good reason why they were not, and that is that the Crown and the judge took the view and put the case to the jury that, because an inference was open from the making of the deposits and the telling of the false story, the source was illegal, the Crown had no obligation to prove what that illegal source was — the Crown case at no time extended beyond those limits.
1. (1990) 51 A. Crim. R., at p. 375.
2. (1990) 51 A. Crim. R., at p. 375.
3. ibid., at p. 363 (emphasis in text).
Police inquiries do not, of themselves, constitute "the course of justice" for the purposes of the offence of perverting the course of justice. It is necessary, in a case involving alleged conduct to divert or frustrate police inquiries, to identify some actual or potential relationship between the alleged conduct and some pending, probable or possible curial proceedings whose course the accused intended to pervert. It is true that one can point to statements in the cases emphasizing the closeness of the connexion between police investigations and pending, probable or possible curial proceedings in relation to the subject matter of those investigations [45] . The closeness of that connexion may, in some circumstances, found a conclusion that conduct aimed at frustrating or misleading police investigations was directed to perverting the course of justice in pending or possible future court proceedings. Nonetheless, such statements should not be permitted to divert attention from the fact that the offence of conspiring to pervert the course of justice involves conspiring to pervert the course of justice in curial proceedings. Where a conspiracy to mislead or frustrate police inquiries is involved, the offence of conspiring to pervert the course of justice will not be established unless it appears that a purpose of the conspiracy was, by misleading or frustrating the police investigation, to pervert the course of justice in pending or possible curial proceedings. For example, if the moneys involved in the present case had indeed come from a "legitimate source" such as "gambling" and the purpose of the concoction of the false story had been merely to conceal Rogerson's gambling activities from his police superiors, there would have been no conspiracy to pervert the course of justice. Necessarily, the onus lay upon the prosecution to exclude that or any other reasonable explanation of the acts of the accused. That is not to say that it is necessary to establish that an accused must have had particular identified curial proceedings in contemplation. It would, for example, suffice if the evidence established, whether directly or by inference, an intention to pervert the course of justice in any future curial proceedings that might ultimately be instituted in relation to the subject matter of the police inquiries.
1. See, e.g., Reg. v Selvage [1982] QB. 372, at pp. 380-381; Reg. v Murphy (1985), 158 C.L.R. 596, at p. 610.
On the other hand, if the evidence in the present case had actually established that the moneys deposited in the bank accounts with the National Australia Bank were the proceeds of criminal activity on the part of Rogerson, the inference could more readily be drawn that a conspiracy to concoct a false story about their origins was directed to perverting the course of justice in any subsequent criminal proceedings relating to those criminal activities. In a context where the prosecution did not seek to prove the commission of some earlier offence and where not even a police investigation had commenced, the question obviously arose whether the evidence established any relationship at all between the conduct of the respondents and some pending, probable or possible course of justice. As I read the judgment of Lee J., the Court of Criminal Appeal held that the evidence failed to establish, or provide an adequate foundation for inferring, any such relationship. The basis of the actual decision to that effect was the rejection of the narrow proposition that, in a case such as the present where no identified curial proceedings at all were pending or in the contemplation of the authorities, it suffices to establish a conspiracy to pervert the course of justice to prove that persons have acted in concert to "fabricate a story as to the source of moneys which they have, but nothing further is shown to relate those moneys to the commission of some crime — as in this case" [46] . In my view, the Court of Criminal Appeal was plainly correct in rejecting that narrow proposition. Proof of the fabrication, by accused persons acting in concert, of a story to frustrate or mislead a police investigation of the source of moneys which are not proved to be unlawfully obtained would not, of itself, suffice to establish conspiracy to pervert the course of justice. There must also be proof that the fabrication was for the purpose of perverting the course of justice in pending or possible curial proceedings which the accused had in contemplation. It is true that the correctness of the factual conclusions reached by the Court of Criminal Appeal about the effect of the evidence, in the context of the conduct of the prosecution case at the trial, is debatable. The correctness of those factual conclusions does not, however, involve any important question of general principle of a kind which would sustain a grant of special leave to appeal to this Court from verdicts of acquittal entered by a court of criminal appeal.
1. Reg. v Rogerson, Nowytarger & Paltos (1990), 51 A. Crim. R., at p. 374, per Lee C.J. at C.L.
Special leave to appeal should be refused.
McHugh J.
The Crown in right of the State of New South Wales seeks special leave to appeal against an order of the Court of Criminal Appeal of New South Wales entering acquittals in respect of an indictment which charged the respondents with conspiracy to pervert the course of justice between 1 May 1985 and 31 July 1986. The principal question in the application is whether, when that charge is based upon an agreement to fabricate evidence designed to interfere with or deflect a police investigation into the possible commission of a crime, proof of the offence requires, as that Court held [47] , "evidence that an identifiable crime has been committed, or evidence that the police conducting the investigation have before them some evidence which raises a suspicion or belief that an identifiable crime has been committed."
1. Reg. v Rogerson, Nowytarger & Paltos (1990), 51 A. Crim. R. 359, at p. 374.
The factual background
At all material times, the first respondent, Roger Caleb Rogerson, was a serving member of the New South Wales Police Force. In May 1985, the second respondent, Morris Enrico Nowytarger, arranged with Rogerson for the latter to deposit sums of money totalling $110,000 in false names in two bank accounts with the National Australia Bank. On 1 July 1985, while Rogerson and Nowytarger were closing the accounts, they were photographed by the Bank's security cameras. On 11 or 12 July 1985, a police officer told Rogerson that he had been photographed "with a criminal". Subsequent to that conversation but before 19 July 1985, Rogerson and the third respondent, Dr. Nicholas John Paltos, met a solicitor, Ross Karp, in a restaurant. According to Karp, Paltos said that Rogerson had a problem and that he thought that Karp and Paltos could fix it. Rogerson then told Karp that he had money in "a bank account or bank accounts" in false names with a friend. Rogerson said that he needed "to explain how the moneys arrived in the account". Later the three men were joined by Nowytarger. Thereafter, the respondents and Karp agreed that Karp would prepare a sale agreement which would falsely show that Karp had paid $60,000 to Rogerson and Nowytarger for the sale of a Bentley car. The sale agreement was backdated to December 1983.
On 16 July 1985, a detective inspector, having been informed of the circumstances in which Rogerson and Nowytarger had been photographed at the Bank, commenced an investigation for the purpose of determining whether Rogerson had breached any departmental regulations or had committed any criminal offence in relation to the possession of the $110,000. On 4 October 1985, the inspector interviewed Rogerson who claimed that about $16,000 of the moneys deposited in the account belonged to him and "came about as a result of weeks and weeks of work spent in repairing a motor vehicle in my own time which was owned by Mr. Nowytarger". Rogerson asserted the genuineness of the 1983 sale agreement and said that the moneys came from the sale of the vehicle to Karp. On 10 December 1985, Nowytarger visited Karp who was then in prison and asked him if he was going to "stick to the story as agreed". In March 1986 Nowytarger, when interviewed by police officers, maintained the genuineness of the sale agreement. When Paltos was interviewed by police, he declined to answer questions in respect of the matter.
A woman who gave evidence under the pseudonym "Miss Jones" also alleged that on about 14 May 1985 she gave Rogerson a large sum of money in exchange for a bag containing white powder in plastic bags. The trial judge told the jury:
The Crown relies on the evidence of Miss Jones as pointing to the likely source of at least some of the money that went into those accounts.
Rogerson denied that he had ever met the woman. His Honour also pointed out to the jury that there was no evidence that Nowytarger or Paltos had any knowledge of this alleged transaction.
On appeal the Court of Criminal Appeal of New South Wales unanimously held that the foregoing evidence failed to disclose the offence of conspiracy to pervert the course of justice. Lee C.J. at C.L., with whose judgment Grove and Loveday JJ. agreed, said [48] :
(except where the accused asserts a bogus crime) there must be evidence that an identifiable crime has been committed, or evidence that the police conducting the investigation have before them some evidence which raises a suspicion or belief that an identifiable crime has been committed.
1. (1990) 51 A. Crim. R., at p. 374.
Conspiracy to pervert the course of justice
To attempt to pervert the course of justice is a common law misdemeanour [49] . The origin of the offence is obscure but it appears to have developed from the law which came to be categorized as a conspiracy to pervert the course of justice [50] . As the English Court of Appeal pointed out in Reg. v Rowell [51] , however, the "use of the word "attempt" in this context is misleading". The essence of the offence is "the doing of some act which has a tendency and is intended to pervert the administration of public justice" [52] . An attempt to pervert the course of justice is a substantive and not an inchoate offence [53] . In Reg. v Machin , the Court of Appeal pointed out that the word "attempt" [54] "is convenient for use in the case where it cannot be proved that the course of justice was actually perverted but it does no more than describe a substantive offence which consists of conduct which has tendency and is intended to pervert the course of justice". It is the tendency of the conduct which is decisive, and it is irrelevant whether the conduct did or did not bring about a miscarriage of justice.
1. Reg. v Vreones [1891] 1 QB. 360, at p. 367; Reg. v Murphy (1985), 158 C.L.R. 596, at p. 609.
2. Archbold, Pleading, Evidence and Practice in Criminal Cases, 43rd ed. (1988), p. 2462.
3. [1978] 1 W.L.R. 132, at p. 138; [1978] 1 All E.R. 665, at p. 671.
4. Vreones [1891] 1 QB., at p. 369; Murphy (1985), 158 C.L.R., at p. 609.
5. Machin (1980), 71 Cr. App. R. 166, at p. 170.
6. (1980) 71 Cr. App. R. 166, at p. 170.
It follows, as the Court of Criminal Appeal held in this case, that the object of a conspiracy to pervert the course of justice is the substantive offence of attempting to pervert the course of justice. But does this mean, as that Court held, that, if no proceedings are pending, an agreement to make a false statement to a police officer is not punishable as a conspiracy to pervert the course of justice unless the prosecution establishes that an identifiable crime has been committed or that the police had before them evidence which raises a suspicion or belief that an identifiable crime has been committed?
Offences for conduct which would now be categorized as conspiracies to pervert the course of justice are among the oldest offences known to the English common law. The modern law of conspiracy developed from the writ of conspiracy, which was created by the Statute of Conspirators "of the probable date, 21 Ed. I" [1293] [55] . That statute made it an offence to combine falsely and maliciously to indict or cause others to be indicted or to combine falsely to move or maintain pleas of the Crown [56] . By the end of the seventeenth century, however, the types of agreement punishable as conspiracies to pervert the course of justice had been greatly extended. Yet it was not until 1933 that anybody appears to have suggested that by itself a wilfully false statement made to a police officer in relation to an actual, alleged or suspected crime might constitute the offence of attempting to pervert the course of justice. No trace of such a suggestion can be found in the eighteenth [57] or nineteenth [58] century writers. Moreover, it was not until 1956 that any court adopted the suggestion. English [59] and Irish [60] courts, however, have now accepted that by itself a false statement to a police officer in relation to an actual, alleged or suspected crime can constitute the offence of attempting to pervert the course of justice. Nevertheless, I cannot accept that such a statement by itself is an offence under the common law of Australia.
1. Winfield, History of Conspiracy and Abuse of Legal Procedure (1921), p. 51; and see Wright, Law of Criminal Conspiracies and Agreements (1873), pp. 5-6.
2. Winfield, op. cit., pp. 51-52.
3. See, e.g., Blackstone, Commentaries on the Laws of England (1769), vol. IV, pp. 127 ff.
4. See, e.g., Hawkins, Treatise of the Pleas of the Crown, 8th ed. (1824), vol. 1, pp. 412-477; Archbold's Criminal Pleading, 19th ed. (1878), pp. 1005-1014; Chitty, Practical Treatise on the Criminal Law, 1st ed. (1816), vol. 3, pp. 1138-1193; Russell, Treatise on Crimes and Misdemeanors, 5th ed. (1877), vol. 3, pp. 109-176.
5. Reg. v Thomas [1979] QB. 326; Reg. v Selvage [1982] QB. 372.
6. Reg. v Bailey [1956] NI. 15.
The first suggestion that a false statement to an officer of the law in relation to an actual, alleged or suspected crime might by itself constitute the offence of attempting to pervert the course of justice arose out of R. v Manley [61] . In that case, the Court of Criminal Appeal upheld a conviction that the appellant had unlawfully effected "a public mischief" in falsely informing the police that she had been assaulted and robbed. The Court, relying on a dictum of Lawrence J. in R. v Higgins [62] , held that "at the present day there [was] a misdemeanour of committing an act tending to the public mischief". The Court also said [63] :
In the opinion of the Court the indictment aptly describes two ingredients of public mischief or prejudice to the community, one of these being that officers of the Metropolitan Police were led to devote their time and services to the investigation of an idle charge, and the other being that members of the public, or at any rate those of them who answered a certain description, were put in peril of suspicion and arrest.
1. [1933] 1 K.B. 529.
2. (1801) 2 East 5 [102 E.R. 269].
3. [1933] 1 K.B., at pp. 534-535.
The reasoning in Manley was strongly criticized by Dr. Stallybrass in an article in the Law Quarterly Review [1] . However, in the course of that article, he submitted that it would have involved [2] "no great extension of the existing law relating to indictable "frauds affecting the public at large" to have dismissed the prisoner's appeal in R. v Manley on the ground that her fraud interfered with the administration of criminal justice".
1. vol. 49 (1933) 183.
2. ibid., at p. 189.
In Reg. v Newland [3] , the Court of Criminal Appeal said that it was "much too late to object that a conspiracy to effect a public mischief is an offence unknown to the law". Nevertheless, after referring to Manley , Lord Goddard C.J., giving the judgment of the Court, said [4] :
With all respect to a case which, as we have said, is binding on us we believe that the right approach to what may be compendiously called public mischief cases is to regard them as part of the law of conspiracy, and to hold the actions of an individual not committed in combination with others as indictable only if they constitute what has been held in the past to be common law or statutory offences. It may be that Manley 's case will some day be considered by the House of Lords and in any case we venture to think that it would be a useful reform if such conduct as was there disclosed were made a summary offence by the legislature. We need not further enlarge on it, as the charge we are now considering was one of conspiracy, except to say that in our considered opinion the safe course is no longer to follow it.
1. [1954] 1 Q.B. 158, at p. 165.
2. ibid., at p. 168.
However, in Reg. v Bailey [5] , where the accused was convicted of unlawfully effecting "a public mischief", the Court of Criminal Appeal of Northern Ireland said that it thought that the purpose of the criticism of Manley in Newland "may have been to criticize the reasoning, based on the dictum of Lawrence J., on which the decision was founded rather than the decision itself". In Bailey , the accused had made a false confession to police officers implicating himself and two other persons in a murder. The Court of Criminal Appeal held that there was no offence of effecting a public mischief but upheld the conviction on the ground that the conduct of the accused fell into the category of acts prejudicial to the administration of public justice. The Court said [6] :
But the administration of public justice, particularly in the criminal sphere, cannot well be confined to the processes of adjudication. In point of principle we think it comprehends functions that nowadays belong, in practice almost exclusively, to the police, such as the investigation of offences and the arrest of suspected persons; and we see no good reason for regarding these preliminaries as beyond the scope of the category we are now considering. We find support for this view in Reg. v Vreones .
1. [1956] N.I., at p. 24.
2. ibid., at p. 26.
It is difficult to accept the Court of Criminal Appeal's conclusion in Bailey that the purpose of the criticism of Manley in Newland "may have been" to criticize the reasoning and not the decision in Manley , for Lord Goddard said in Newland that the only safe course was no longer to follow the decision in Manley . Moreover, although in Newland Lord Goddard referred to Dr. Stallybrass' criticism of the dictum of Lawrence J. in Higgins , his Lordship did not suggest that the decision in Manley could be supported on the ground that "her fraud interfered with the administration of justice". It is also difficult to see how the decision or the reasoning in Vreones supports the view that investigations by police officers of actual, alleged or suspected crimes are part of "the course of justice" for the purpose of the offence of attempting to pervert the course of justice. In Vreones , the appellant had been convicted on a count which alleged that, after altering the character of certain samples of goods, he forwarded them to an Association with the intent that they should be used before arbitrators if any dispute arose between the parties to the contract for the sale of the goods. No arbitrators had been and, because of his conduct, ever were appointed. But the conviction was upheld. Lord Coleridge C.J. thought that the case was one of the "manufacture of false evidence for the purpose of misleading a judicial tribunal" [7] . Pollock B. thought "that by tampering with the evidence which was to be laid before that tribunal the defendant was interfering with the course of justice" [8] . Vreones is certainly authority for the proposition that the offence of attempting to pervert the course of justice may arise when the attempt is to pervert proposed judicial proceedings. It has been so regarded in this Court [9] . But it lends no support to the proposition that police investigations are part of "the course of justice" for the purpose of the offence of attempting to pervert the course of justice. Moreover, as Watkins L.J. said in Selvage , the facts of Vreones were "as close to if not on the very boundary itself of the offence of perverting the course of justice" [10] .
1. Vreones [1891] 1 QB., at p. 366.
2. ibid., at p. 369.
3. See Murphy (1985), 158 C.L.R., at p. 609.
4. [1982] Q.B., at p. 381.
Since Bailey , however, English courts have accepted that police investigations are part of "the course of justice" for the purposes of the offences of conspiring to pervert the course of justice and attempting to pervert the course of justice [11] . In Selvage , the Court of Appeal said [12] :
It is obvious from these cases that this offence which affects the administration of justice is not confined to matters directly concerning criminal proceedings already in being. It impinges upon the process of investigating crime suspected by the police of having been committed or falsely alleged to have been committed by a person desirous of unlawfully bringing criminal proceedings about or of causing police officers to embark upon the process of investigating false accusations to the detriment of their other duties.
The Court also said [13] :
a course of justice must have been embarked upon in the sense that proceedings of some kind are in being or are imminent or investigations which could or might bring proceedings about are in progress in order that the act complained about can be said to be one which has a tendency to pervert the course of justice.
These passages in Selvage were cited in this Court in Murphy [14] for the purpose of showing that conduct which occurred before any curial proceedings had been commenced could constitute the offence of attempting to pervert the course of justice. But in Reg. v Todd [15] , in what is by far the fullest and most valuable examination of the whole subject, the Full Court of South Australia said:
With all respect to the Court of Appeal of Northern Ireland, however, we are unable to accept, in the absence of authority, that the course of justice for this purpose includes the investigation by the police of facts for the purpose of ascertaining whether or not a crime has been committed. A perusal of the very full discussions, supported by reference to many cases, on the subject of perjury, persuades us that if there had been a parallel (but less serious) crime of giving false information to the officers of the law some mention of it would have appeared in the text books.
1. See Reg. v Thomas [1979] QB., at p. 331; Reg. v Selvage [1982] QB., at pp. 380-381.
2. Selvage [1982] QB., at p. 380.
3. [1982] Q.B., at p. 381.
4. (1985) 158 C.L.R., at p. 610.
5. [1957] S.A.S.R. 305, at p. 328.
In Todd , the Full Court held that the accused had committed no offence where his conduct had led police officers to conclude that he may have drowned in a motor vehicle accident and had caused them to investigate whether that was so.
I think that the Full Court of South Australia was correct in Todd in holding that investigations of actual or suspected crimes by officers of the law are not part of "the course of justice" for the purpose of the common law offences concerned with perverting the course of justice. Nor without more is it an offence at common law to make a false statement to an officer of the law in the course of an investigation into an actual or suspected crime. The cases and text books to which the Full Court referred in Todd and such additional material, as I have examined myself, give no support for the contrary conclusion. The absence of any contrary statement, prior to the twentieth century, in the reported cases, the digests, the text books and the precedents of indictments in books on criminal law compels the conclusion that, at the time that the common law became part of the law of Australia, a false statement made to an officer of the law during the investigation of an actual, alleged or suspected crime was not by itself a common law misdemeanour. It also compels the conclusion that the investigation of an actual or suspected crime was not part of the "course of justice" for the purpose of the offence of attempting to pervert the course of justice. Nor is there anything in any case decided in this country since the introduction of the common law which lends support for a conclusion contrary to that to which I have come. Indeed, Todd is authority for the proposition that a false statement made to a police officer in relation to an actual, alleged or suspected crime does not constitute an attempt to pervert the course of justice [16] . It is true that, in Murphy , this Court set out those passages in Selvage which extend the scope of the "course of justice" to include investigations by police officers. But the context shows that this Court was not intending to define the scope of the offence in terms of that passage.
1. See also R. v Kataja [1943] VL.R. 145.
Furthermore, principle compels the conclusion that police investigations are not part of the course of justice. The object of the offence of attempting to pervert the course of justice was, historically, and remains today, the protection of the process and procedures of the Sovereign's courts. Indeed, Archbold [17] asserts that "the offence of perverting the course of justice is merely contempt under another name". For the purpose of the law of contempt, it is firmly established "that proceedings are pending in criminal cases after a person has been arrested and charged" [18] and not before. In James v Robinson , this Court held that two newspaper articles which "clearly identified Robinson as the gunman" [19] who had murdered two persons were not contempts of court because the articles appeared two days before any complaints against him were sworn. In Williams v The Queen [20] , which was not a contempt case, Wilson and Dawson JJ. said:
The point at which an arrested person is brought before a justice upon a charge is the point at which the machinery of the law leading to trial is put into operation. It is the point from which the judicial process commences and purely ministerial functions cease.
It follows that for the purpose of the offence of perverting the course of justice, the course of justice does not commence in criminal proceedings until the laying of an information against or the arrest of an accused person [21] . In civil proceedings it does not commence until the institution of the proceedings. In both criminal and civil proceedings, the course of justice ends when the rights and liabilities of the parties have been finally determined and declared after "an inquiry concerning the law as it is and the facts as they are, followed by an application of the law as determined to the facts as determined" [22] . As Vreones shows, it is not necessary that the inquiry be conducted by a court in the strict sense, but it must involve an exercise of judicial power. The course of justice, like the judicial function, "is inseparably bound up with the idea of a suit between parties, whether between Crown and subject or between subject and subject" [23] . It follows that, as a matter of principle, it is not possible to regard police investigations as part of the course of justice for the purpose of the common law offence of attempting to pervert the course of justice.
1. op. cit., p. 2463.
2. James v Robinson (1963), 109 C.L.R. 593, at p. 606.
3. ibid., at p. 599.
4. (1986) 161 C.L.R. 278, at p. 306.
5. James v Robinson .
6. Reg. v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty. Ltd. (1970), 123 C.L.R. 361, at p. 374.
7. Labour Relations Board of Saskatchewan v John East Iron Works Ltd. [1949] AC. 134, at p. 149.
Courts are no longer able to create criminal offences [24] . Consequently, it is not open to the courts of this country to extend the law by declaring that, by itself, a wilfully false statement made to a police officer in relation to an actual, suspected or alleged crime constitutes an attempt to pervert the course of justice. Moreover, if, contrary to history and principle, this Court now declared that the common law misdemeanour of attempting to pervert the course of justice was established simply by the making of a wilfully false statement in relation to an alleged, actual or suspected crime, it is difficult to see how the offence could be limited to investigations by police officers. Many government officials, besides police officers, are today charged with the duty of investigating breaches of the law. Indeed, any wilfully false statement made to any person investigating whether curial proceedings should be instituted in respect of an actual or supposed civil or criminal wrong would also be arguably within the ambit of the offence. In the result, conduct which for hundreds of years had not been in breach of the criminal law would become so without legislative authority. Whether conduct which intentionally misleads police officers and other government officials should be punishable as an offence, and, if so, to what extent, must remain a matter for the legislature and not the courts.
1. Reg. v Knuller (Publishing, etc.) Ltd. [1973] AC. 435, at p. 479.
Nevertheless, in some circumstances, a false statement made to a police officer in the course of the investigation of an actual, alleged or suspected crime can constitute the offence of attempting to pervert the course of justice even though no judicial proceedings have been commenced. As this Court said in Murphy [25] , "an attempt made to pervert the course of justice at a time when no curial proceedings of any kind have been instituted is an offence". Because the course of justice includes proposed as well as existing judicial proceedings [26] , a false statement made to a police officer will constitute the offence if it had a tendency to pervert the course of judicial proceedings and if it was made with the intention to do so.
1. (1985) 158 C.L.R., at p. 609.
2. Vreones ; White v The King (1906), 4 C.L.R. 152.
Although a statement made before the commencement of judicial proceedings cannot amount to a contempt of those proceedings [27] , such a statement will be an attempt to pervert the course of justice if the relevant intent and tendency are present. In this respect, the law relating to contempt and the law relating to perverting the course of justice have gone separate ways. The conviction of the appellant in Vreones was upheld although the arbitration never commenced. In White , this Court upheld the conviction of a person who had made a false statement in a petition which sought a judicial inquiry. In Reg. v Kane [28] , the New Zealand Court of Appeal upheld a conviction for attempting to defeat the course of justice where the appellant, who had been present at the stabbing of a youth, urged a witness to tell the police, when they came, that he was out of the room and knew nothing of the affair and also persuaded the offender to claim falsely that the stabbing was wholly accidental. McCarthy J., who gave the judgment of the Court, said that it was correct that the charge "does not lie on every occasion when the police are misled by false information wilfully given" [29] . He gave Todd as an example of that class of case. But his Honour said that:
there is an essential difference between that class of case and the one we have before us now, where in fact a crime had occurred, the police were in the process of investigating it, and the accused's conduct was aimed at preventing or obstructing a prosecution which he contemplated might follow. It seems to us that, at least when that situation exists, the offence of attempting to pervert the course of justice lies at common law.
1. James v Robinson .
2. [1967] N.Z.L.R. 60.
3. ibid., at p. 63.
In Kalick v The King [30] , the Supreme Court of Canada held that the appellant was rightly convicted of intending "to interfere corruptly with the due administration of justice" where he had offered a bribe of $1,000 to call "the matter square" after a police officer had found a discrepancy in certain records required to be kept under a Temperance Act. In each of these four cases, the conduct of the accused had the tendency to affect identifiable judicial proceedings.
1. (1920) 55 D.L.R. 104.
Furthermore, the course of justice is not synonymous with the course of any particular judicial proceedings. It is well established that a criminal contempt is committed where there has been "an interference with the due administration of justice either in a particular case or more generally as a continuing process" [31] . Thus, to dismiss an employee because he was away from work by reason of jury service is a contempt because it has a tendency to interfere with the administration of justice as a continuing process [32] . Likewise publishing "scandalous" matter concerning a court or judge is a contempt of court although the matter does not relate to any pending proceedings [33] . In Selvage [34] , the Court of Criminal Appeal pointed out that the course of justice is "a term with which the administration of justice is for present purposes synonymous". Since attempting to pervert the course of justice is a form of criminal contempt, in principle, the offence of attempting to pervert the course of justice should also encompass attempts to pervert the course of justice as a continuing process. No doubt such cases are rare because they require conduct which perverts the course of justice in general and not in any particular case. Bribing a judicial officer to decide cases of a particular class in a particular way or bribing a police officer to attempt to persuade other police officers to give false evidence whenever members of a particular organization were arrested would seem to be examples of the offence. Altering the current endorsements on the records of drivers' licences in a case where, by statute, the records were admissible as evidence of their contents would also seem to be an example of attempting to pervert the course of justice if the relevant intent was present because it has a tendency to interfere with the course of any judicial proceedings arising out of the charging of the drivers concerned. But in Selvage , the Court of Criminal Appeal held to the contrary. The Court said [34] :
It has to be borne in mind that in the present case there was not the slightest suggestion that criminal proceedings were pending or imminent or being investigated or that any actual proceedings were within the contemplation of Mrs. Selvage or Mr. Morgan or anyone else at any relevant time. In no decided case known to this court did such a situation as this obtain. In all of them there was, to say the least, within the contemplation of the convicted person some kind of proceeding in a court or judicial tribunal likely upon the happening of a foreseeable event to arise if it was not already in being.
However, their Lordships appear to have overlooked that the offence is made out if there is an attempt to pervert the course of justice as a continuing process.
1. Attorney-General v Leveller Magazine [1979] AC. 440, at p. 449.
2. Attorney-General v Butterworth [1963] 1 QB. 696.
3. Bell v Stewart (1920), 28 C.L.R. 419, at pp. 428-429.
4. [1982] Q.B., at p. 381.
5. [1982] Q.B., at p. 381.
Unless the prosecution proves that the course of justice as a continuing process has been perverted or proves facts which show that an identifiable person has committed an identifiable crime, it is difficult to see how the prosecution can prove that the conduct of the accused interfered with the course of justice. Vreones , White , Kane and Kalick are each authority for the proposition that an attempt to prevent a prosecution being instituted or to interfere with the evidence which might be given in a prosecution, if it was instituted, can constitute an attempt to pervert the course of justice. But, in each of these cases, it was possible to identify the proceedings which would have been instituted. Leaving aside the continuous process cases, proof of the offence will require evidence that the accused has engaged in conduct which prevented or might have prevented the prosecution of a particular offence or that the accused has engaged in conduct which had the tendency to change or did change evidence which would otherwise have been put before a judicial tribunal or which had the tendency to prevent or did prevent evidence from being put before that tribunal. If the evidence does not establish what proceedings would have been commenced or what proceedings were interfered with, the conduct of the accused cannot be shown to have the tendency to pervert the course of justice which, ex hypothesi, is undefined. It is not enough that the conduct of the accused has misled an investigation into whether a person has committed any offence against the law.
In Reg. v Withers [35] , Lord Simon of Glaisdale expressed the opinion that both Manley and Bailey were cases of attempting to pervert the course of justice. Since the accused in Bailey had not only confessed to a murder himself but implicated two other individuals in the murder, it seems correct to regard his statements as perverting the judicial proceedings which would arise out of the prosecution of the accused and the other two men. But while the conduct of the accused in Manley had the tendency and was intended to mislead the investigating police officers, it is difficult to see how her conduct had reached the stage where it had any tendency to mislead a judicial tribunal. To constitute the offence, the conduct of the accused must have been such "for there to be a risk, without further action by him [or her], that injustice will result" [36] . If the accused in Manley had named or identified an individual, the course of justice which the accused had attempted to pervert would have been identified whether or not the person named or identified was in fact charged. But, without further action by the accused, it is difficult to see how her conduct had any tendency to interfere with any judicial proceedings. She had claimed a crime had been committed but she had not put anybody at risk of prosecution.
1. [1975] A.C. 842, at p. 868.
2. Reg. v Murray (1982), 75 Cr. App. R. 58, at p. 62.
Just as the offence of attempting to pervert the course of justice can be committed although no judicial proceedings are pending, so can the offence of conspiracy to pervert the course of justice be committed although no judicial proceedings are pending. Thus, in Reg. v Hammersley [1] , the Court of Criminal Appeal held that two police officers and a bookmaker were correctly convicted of conspiracy to obstruct the course of public justice over a nine-year period. The Crown led evidence that two of the defendants and another police officer (who was acquitted) implemented the agreement by protecting people who were known to be criminals and by preventing the apprehension by other police officers of persons who were suspected to be guilty of offences. The Court said [2] :
These defendants were, on the evidence which the jury accepted, interviewing suspected criminals, in some cases actual criminals, and saying that for considerations they would not bring charges or they would help them when charges were brought or they would prevent them from being arrested by other police forces.
The Court seems to have regarded the case as a single conspiracy to pervert the course of justice as a continuing process. In R. v Sharpe and Stringer [3] , the Court of Criminal Appeal held that the appellants were correctly convicted of conspiring "to defeat the ends of public justice by concealing and destroying evidence of the commission of a crime". The Court rejected the contention that there could be no conspiracy to obstruct the course of public justice "unless proceedings have already begun" [4] . The judicial proceedings which the appellants conspired to pervert were clearly identified.
1. (1958) 42 Cr. App. R. 207.
2. ibid., at p. 214.
3. (1937) 26 Cr. App. R. 122.
4. ibid., at p. 126.
The directions of the trial judge
At the trial the Crown made no attempt to prove that the respondents had conspired to pervert the course of justice in relation to any judicial proceedings which were pending or proposed. The learned trial judge left the Crown case to the jury as follows:
The Crown says that the conspiracy to fabricate the source of the moneys deposited in the National Australia Bank accounts occurred at a time when police investigations were inevitable and that such investigations could lead only to criminal proceedings against Rogerson and/or Nowytarger — that is, criminal proceedings were imminent or threatened. To establish its case the Crown must show that what was done pursuant to the agreement — that is the conspiratorial agreement to pervert the administration of justice — would have that tendency and was so intended by those who are parties to the conspiracy. The Crown says that the acts of Rogerson, Nowytarger and Karp in pursuance of the agreement were intended to foil the police inquiry and clearly had that effect — that is the fabrication of the false agreement, of the receipts and the accounts given to the police by those three persons. And, of course, on the Crown case all those events occurred after the police inquiry had commenced, if you accept that it commenced on 16 July. It would follow, members of the jury, if you accept the evidence of the young lady who typed out the agreements and receipts, Miss Parkinson, that she typed the agreement on 17 July. So clearly if you accept that as being the date that the agreement and receipts were typed, they were signed certainly no earlier than the 17th by the two accused and Karp. The accounts given to the investigating police also occurred after 16 July.
The effect of this direction was to equate perverting the course of justice with foiling the police inquiry.
Just before the jury retired, the learned trial judge gave a further direction to the jury. He said:
When I was summarizing the Crown case, I said words to this effect, that in the Crown case the conspiracy to fabricate a false account of the moneys deposited in the National Australia Bank account occurred at a time when the police investigations were inevitable and that such investigations could lead to criminal proceedings against either the accused Nowytarger or Rogerson or both. I think it is implicit in what I said to you there members of the jury and I do mention this to you, you would have to be satisfied beyond a reasonable doubt that the accused that you [are] considering believed that a police inquiry would take place in that context at that time.
This direction equated the offence with interference with a police inquiry or investigation which could lead to criminal proceedings.
It appears from his Honour's directions that the crime with which Rogerson and/or Nowytarger would have been charged was never identified. Hence, the nature of the proceedings which the respondents were alleged to have conspired to pervert was never identified. The Crown merely alleged that the police investigations "could lead only to criminal proceedings against Rogerson and/or Nowytarger — that is, criminal proceedings were imminent or threatened". In his final summary of the Crown case, the learned judge left the case to the jury on the basis that it was enough to constitute the offence that the police investigations "could lead to criminal proceedings". The Crown did not identify with any precision, or at all, how the investigations could lead to criminal proceedings or what they would be. Since any police inquiry may lead to the institution of criminal proceedings, the effect of the directions of the learned trial judge was that the respondents were guilty if the jury found that the agreement to fabricate an account of the source of the moneys could foil the inquiry and the respondents had the intention to do so. But such a direction could only be correct if police investigations were part of the course of justice or if the offence of conspiracy to pervert the course of justice was made out if the investigation could possibly lead to a prosecution for an offence even though the offence could not be identified.
I have already held that police investigations are not part of the course of justice. So the question arises whether a person can be guilty of attempting to pervert the course of justice if the conduct of that person has interfered with a police investigation which could lead to a criminal prosecution. Stated in this bald form, the question can have only one answer. Unless the judicial proceedings, which would be the subject of the prosecution, are identified, it cannot be proved that the conduct of the accused had the tendency to affect the course of justice in judicial proceedings. And the proceedings cannot be identified if their subject matter is not identified. Consequently, the directions of the learned trial judge were erroneous and, by themselves, would require a new trial of the charge. But the Court of Criminal Appeal went further. It held, correctly in my opinion, that there was no evidence to support the charge.
No evidence to support the charge
I am unable to accept the conclusion that, if accepted, the evidence established the offence because it proved that the respondents conspired to deceive the police and deflect them from instituting a prosecution based on the belief of those officers that the money, withdrawn from the National Australia Bank, was unlawfully obtained. The acceptance of such evidence would lead only to the conclusion that the respondents had agreed to fabricate evidence with the intention of perverting the course of justice. It would not establish that they had conspired to do anything which had the tendency to pervert the course of justice. A conspiracy to pervert the course of justice requires not merely an intention to pervert the course of justice but an agreement to do something which has the tendency to pervert it. The conduct of the respondents was not proved to have any tendency to pervert the course of justice because it was never proved what proceedings could have been affected by their conduct. The offence of attempting to pervert the course of justice is not proved if all that can be established is that the conduct of the accused frustrated or interfered with an investigation into what the investigators believed or suspected might be a crime; it must be shown, in a case such as the present, that the conduct of the accused had the tendency to prevent the investigators from instituting proceedings in respect of a crime. Nor is the offence proved if all that can be established is that the accused believed that what they were doing would pervert the course of justice. Whatever the accused have done or intended to do, the offence of conspiracy to pervert the course of justice is not made out unless they have agreed to do something which has the tendency to pervert the course of judicial proceedings. Since the Crown at no stage attempted to identify the crime or even the category of the crime, which would be the subject of judicial proceedings, there was no evidence upon which the jury could find that the respondents had conspired to do something which had the tendency to pervert the course of judicial proceedings.
In this Court, it was also suggested that the police investigation could have led to disciplinary proceedings being instituted against Rogerson. It is enough to say that that case was not left to the jury and, in any event, suffers from the same defect as the case that was left to the jury.
Special leave
It is the practice of this Court to refuse to grant special leave to the Crown to appeal against an order of acquittal by a Court of Criminal Appeal unless the case is exceptional [5] . Counsel for the Crown in right of the State of New South Wales, supported by counsel for the Commonwealth of Australia and the State of South Australia who intervened in the proceedings, submitted that, to require the Crown to prove exceptional circumstances, is inconsistent with the conferring of the discretion to grant or refuse special leave. It is unnecessary to resolve that issue in this case because the application raises questions of exceptional importance concerning the scope of the offence of conspiracy to pervert the course of justice. It is therefore a proper case for the grant of special leave.
1. R. v Wilkes (1948), 77 C.L.R. 511, at pp. 516-517.
Special leave to appeal should be granted. But the appeal must be dismissed. |
high_court_of_australia:/showbyHandle/1/9626 | decision | commonwealth | high_court_of_australia | text/html | null | Taxation, Commissioner of v Dalco [1990] HCA 3 | https://eresources.hcourt.gov.au/showbyHandle/1/9626 | 2024-09-13T22:50:50.271928+10:00 | High Court of Australia
Mason C.J. Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ.
Taxation, Commissioner of v Dalco
[1990] HCA 3
ORDER
Appeals allowed. Set aside the orders of the Full Court of the Federal Court and in lieu thereof order that each of the appeals to that Court be dismissed with costs. Order that the appellant pay the respondent's costs of each appeal to this Court.
Cur. adv. vult.
The following written judgments were delivered:—
1990, Feb. 9
Mason C.J.
I agree with the reasons for judgment of Brennan J. and Toohey J.
Brennan J.
The appellant ("the Commissioner") assessed the respondent ("the taxpayer") to income tax by amended assessments in respect of the years ended 30 June 1976, 1977, 1978 and 1980. Written notices of the amended assessments were served upon the taxpayer. The assessments were made under par. (b) of s. 167 of the Income Tax Assessment Act 1936 Cth ("the Act"). Section 167 must be read in conjunction with s. 166 of the Act for the two sections together prescribe the scope of the duty of the Commissioner to make assessments and confer upon him the power to perform that duty: George v. Federal Commissioner of Taxation [1] . The taxpayer does not impugn the validity of the assessments; he attacks the respective amounts at which his taxable income was assessed.
1. (1952) 86 C.L.R. 183, at p. 204.
The taxpayer's appeals to the Supreme Court of New South Wales consequent on the Commissioner's disallowance of his objections to the assessments were dismissed by Yeldham J. [2] . The taxpayer appealed to the Federal Court. By a majority (Sheppard and Gummow JJ., Wilcox J. dissenting) the Full Court allowed the appeals [3] . The majority did not find any factual error in the findings made by Yeldham J. but they held that the taxpayer had succeeded in showing that each of the assessments was excessive "in that it was not warranted by law" [4] . They remitted each matter to the Commissioner for reassessment. From that order, the Commissioner brings these appeals by special leave.
1. (1988) 88 A.T.C. 4131.
2. (1988) 88 A.T.C. 4649.
3. (1988) 88 A.T.C., at p. 4666.
In the proceedings before Yeldham J., the taxpayer was able to show the bases on which the Commissioner had proceeded in making the assessments and he sought to demonstrate that those bases were erroneous. In brief, he sought to show that the Commissioner had wrongly treated the income of companies or trusts which the taxpayer or his family company acquired or controlled as assessable income of the taxpayer. Yeldham J. found that the taxpayer "completely disregarded corporate structures and entitlements or used them purely for convenience in the lending of money and the claiming of expenses" [5] and his Honour considered that in each of the years of income there was a derivation of income by the taxpayer that was dealt with at his direction with a disregard of corporate rights. His Honour thought that much of the evidence of the taxpayer was unsatisfactory, and he said [6] :
At the very least he had the control and benefit of the moneys which the Commissioner has included as assessable income during the years in question or their equivalent. (See ss. 19 and 25(1).)
It is plain from the authorities that the onus is upon the taxpayer to demonstrate that the Commissioner's figures in relation to taxable income were excessive, by showing the sources of that income year by year and excluding all sources of income other than those which he admits. That onus has not been discharged as there were funds available to him from unexplained sources year by year and shortages of income in each year that were and are unexplained in a satisfactory manner.
As the taxpayer "failed to prove that any relevant assessment [was] erroneous or excessive", Yeldham J. dismissed the appeals [7] .
1. (1988) 88 A.T.C., at p. 4141.
2. (1988) 88 A.T.C., at p. 4142.
3. (1988) 88 A.T.C., at p. 4143.
The majority of the Full Court of the Federal Court noted that the "evidence before the Supreme Court disclosed the existence and some of the activities of numerous trusts and corporations which were associated with the taxpayer in either or both a legal and practical sense" [8] , but their Honours held that the Commissioner had proceeded on a wrong basis in making the assessments. Their Honours said [9] :
it was open to the taxpayer to endeavour to demonstrate that each of the assessments (that is, each of the processes of assessment) was excessive in that it was not warranted by law. It is that submission which we have accepted, but we make it clear that we do not find error in his Honour's findings of fact that Mr. Dalco did not show that in fact his income for each of the tax years was less than the figure arrived at by the Commissioner, and did not show that his only income was disclosed in his income tax returns.
1. (1988) 88 A.T.C. 4651.
2. (1988) 88 A.T.C., at p. 4666.
The divergence of views reveals the question for determination by this Court: In proceedings on appeal to a court pursuant to Div. 2 of Pt V of the Act against an assessment made under s. 167(b), does the taxpayer discharge the burden of proving that the assessment is excessive where (a) he does not prove that the amount assessed as his taxable income in fact exceeds his taxable income, but (b) he shows that the Commissioner formed a judgment as to the amount of his taxable income on a wrong basis? The answer to the question turns, of course, upon a construction of the relevant provisions in Pts IV and V of the Act.
Where one or other of the situations described in pars (a), (b) and (c) of s. 167 exists, the Commissioner or his delegate is empowered to make an assessment of an amount which, in the Commissioner's judgment, is the amount on which tax ought to be levied: George's Case [10] . It is that amount which, for the purpose of s. 166, becomes the taxpayer's taxable income. That amount may not be in truth the taxpayer's taxable income for a particular income year and it may not be so regarded by the Commissioner (as in Trautwein v. Federal Commissioner of Taxation [11] ) but, for the purpose of s. 166, that amount is the taxpayer's taxable income for the income year to which the assessment relates unless it is shown on appeal from, or on review of, the assessment that the amount of the assessment is wrong: Henderson v. Federal Commissioner of Taxation [12] . In a case arising under s. 167(b), there are two functions for the Commissioner or his delegate to perform: first, he must decide whether he is satisfied with the return furnished, and, if he is not, he must form a judgment of the amount on which tax ought to be levied. In George's Case [13] it was held that the former function was a procedural step and was thus part of the making of the assessment, the due making of which is conclusively proved by the production of a notice of assessment: s. 177(1). By contrast, in proceedings on appeal against an assessment the function of forming a judgment of the amount on which tax ought to be levied is not conclusively proved by the production of a notice of assessment. That is because s. 177 distinguishes "between the procedure or mechanism by which the taxable income and tax is ascertained or assessed on the one hand and on the other hand the substantive liability of the taxpayer. The former involves the due making of the assessment": George's Case [13] ; McAndrew v. Federal Commissioner of Taxation [14] ; and see F.J. Bloemen Pty. Ltd. v. Federal Commissioner of Taxation [15] .
1. (1952) 86 C.L.R., at p. 204.
2. (1936) 56 C.L.R. 63.
3. (1970) 119 C.L.R. 612, at p. 648.
4. (1952) 86 C.L.R., at pp. 206-207.
5. (1952) 86 C.L.R., at pp. 206-207.
6. (1956) 98 C.L.R. 263, at p. 271.
7. (1981) 147 C.L.R. 360, at p. 373.
In relation to the proceedings on appeal against the assessments before Yeldham J., s. 190 provides:
(a) the taxpayer shall, unless the court otherwise orders, be limited to the grounds stated in his objection; and
(b) the burden of proving that the assessment is excessive shall lie upon the taxpayer.
Section 190(b) confirms the burden of proof which, apart from that provision, a taxpayer appellant would bear in seeking relief from the court against the liability which is otherwise conclusively imposed upon him by operation of s. 177(1): McAndrew's Case [14] ; McCormack v. Federal Commissioner of Taxation [16] . The term "excessive" in s. 190(b) relates to the "amount" of the assessment which is mentioned in s. 177(1): McAndrew's Case [14] .
1. (1956) 98 C.L.R. 263, at p. 271.
2. (1979) 143 C.L.R. 284, at pp. 301, 306.
3. (1956) 98 C.L.R. 263, at p. 271.
A taxpayer, who seeks to discharge the burden of proving that the amount shown in the notice of assessment is excessive, is limited by s. 190(a) to the grounds stated in an objection against the assessment. An objection must state "fully and in detail" the grounds on which a taxpayer relies (s. 185) and the Commissioner is required, after consideration of the objection, to "disallow it, or allow it either wholly or in part": s. 186. But an objection and a Commissioner's notice of decision on the objection are not pleadings which so confine the issues as to preclude the Commissioner from putting the taxpayer to proof of the true amount of his taxable income. After all, the purpose of the procedure of assessment, objection and appeal or review is to ascertain the true tax liability of the taxpayer under the substantive provisions of the Act. Oftentimes, the grounds of an objection and the Commissioner's notice of decision thereon will define the issues for determination by a court entertaining an appeal against the assessment; but not necessarily so. It is not the grounds of the objection against an assessment but the objection itself which is treated as an appeal and forwarded to a Supreme Court for hearing and determination: ss. 187(1)(b), 197, 199. It would be inappropriate for a court determining an appeal to make an order altering the tax liability assessed (s. 199) unless the court were satisfied that the amount to which it proposed to alter the assessment represented the true tax liability of the taxpayer. Although the grounds of objection limit the grounds of appeal, the ultimate question for the court hearing the appeal is not whether the grounds have been made out but whether the amount assessed as taxable income is wrong. The burden which rests on a taxpayer is to prove that the assessment is excessive and that burden is not necessarily discharged by showing an error by the Commissioner in forming a judgment as to the amount of the assessment.
The matters which are excluded by s. 177(1) from challenge in proceedings on appeal against an assessment (including an amended assessment (s. 173)) have been narrowly confined in accordance with legislative policy "to give to the taxpayer full opportunity on objecting to his assessment of contesting his liability in every respect before a court or before a board of review": McAndrew's Case [17] . It is therefore open to a taxpayer to attack not only the calculation of the amount of an assessment but the authority of the Commissioner to make the assessment. Thus it was held in McAndrew's Case that it was open to a taxpayer on appeal to challenge the fulfilment of the conditions mentioned in s. 170(2) governing the power of the Commissioner to impose a tax liability by amendment of an assessment: see p. 271. Taylor J., in a passage on which the majority of the Full Federal Court relied in the present case, said [18] :
there is no reason for thinking that an assessment, made in purported but not justifiable exercise of a statutory power, may not properly be described as excessive; it purports to impose a specified liability and, upon appeal, the claim of the appellant is that he is not liable to pay any part of it. Whether the particular ground upon which he seeks to escape or reduce the liability merely touches the accuracy of the assessment or assails its validity as an assessment, he is, in the words of s. 185, "dissatisfied with" the assessment because it purports to impose upon him a liability in excess of that to which he may lawfully be subjected and I can see no reason why, in either case, his complaint may not be accurately described as a complaint that his assessment is excessive.
This statement was accepted as correct by Mason and Wilson JJ. (with whom Stephen and Aickin JJ. agreed) in F.J. Bloemen Pty. Ltd. [19] .
1. (1956) 98 C.L.R., at p. 270.
2. (1956) 98 C.L.R., at pp. 282-283.
3. (1981) 147 C.L.R., at p. 375.
McAndrew's Case is clearly distinguishable from the present case. Here, it is conceded that, upon the facts of the present case, there was power in the Commissioner to make an assessment under s. 167(b); there, the taxpayer denied the power of the Commissioner, on the facts of that case, to make an amended assessment under s. 170(2). Here, the question is whether the amount assessed is correct; there, the question was whether the Commissioner had power to make an amended assessment. Although the point is not in issue in the present case (for the validity of the assessment is conceded), George's Case establishes either that par. (b) of s. 167 does not create a condition precedent governing the power to make an assessment or that, if it does, the fulfilment of the condition precedent is part of the due making of the assessment not going to substantive liability so that, by force of s. 177(1), the existence of the circumstances mentioned in par. (b) is not open to challenge in proceedings on appeal from an assessment. McAndrew's Case, on the other hand, establishes that s. 170(2) creates a condition precedent governing the power to make an amended assessment and that the satisfaction of the requirements of s. 170(2) is not merely part of the due making of the assessment which does not affect substantive liability. It was held that s. 170(2) creates a condition precedent, the satisfaction of which was not protected from challenge in appeal proceedings by s. 177(1). As the amount of the amended assessment would be shown to be excessive if the requirements of s. 170(2) were not satisfied, s. 190(b) imposed on the taxpayer the burden of showing that the requirements had not been satisfied.
The ground of objection on which the taxpayer here relies is error in the formation of a judgment as to the amount on which tax ought to be levied. But mere error in the formation of that judgment by the Commissioner does not warrant the setting aside of the amount assessed. Given the validity of the exercise of the power to make an assessment under s. 167(b), the ultimate question is whether the amount of the assessment is excessive. The amount of the assessment might not be excessive in fact, though the reasons which led to the assessment were erroneous. In George's Case [20] the Full Court said:
the law has always been taken to be that in an appeal from an assessment the burden lies upon the taxpayer of establishing affirmatively that the amount of taxable income for which he has been assessed exceeds the actual taxable income which he has derived during the year of income.
Kitto J., from whose judgment the appeal in George's Case was brought, said [21] :
[Section] 190 (b) places the burden of proving that the assessment is excessive upon the appellant; and in order to carry that burden he must necessarily exclude by his proof all sources of income except those which he admits. His case must be that he did not derive from any source taxable income to the amount of the assessment.
1. (1952) 86 C.L.R., at p. 201.
2. (1952) 86 C.L.R., at p. 189.
Counsel for the taxpayer invited the Court to overrule George's Case in so far as it requires a taxpayer to prove that the amount of taxable income assessed exceeds the taxpayer's actual taxable income, but that proposition does not rest on George's Case alone. At base, it rests on s. 190(b) but it is acknowledged in McAndrew's Case, McCormack's Case and F.J. Bloemen Pty. Ltd. (at pages earlier cited). In this respect, George's Case is not open to doubt. It follows that Wilcox J. was right in holding that "the task for the taxpayer, upon an appeal or a review under Pt V of the Act, is to show that the amount of money for which tax is levied by a particular notice of assessment exceeds the actual substantive liability of the taxpayer" [22] .
1. (1988) 88 A.T.C., at p. 4674.
In Trautwein's Case [23] Latham C.J. expressed a possible qualification upon the general rule that the taxpayer must show "not only negatively that the assessment is wrong, but also positively what correction should be made in order to make it right or more nearly right." He added:
I say "as a general rule" because, conceivably, there might be a case where it appeared that the assessment had been made upon no intelligible basis even as an approximation, and the court would then set aside the assessment and remit it to the commissioner for further consideration.
His Honour evidently had in mind an error which not only affected the correctness of the amount assessed but vitiated the purported exercise of the power to assess conferred by ss. 166 and 167. Such a case would be exceptional, and a court must be careful to maintain the distinction between an error in exercising the power to make an assessment and an error which deprives a purported assessment of validity: see Re Moore; Ex parte Co-operative Bulk Handling Ltd. [24] ; and R. v. Taylor; Ex parte Professional Officers' Association — Commonwealth Public Service [25] . If there could conceivably be such a case as Latham C.J. had in mind, this is not it. The amounts assessed represent the Commissioner's bona fide judgment as to the amount of the taxpayer's taxable income and the power to make the assessment was validly exercised. The assessments being valid, the burden was on the taxpayer to prove that the amounts assessed were excessive.
1. (1936) 56 C.L.R., at p. 88.
2. (1982) 56 A.L.J.R. 697; 41 A.L.R. 221.
3. (1951) 82 C.L.R. 177, at p. 186.
The manner in which a taxpayer can discharge that burden varies with the circumstances. If the Commissioner and a taxpayer agree to confine an appeal to a specific point of law or fact on which the amount of the assessment depends, it will suffice for the taxpayer to show that he is entitled to succeed on that point. Absent such a confining of the issues for determination, the Commissioner is entitled to rely upon any deficiency in proof of the excessiveness of the amount assessed to uphold the assessment, though the taxpayer is limited to the grounds of his objection. In Gauci v. Federal Commissioner of Taxation [26] , Mason J. said:
The Act does not place any onus on the Commissioner to show that the assessments were correctly made. Nor is there any statutory requirement that the assessments should be sustained or supported by evidence. The implication of such a requirement would be inconsistent with s. 190(b) for it is a consequence of that provision that unless the appellant shows by evidence that the assessment is incorrect, it will prevail.
That view, expressed in a dissenting judgment, now prevails: Macmine Pty. Ltd. v. Commissioner of Taxation [27] ; McCormack's Case [28] .
1. (1975) 135 C.L.R. 81, at p. 89.
2. (1979) 53 A.L.J.R. 362, at pp. 366, 371, 381.
3. (1979) 143 C.L.R., at pp. 303, 306, 323.
Although the Commissioner is entitled to rely on any deficiency in proof of the excessiveness of the amount assessed, the exigencies of litigation may justify on occasions an order that the Commissioner furnish particulars of the basis on which he proposes to support an assessment: Bailey v. Federal Commissioner of Taxation [29] . In that case, the assessment was based on s. 260. Although the Commissioner was ordered to furnish particulars of the application of s. 260 on which he proposed to support the assessment, Aickin J. (with whom the other Justices agreed) observed [30] that if, in the course of evidence, facts emerged which were not previously known to the Commissioner and which suggested a different or additional application of s. 260 from the application of which particulars had been given, the Commissioner would be permitted to amend the particulars.
1. (1977) 136 C.L.R. 214.
2. (1977) 136 C.L.R., at p. 228.
The majority of the Full Federal Court in the present case treated the error which they held to infect the Commissioner's assessment of the amount of the taxpayer's taxable income as concluding the question whether that amount was excessive. It did not. If this were a case where all the material facts were known and the amount of taxable income depended on the legal complexion of those facts, the taxpayer would succeed upon establishing that the Commissioner erroneously included in the assessed taxable income an amount which, on those facts, ought not to have been included. But where, as here, the taxpayer has not proved that his actual taxable income is less than the amount assessed, the Court does not know all the material facts and it cannot find that the amount assessed is wrong. A taxpayer who shows on the facts that are known a mere error by the Commissioner in assessing the amount of the taxpayer's taxable income does not show that his objection should have been allowed or that the appeal against the assessment must be allowed. If it were not for s. 190(b), the process of assessment might have to be repeated whenever on appeal an error affecting the amount assessed were found. But s. 190(b), coupled with s. 200, brings to finality the ascertainment of the taxpayer's liability in respect of the income period to which the assessment relates. Unless the amount of the assessment is found to be excessive in the sense of being greater than the taxable income on which tax ought to have been levied, the taxpayer fails on his appeal.
A contrary view derives some support from an observation by Barwick C.J. in Bailey v. Federal Commissioner of Taxation [31] . His Honour said:
It is that process of assessment which, by virtue of s. 190(b), an appellant taxpayer must satisfy the Board of Review or an appellate court is "excessive". If some step in that process which affects the amount of tax lacks the authority of the Act the assessment is "excessive": and the powers of s. 195 or of s. 199, as the case may be, become available.
It may be that his Honour had in mind a case where all the material facts were known and the only question was the legal complexion to be attributed to them: cf. his observations in Henderson v. Federal Commissioner of Taxation [32] . But if his Honour did not intend the cited passage to be so understood, I must respectfully disagree with it. Since McAndrew's Case [33] it has been generally accepted that "excessive" refers to the amount of the assessment, not to any unauthorized step in the process of its calculation.
1. (1977) 136 C.L.R., at p. 217.
2. (1970) 119 C.L.R., at p. 648.
3. (1956) 98 C.L.R. 263.
In this case, as the taxpayer failed to discharge the burden of proving that his taxable income was in truth less than the amount assessed, his appeals were rightly dismissed by Yeldham J. These appeals must therefore be allowed, the orders of the Full Court of the Federal Court set aside and the orders of Yeldham J. restored.
Deane J.
I am in general agreement with the judgments of Brennan J. and Toohey J. I add some comments for myself.
In the circumstances of the present case, the respondent taxpayer discharged the onus imposed upon him by the Income Tax Assessment Act 1936 Cth (in particular, s. 190(b)) only if he proved, on the balance of probabilities, that his actual assessable income during the period to which a particular assessment related was less than the amount included as assessable income in that assessment. The learned trial judge (Yeldham J.) found that the respondent had failed to prove that that was so in respect of any of the challenged assessments. In this Court, the respondent has not challenged his Honour's finding in that regard.
In a case where the only issue between a taxpayer and the Commissioner is whether a particular item of income which the Commissioner has treated as assessable income of the taxpayer was derived by the taxpayer or by someone else, the onus which the Act imposes upon the taxpayer will commonly be discharged if the taxpayer establishes, on the balance of probabilities, that the relevant income was derived by the other person. The present is not, however, such a case. Even if it be accepted that the respondent succeeded in proving that particular items of income were primarily derived by one or other of the companies associated with him, there remained in issue the question whether some or all of the relevant amounts had been subsequently derived by the respondent as payments in the nature of income made to him or on his behalf by that company. There also remained in issue the question whether the respondent had derived other undisclosed income. The respondent's failure to discharge the onus which the Act placed upon him in respect of those remaining issues had the consequence that he failed to establish that the Commissioner's assessments of his assessable income were excessive.
It follows that the appeals must be allowed and the orders of Yeldham J. restored.
Dawson J.
I agree with both Brennan J. and Toohey J.
Toohey J.
These appeals involve the application of various sections of the Income Tax Assessment Act 1936 Cth ("the Act") relating to the making of assessments and to appeals against assessments. The Court is concerned with amended assessments raised by the appellant ("the Commissioner") against the respondent ("the taxpayer") in respect of the years ended 30 June 1976, 1977, 1978 and 1980, following an investigation into the taxpayer's affairs.
Yeldham J. held that in each of the relevant years the taxpayer "completely disregarded corporate structures and entitlements or used them purely for convenience", that there was "a derivation of income by the taxpayer that was dealt with at his direction with a disregard of corporate rights" [34] and that the taxpayer "lived at a rate beyond his disclosed cash income and had control of large sums of money in respect of which there was no proper accounting or adequate explanation." [34] His Honour found that the evidence of the taxpayer was unsatisfactory and that "[a]t the very least he had the control and benefit of the moneys which the Commissioner has included as assessable income during the years in question or their equivalent". Yeldham J. concluded that the taxpayer [35] had failed to satisfy the onus cast upon him by the Act of proving that the assessments were excessive. He therefore dismissed appeals against disallowance of objections and confirmed the assessments [36] .
1. (1988) 88 A.T.C., at p. 4141.
2. (1988) 88 A.T.C., at p. 4141.
3. (1988) 88 A.T.C., at p. 4142.
4. (1988) 88 A.T.C. 4144.
An appeal by the taxpayer to the Full Court of the Federal Court was successful (Sheppard and Gummow JJ., Wilcox J. dissenting) [37] . It is crucial to the outcome of the matters now before this Court to appreciate the precise basis upon which Sheppard and Gummow JJ. set aside the orders of Yeldham J. Their Honours said expressly that they did not "find error in his Honour's findings of fact that Mr. Dalco did not show that in fact his income for each of the tax years was less than the figure arrived at by the Commissioner, and did not show that his only income was disclosed in his income tax returns". But, they held, the taxpayer had succeeded in showing that each of the assessments was excessive, "in that it was not warranted by law" [38] . The assessments therefore had to go back to the Commissioner for reassessment.
1. (1988) 88 A.T.C. 4649.
2. (1988) 88 A.T.C. 4666.
Sheppard and Gummow JJ. held that the assessments were not warranted in law because, adopting the language of Taylor J. in McAndrew v. Federal Commissioner of Taxation [39] , they were made "in purported but not justifiable exercise of statutory power". Some reference is necessary to each of the relevant years in order to explain that statement.
1. (1956) 98 C.L.R. 263, at p. 282.
1976
The relevant assessment showed a taxable income of $92,043. It is enough for the purposes of the present appeal that this amount was said to have been derived by the taxpayer from an interest in Corporate Consultants (Sydney) Pty. Ltd. which was held by Martine Securities Pty. Ltd., a company which was wholly owned by the taxpayer and his family until June 1976. In the view of the majority, the material available to the Commissioner provided no basis for a conclusion that Martine, still less the taxpayer, dealt with the $92,043 on behalf of Martine or the taxpayer in the 1976 tax year.
Specifically, the majority concluded that the Commissioner had approached the matter on the wrong footing by ignoring legal entities that stood between the taxpayer and Corporate Consultants (Sydney).
1977
The amount shown in the amended assessment was $187,878. This figure was based on the original income declared by the taxpayer plus $183,000, being one-third of $549,000 which, said the majority, might be taken to have been the amount derived by Corporate Consultants (Sydney). In their view, there was no material to warrant a conclusion that the taxpayer, either directly or through Martine, had derived that income.
1978
For this year the assessment showed an income of $450,799, later revised by amended reassessment to $308,618. As to $173,000 of this latter amount, Sheppard and Gummow JJ. concluded, for the same reasons as those expressed in respect of the 1977 assessment, that there was no foundation for treating this as part of the taxpayer's income. As to the balance of $102,086, their Honours were of the opinion that, on the material available to the Commissioner, the money was received by Corporate Consultants Australia Pty. Ltd. after the end of the relevant tax year and that in any event there was no basis for concluding that the sum constituted part of the taxpayer's income. The shareholding in Corporate Consultants Australia was held as to one half by Dalvest Pty. Ltd. as trustee for another Dalco trust, of which the taxpayer was not a beneficiary, and as to the other half, by the taxpayer as trustee for Dalvest.
1980
The amount specified in the amended assessment was $659,204, an amount representing the (erroneous) total of $9,264 originally declared by the taxpayer, and $650,080. In the view of the majority, there was material to show that Trevina Pty. Ltd. had received the sum of $650,080. The shares in Trevina were held by Dalvest and another company on behalf of various Dalco Family Trusts. Trevina itself was trustee for two Dalco Unit Trusts of which the taxpayer was not a unit holder or a beneficiary. Having analyzed the relationship of the various entities, Sheppard and Gummow JJ. said: "That the moneys so received were in truth income in Trevina's hands does not provide a basis for a judgment that an amount equivalent to that sum ought to be treated as having been derived by the taxpayer in the 1980 tax year."
Before this Court it was not the taxpayer's case that he had demonstrated to Yeldham J. that his taxable income for the years in question was less than the assessments concerned. It must also be said that the Commissioner did not seek to show that the conclusions reached by Sheppard and Gummow JJ. as to the way in which he went about making those assessments were unfounded. Each party took a stand on the language of the Act.
The Commissioner's starting point was s. 166 of the Act which empowers, indeed directs, him to "make an assessment of the amount of the taxable income of any taxpayer" from the returns "and from any other information in his possession, or from any one or more of these sources".
Section 166 is to be read with s. 167 (the latter is not an independent power but is "epexegetical to" the former — George v. Federal Commissioner of Taxation [40] ). In the circumstances of the present appeals it is par. (b) of s. 167 on which the Commissioner relies. That is, he says that he was not satisfied with the returns furnished by the taxpayer and was therefore empowered to "make an assessment of the amount upon which in his judgment income tax ought to be levied". Section 6(1) of the Act relevantly defines "assessment" to mean "the ascertainment of the amount of taxable income and of the tax payable thereon". The view of Kitto J. in Batagol v. Federal Commissioner of Taxation [41] , that "assessment" means "the completion of the process by which the provisions of the Act relating to liability to tax are given concrete application in a particular case with the consequence that a specified amount of money will become due and payable as the proper tax in that case" was generally shared by the other members of the Court in that case and was endorsed by Mason and Wilson JJ. in F.J. Bloemen Pty. Ltd. v. Federal Commissioner of Taxation [42] .
1. (1952) 86 C.L.R. 183, at p. 204.
2. (1963) 109 C.L.R. 243, at p. 252.
3. (1981) 147 C.L.R. 360, at pp. 371-372.
Section 175 provides that the validity of any assessment "shall not be affected by reason that any of the provisions of this Act have not been complied with". The section "does not relieve the Commissioner from the necessity of performing his duty to make an assessment" but it does protect "the validity of an assessment, once made, from the consequences which might otherwise flow from the Commissioner's failure to comply with any provisions of the Act": Bloemen [43] . In the present appeals, counsel for the taxpayer eschewed any suggestion that the assessments were invalid.
1. (1981) 147 C.L.R., at p. 371.
Section 177(1) then provided that the production of a notice of assessment "shall be conclusive evidence of the due making of the assessment and (except in proceedings on appeal against the assessment) that the amount and all the particulars of the assessment are correct". The effect of s. 177(1) is that, on production of an assessment, "the taxpayer is precluded from contesting that the Commissioner has made an assessment or that in making the assessment he has complied with the statutory formalities. The taxpayer is entitled to dispute his substantive liability to tax in proceedings under Pt V": Bloemen [44] .
1. (1981) 147 C.L.R., at p. 375.
Finally, in this concatenation of sections, s. 190(b) casts "the burden of proving that the assessment is excessive" upon the taxpayer. It is with the meaning and scope of this provision that these appeals are mainly concerned.
In McAndrew [45] , Dixon C.J., McTiernan and Webb JJ. referred to the term "excessive" in s. 190(b) as "the word chosen to correspond with the word "amount" in s. 177(1)", adding: "It is perhaps not a good choice." At the same time their Honours had no doubt that " "excessive" relates to the amount of the substantive liability". McAndrew was concerned with an appeal against an amended assessment. The Court regarded the term "excessive" as extending over the area in which the conditions precedent to the power to amend mentioned in s. 170(2) found a place. It held that, once a regular notice of assessment was produced, the burden was on the taxpayer to show that he had made a full and true disclosure of all the material facts necessary for his assessment or that there had not been an avoidance of tax [46] .
1. (1956) 98 C.L.R., at p. 271.
2. (1956) 98 C.L.R., at p. 269.
I agree with Wilcox J. in the Federal Court that "the task for the taxpayer, upon an appeal or a review under Pt V of the Act, is to show that the amount of money for which tax is levied by a particular notice of assessment exceeds the actual substantive liability of the taxpayer". As his Honour points out, a taxpayer will generally discharge that onus by satisfying the court or tribunal that his or her true taxable income is less than that appearing in the assessment. He or she may also do so by pointing to some error of computation or, as suggested by McAndrew, by showing non-compliance with statutory conditions precedent to the imposition of liability, in that case arising by reason of an amended assessment. A taxpayer does not necessarily discharge the onus of showing that an assessment is excessive, merely by showing that moneys treated by the Commissioner as income are in truth not the income of the taxpayer, though that may be a step in demonstrating his or her taxable income to be less than the assessment.
In George [47] the Court said:
the law has always been taken to be that in an appeal from an assessment the burden lies upon the taxpayer of establishing affirmatively that the amount of taxable income for which he has been assessed exceeds the actual taxable income which he has derived during the year of income.
There can be no quarrel with that statement. There have been situations in which a taxpayer has argued that his or her taxable income was in fact more than that for which he or she had been assessed. By way of example, a taxpayer has contended for a different basis to that on which the income of a partnership had been calculated (Henderson v. Federal Commissioner of Taxation [48] ), or has complained that the Commissioner attributed to him a loss which the taxpayer sought to attribute to a unit trust: Federal Commissioner of Taxation v. Gulland [49] . Whether such challenges truly fall within the operation of s. 190(b) was not explored in either of the decisions mentioned; in any event the context here is entirely different.
1. (1952) 86 C.L.R., at p. 201.
2. (1970) 119 C.L.R. 612.
3. (1985) 160 C.L.R. 55.
In George [50] , the Court further refined the scope of s. 190(b) by contrasting it with s. 177, saying:
The clear policy of s. 177 is to distinguish between the procedure or mechanism by which the taxable income and tax is ascertained or assessed on the one hand and on the other hand the substantive liability of the taxpayer. Obviously the "due making of the assessment" was intended to cover all procedural steps, other than those if any going to substantive liability and so contributing to the excessiveness of the assessment, the thing which is put in contest by an appeal.
Read with the earlier passages quoted, there can be no doubt that, in the view of the members of the Court in George, a taxpayer does not succeed in establishing that an amount is excessive unless he or she can challenge the substantive liability imposed by the assessment.
1. (1952) 86 C.L.R., at pp. 206-207.
As stated, Sheppard and Gummow JJ. adopted the language of Taylor J. in McAndrew [51] , where his Honour said that "there is no reason for thinking that an assessment, made in purported but not justifiable exercise of a statutory power, may not properly be described as excessive". If, as I think, his Honour meant no more than that non-compliance with the statutory conditions precedent to the imposition of liability, in that case arising by reason of an amended assessment, will render an assessment open to challenge, the passage does not assist the taxpayer. In McAndrew the statutory conditions precedent were that the taxpayer had not made a full and true disclosure or had avoided tax. The onus was held to be on the taxpayer to show that neither of these conditions existed. Given those conditions precedent, the taxpayer had necessarily to prove that his declared income was his true income. Only by so doing would he show that the amended amount was excessive. However, it is not the present taxpayer's case that, in raising the assessments, the Commissioner failed to comply with any relevant statutory condition precedent. His complaint is simply that the amounts of taxable income in the assessments are excessive.
1. (1956) 98 C.L.R., at p. 282.
Likewise, the taxpayer can derive no comfort from Bailey v. Federal Commissioner of Taxation [52] . Barwick C.J., speaking of the assessment provisions of the Act, said [53] : "It is that process of assessment which, by virtue of s. 190(b), an appellant taxpayer must satisfy the Board of Review or an appellate court is "excessive". If some step in that process which affects the amount of tax lacks the authority of the Act the assessment is "excessive"." But Bailey concerned an application by the taxpayer for particulars of an arrangement which the Commissioner considered attracted the attention of s. 260 of the Act. The High Court reversed an order of the Supreme Court of New South Wales and ordered that the Commissioner give particulars of the arrangement. Barwick C.J.'s remarks were made in the context that avoidance of the arrangement was crucial to the process of assessment, hence the justification for ordering the Commissioner to furnish particulars. Barwick C.J. distinguished George, saying [54] : "In that case, an unsuccessful endeavour was made to obtain details of the assessment of assessable income made by the Commissioner under s. 167 of the Act. This element of the process of assessment in the particular circumstances was not an application of the Act to a factual situation: on the contrary, it was an exercise of the Commissioner's power to determine the principal fact to which the Act should be applied."
1. (1977) 136 C.L.R. 214.
2. (1977) 136 C.L.R., at p. 217.
3. (1977) 136 C.L.R., at p. 218.
The same may be said of the present case, concerning as it does assessments under s. 167 of the Act. But more significant is the finding by Yeldham J. [55] that the taxpayer "[a]t the very least" had control and benefit of the moneys included by the Commissioner in his assessable income. Although such "control and benefit" may not be conclusive proof of the taxpayer's liability, it does entail that the taxpayer do more than show that the Commissioner's assessment was made on a wrong basis.
1. (1988) 88 A.T.C., at p. 4142.
That is not to say that, in such circumstances, the Commissioner's assessment is completely at large or that particulars of an assessment will not be ordered. If the Commissioner has simply plucked a figure "out of the air" (Reg. v. Deputy Commissioner of Taxation (W.A.); Ex parte Briggs [56] ) or has proceeded "upon no intelligible basis" (Trautwein v. Federal Commissioner of Taxation [57] ), the Commissioner may be in breach of his statutory duty to make an assessment from the information in his possession: see Bloemen [58] . I express no view on that matter for this is not such a case; the assessments were reached after a long and detailed investigation into the taxpayer's affairs.
1. (1987) 14 F.C.R. 249, at p. 269.
2. (1936) 56 C.L.R. 63, at p. 88.
3. (1981) 147 C.L.R., at p. 371.
For this taxpayer to demonstrate that in some respects, indeed it may be in a number of respects, the Commissioner erred in the way in which he attributed income to the taxpayer or otherwise dealt with the material available to him does not prove that an assessment was excessive. It does not prove that the taxable income of the taxpayer was less than the amount of taxable income shown in any of the assessments. It was necessary for the taxpayer to make good the proposition that his income was less; this he failed to do in respect of any of the assessments.
The appeals must be allowed and the appeals to the Federal Court of Australia dismissed with costs. In accordance with the condition attached to the grant of special leave to appeal, the appellant must pay the respondent's costs of the appeals to this Court.
Gaudron J.
I agree with both Brennan J. and Toohey J.
McHugh J.
I agree with the judgments of Brennan J. and Toohey J. |
high_court_of_australia:/showbyHandle/1/11560 | decision | commonwealth | high_court_of_australia | text/html | null | Day & Dent Constructions Pty Ltd (In Liq) v North Australian Properties Pty Ltd [1982] HCA 20 | https://eresources.hcourt.gov.au/showbyHandle/1/11560 | 2024-09-13T22:51:07.329969+10:00 | High Court of Australia
Gibbs C.J. Stephen, Mason, Murphy and Aickin JJ.
Day & Dent Constructions Pty Ltd (In Liq) v North Australian Properties Pty Ltd
[1982] HCA 20
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
1982, April 30
Gibbs C.J.
The appellant, Day & Dent Constructions Pty. Ltd. (In liquidation) ("Day & Dent") as plaintiff, brought proceedings in the Supreme Court of the Northern Territory against the respondent, North Australian Properties Pty. Ltd. (Provisional Liquidator Appointed) ("N.A.P."), claiming $100,000 as moneys lent by the plaintiff to the defendant. Gallop J., who tried the action, gave judgment for the defendant [1] . An appeal was brought to the Full Court of the Federal Court which, by a majority, dismissed the appeal [2] . This appeal is brought from that decision.
1. (1980) 5 N.T.R. 22.
2. (1981) 54 F.L.R. 277; 34 A.L.R. 595.
The facts are not in dispute. On 18 October 1976, Day & Dent applied to Esanda Limited ("Esanda") for a loan of $100,000 for one year at interest and requested Esanda to disburse the money for the use and benefit of N.A.P. On the same day N.A.P. gave Esanda a mortgage over certain of its property to secure repayment of any loans made by Esanda to N.A.P. or to Day & Dent. The mortgage was executed by Day & Dent as well as by N.A.P. and both companies undertook liability to repay principal and interest; in addition, N.A.P. guaranteed payment thereof. Also on the same day N.A.P. executed a guarantee in favour of Esanda for any indebtedness of Day & Dent; a further guarantee in similar terms was executed by N.A.P. on 3 June 1977. In November 1976 the $100,000 was paid by Esanda in the manner requested by Day & Dent, for the use and benefit of N.A.P. On 18 May 1978 Day & Dent was wound up. At that date none of the money lent had been repaid to Esanda, although it had become due for repayment at the end of November 1977. On 6 June 1978 Day & Dent demanded repayment by N.A.P. of $100,000 and on 2 August 1979 Esanda demanded repayment by N.A.P. of all moneys secured by the mortgage. N.A.P. paid nothing to Day & Dent but paid Esanda in full — the payment to Esanda of course included the $100,000 borrowed by Day & Dent.
Gallop J. held that although there was no loan by Day & Dent to N.A.P., the latter company was indebted to Day & Dent in respect of the $100,000 applied, at the direction of Day & Dent, for the use and benefit of N.A.P. However, Gallop J. held that N.A.P. was entitled to set off against its debt to Day & Dent the amount it had paid to Esanda with the result that it owed Day & Dent nothing. Counsel for Day & Dent challenges this conclusion on the ground that at the date of the winding up the liability of Day & Dent to N.A.P. was purely contingent, since at that date N.A.P. had not been called on by Esanda to pay, and had not paid anything; accordingly, it was submitted, there was no sum to set off. If this submission is correct, the result will be indeed surprising: Day & Dent, which has paid nothing to Esanda, and now can never be called on to pay anything, will be entitled to receive $100,000 from N.A.P., which has already paid that sum to Esanda. It is true that N.A.P. will be entitled to lodge a proof of debt and to be paid a dividend, assuming funds are available for that purpose.
It is common ground that the decision of the appeal depends on the effect of s. 86 (1) of the Bankruptcy Act 1966 Cth, as amended, which is rendered applicable to the winding up of an insolvent company by s. 291 of the Companies Act 1963 N.T., as amended. Section 86 (1) provides as follows:
Subject to this section, where there have been mutual credits, mutual debts or other mutual dealings between a person who has become a bankrupt and a person claiming to prove a debt in the bankruptcy—
(a) an account shall be taken of what is due from the one party to the other in respect of those mutual dealings;
(b) the sum due from the one party shall be set off against any sum due from the other party; and
(c) only the balance of the account may be claimed in the bankruptcy, or is payable to the trustee in the bankruptcy, as the case may be.
The effect of this section was considered by this Court in Hiley v. Peoples Prudential Assurance Co. Ltd. [3] . There the appellant, a policy-holder in a life assurance company, borrowed money from the company in pursuance of a scheme enabling holders of such policies to purchase homes and as security for its repayment gave a mortgage over certain land and deposited his policy. The mortgage was transferred by the assurance company by way of security to another company and later, also by way of security, by that other company to a bank. Later the assurance company was ordered to be wound up, and the liquidator notified the appellant that the assurance company would not carry out its obligations under the policy. Later still, the bank agreed to re-transfer the mortgage to the assurance company. In a suit brought by the assurance company, to recover the moneys due by the appellant under the mortgage, the appellant sought to set off against the mortgage debt the damages sustained by reason of the company's repudiation of its obligations under the policy. The appellant's claim was based on s. 82 of the Bankruptcy Act 1924 Cth, as amended, which corresponded to the present s. 86. On behalf of the assurance company it was argued that the fact that the mortgage had been assigned and was vested in the bank at the date of liquidation meant that there was no mutual credits or mutual dealings. This Court, by a majority (Rich, Starke and Dixon JJ., Latham C.J. dissenting), held that the appellant was entitled to a set-off under s. 82. There was no difference between Latham C.J. and the other members of the Court as to the principles to be applied, although there was a difference as to their application. The Court held that the date of the liquidation is the date at which mutual credits, mutual debts or mutual dealings must exist if the section is to apply [4] . It was further held that it was not necessary that any money should have been payable by the appellant to the assurance company at the date of the winding up; it was enough that there was then a liability which later matured into a debt. Latham C.J. said "that it is sufficient to justify a set-off if at the date of the winding up there existed contractual obligations the enforcement of which might give rise to a claim provable in the winding up" [5] . Rich J. said [6] :
The date of the commencement of the liquidation corresponds with the date of the sequestration order in bankruptcy. But this statement does not mean that at the time when the winding up commences there must exist claims which then and there can be made the subject of account and set off Rights must be vested in the creditor and in the company which, without any new transaction, grow in the natural course of events into money claims capable of forming items in an account or capable of settlement by set-off.
Starke J. [7] cited Eberle's Hotels and Restaurant Co. v. Jonas [8] , as authority for the proposition that the dealings on each side must be such as "would end in a money claim". Later, his Honour said [9] :
There are cases in the books in which sureties who have been compelled to pay a principal debt after bankruptcy have been allowed to set off the sum so paid against debts due to the bankrupt But the obligation of the surety in those cases arose before bankruptcy and was an obligation which might and did in fact end in a money claim.
Dixon J. said [10] :
the general rule does not require that at the moment when the winding up commences there shall be two enforceable debts, a debt provable in the liquidation and a debt enforceable by the liquidator against the creditor claiming to prove. It is enough that at the commencement of the winding up mutual dealings exist which involve rights and obligations whether absolute or contingent of such a nature that afterwards in the events that happen they mature or develop into pecuniary demands capable of set off. If the end contemplated by the transaction is a claim sounding in money so that, in the phrase employed in the cases, it is commensurable with the cross-demand, no more is required than that at the commencement of the winding up liabilities shall have been contracted by the company and the other party respectively from which cross money claims accrue during the course of the winding up.
The reason why Latham C.J. differed from the other members of the Court in the result was that he considered that the assurance company at the date of the liquidation had no right the enforcement of which could put it in a position to make a money claim against the defendant, since its rights were acquired by virtue of the transfer of the mortgage, to which it became entitled by reason of a completely new transaction, whereas the majority considered that the assurance company's rights in relation to the mortgage arose out of rights subsisting at the time when the winding up began.
1. (1938) 60 C.L.R. 468.
2. (1938) 60 C.L.R., at pp. 480-481, 487, 490, 495-496.
3. (1938) 60 C.L.R., at p. 483.
4. (1938) 60 C.L.R., at p. 487.
5. (1938) 60 C.L.R., at p. 490.
6. (1887) 18 Q.B.D. 459, at p. 465.
7. (1938) 60 C.L.R., at p. 491.
8. (1938) 60 C.L.R., at pp. 496-497.
The principle upon which Hiley v. Peoples Prudential Assurance Co. Ltd. was decided in my opinion governs the present case. Indeed, Starke J., in the passage cited, expressly recognized that the principle applies to the case of a surety who pays off the principal creditor after the commencement of the bankruptcy. The "cases in the books" to which Starke J. refers appear to be Jones v. Mossop [11] and Re Moseley Green Coal & Coke Co. Ltd.; Barrett's Case [No. 2] [12] . The former case depended upon equitable principles but Wigram V.C. considered that the same result — namely that the surety who had paid off the principal creditor after the insolvency was entitled to a set-off — would have been reached if the case had been one of bankruptcy [13] . In the latter case, Barrett was liable as a contributory to a company which was being wound up. Before the winding up, Barrett had become a surety to one Lea for repayment of a debt in respect of which the company gave Lea a promissory note. After the winding up, Barrett arranged for his sister to pay off Lea and to take a transfer of the promissory note, which she then transferred to Barrett. It was held that Barrett was entitled to set off the company's indebtedness on the promissory note against his own liability as a contributor of the company. In Hiley v. Peoples Prudential Assurance Co. Ltd. [14] , Dixon J. said that the decision in that case justified, if it did not require, the conclusion reached in Hiley's Case.
1. (1844) 3 Hare 568; [ 67 E.R. 506].
2. (1865) 12 L.T. (N.S.) 193; 4 De G.J. & S. 756 [46 E.R. 1116].
3. (1844) 3 Hare, p. 571 [67 E.R., at p. 508].
4. (1938) 60 C.L.R., at p. 500.
The principle that it is enough that at the date of the liquidation there existed on the one hand a debt and on the other hand a liability which in due course might mature into a debt is supported by other decisions. In Sovereign Life Assurance Co. v. Dodd [15] , the debt set off was an amount which became payable under policies of insurance if the insured person lived until a particular date; he did live until that date but the insurance company, of which he was a debtor, was wound up in the meantime. Charles J. said [16] :
there was no new transaction. The loans on the one hand and the insurance on the other, were both prior in date to the winding-up petition, and there was, when the petition was presented, a debt due from the defendant, and a contract with him which would probably result — and has in fact resulted — in a debt due to him.
A similar case is In re Daintrey; Ex parte Mant [17] . D, who was indebted to M in the sum of £86, sold his business to M under an agreement which fixed as the price a portion of the profits expected to be earned for three years from the business sold. At the time when a receiving order was made against D no profits had been earned from the business but at the end of three years £300 was found to be due from M to D under the agreement. It was held that M was entitled to set off the £86 against the £300 due to D's trustees. In that case obviously the question whether anything became payable under the agreement for the sale of the business depended on the contingency whether any profits were earned. In In re Taylor; Ex parte Norvell [18] , Phillimore J., whose judgment was accepted by the Court of Appeal, apparently viewed In re Daintrey; Ex parte Mant as a case of contingent liability for, after referring to that decision, he said [19] :
Any obligation prospective or contingent to which the bankrupt is subject, and which, if it becomes an attaching obligation, will result in a money claim, is, under s. 37, sub-ss. 3 and 4, of the Bankruptcy Act, 1883, to be estimated as at the date of the receiving order, and if the obligation arises out of mutual dealings between the debtor and a creditor it is the subject of set-off under s. 38.
(See also In re City Life Assurance Co. [20] .)
1. [1892] 1 Q.B. 405.
2. [1892] 1 Q.B., at pp. 411-412.
3. [1900] 1 Q.B. 546.
4. [1910] 1 K.B. 562.
5. [1910] 1 K.B., at p. 568.
6. [1926] 1 Ch. 191, at p. 204.
However, in spite of these authorities counsel for the appellant asked us to hold that if there is only a contingent liability in existence at the date of the liquidation there is nothing which can be set off. The principal authority cited in support of this proposition is the decision of the Court of Appeal in Re a Debtor; Ex parte the Debtor v. Trustee of the Property of Waite [21] . In that case C. borrowed money from a bank in order to purchase goods which he supplied to W. on credit and W. guaranteed C.'s overdraft with the bank and deposited with the bank some title deeds. At the date when a receiving order was made against W. he owed £101 to C. in respect of goods supplied. Subsequently, in order to obtain release of the title deeds, W.'s trustee in bankruptcy paid to the bank £133 and subsequently obtained judgment against C. for that amount and costs. C. failed to comply with a bankruptcy notice issued in respect of the judgment debt and the question was whether a receiving order could properly be made against C. It was held that the receiving order was rightly made because on the relevant date for the consideration of mutual debts there was no debt due to W. from C. It is to be noted that in this case the surety was the person who became bankrupt and the payment of the debts guaranteed was made by the bankrupt's trustee. This circumstance was relied upon in the judgment of the Divisional Court from which an appeal was brought to the Court of Appeal. Danckwerts J. said [22] :
It appears to us to be a very odd result, if the expenditure by the trustee of £133 14s. of Waite's creditors' money, in order to complete the sale of an asset, enables the appellant to secure payment in full of the debt for which up to that time he had only a right of proof, while at the same time he has been freed from his overdraft at the bank.
Later he said [23] :
There was nothing due from the appellant to Mr. Waite at the date of the receiving order. It was only later, when the trustee in bankruptcy paid off the bank, that a debt became due from the appellant and that payment was made not by Mr. Waite but by the trustee, and out of assets which then were no longer vested in Mr. Waite but in the trustee. It seems to us, therefore, that the decision in the action by Waite's trustee against the appellant was right in declining to admit the set off. There was in fact no mutuality at the date of the receiving order in Waite's bankruptcy and the debt on which the action was founded was due not to Mr. Waite but to his trustee.
The Divisional Court regarded the facts that it was the surety who was insolvent, and that his trustee paid off the debt, as distinguishing the case before them from Jones v. Mossop [24] and Re Moseley Green Coal & Coke Co. Ltd.; Barrett's Case . However, in the Court of Appeal, although Evershed M.R. did mention that it was unusual for the trustee of a bankrupt surety to pay off the amount due by the principal debtor to the judgment creditor before any demand had been made [25] , the ratio of the decision does appear to have been that if the liability of the surety is only contingent at the relevant date, the fact that he subsequently makes payment under the guarantee does not entitle him to a set-off [26] . Lord Evershed M.R. considered that the decision in Re Moseley Green Coal & Coke Co. Ltd.; Barrett's Case depended on its own special facts [27] . All the members of the Court distinguished In re Daintrey; Ex parte Mant [28] on the ground that in that case there was an obligation already incurred which remained only to be quantified [29] , and, on the other hand, were of opinion that dicta in the earlier decision of the Court of Appeal in In re Fenton; Ex parte Fenton Textile Association Ltd. [30] , supported their conclusion. That was a case in which neither the surety nor his trustee had ever paid anything under the guarantee, and it was, for that reason, distinguishable, as of course the members of the Court in Re a Debtor recognized.
1. [1956] 3 All E.R. 225.
2. [1956] 2 All E.R. 94, at p. 97.
3. [1956] 2 All E.R., at p. 100.
4. (1844) 3 Hare 568 [67 E.R. 506].
5. [1956] 3 All E.R., at p. 228.
6. [1956] 3 All E.R., at pp. 229-230, 235.
7. [1956] 3 All E.R., at p. 229.
8. [1900] 1 Q.B. 546.
9. [1956] 3 All E.R., at pp. 227, 233.
10. [1931] 1 Ch. 85.
The facts that in Re a Debtor the surety was the bankrupt, and the payments were made by the trustee to enable him to obtain the bankrupt's property, may justify a conclusion that there were no mutual dealings between the trustee and the debtor. Since the case may on that ground be distinguished from the present, I would leave open the question whether it was rightly decided. However, with all respect the reasons given in support of the decision cannot be regarded as satisfactory. Although the facts in Re Moseley Green Coal & Coke Co. Ltd.; Barrett's Case [No. 2] [31] were complicated, the case clearly enough decided that the fact that Barrett entered into the contract of suretyship before the winding up was enough to entitle him to set off the rights he subsequently acquired under the promissory note against his liability as a contributory. As I have already indicated, I consider that In re Daintrey; Ex parte Mant was a case in which the obligation to pay was, at the date of the receiving order, contingent on profits being made in future. The dicta in In re Fenton; Ex parte Fenton Textile Association Ltd on which the Court relied in Re a Debtor and which are set out in the judgment of Lord Evershed M.R. [32] in the latter case appear to be ambiguous, if not conflicting. The authorities discussed in Re a Debtor do not in my opinion support the conclusion that if the surety has not paid the principal creditor at the date of the liquidation, he will not be entitled to a set-off, notwithstanding that he susequently makes a payment.
1. (1865) 4 De G.J. & S. 756 [46 E.R. 1116].
2. [1956] 3 All E.R., at pp. 230-231.
Counsel for the appellant also relied on the decision of Adam J. in Re Bruce David Realty Pty. Ltd. (In liq.) [33] . That was a case which, like In re Fenton; Ex parte Fenton Textile Association Ltd., was one in which no payment was ever made by the surety. In the course of his judgment Adam J. said [34] :
The principle of mutual dealings does not permit of a surety setting off his claim to be indemnified by the bankrupt principal debtor, save to the extent that at the commencement of the bankruptcy the surety has paid the guaranteed debt to the principal creditor.
Although there is no reason to doubt the correctness of the decision reached by Adam J. in that case, this obiter dictum, which was obviously influenced by some of the dicta in In re Fenton; Ex parte Fenton Textile Association Ltd. cannot be accepted as correct.
1. [1969] V.R. 240; (1968) 14 F.L.R. 56.
2. [1969] V.R., at p. 243; (1968) 14 F.L.R., at p. 60.
Sheppard J., in his dissenting judgment in the Federal Court, referred to the fact that some of the cases cited by Dixon J. as authority for the passage in his judgment [35] , which I have already cited, appear to accept the rule, laid down in Rose v. Hart [36] , that mutual credits "meant such credits only as must in their nature terminate in debts": see Naoroji v. Chartered Bank of India [37] ; Astley v. Gurney [38] and cf. Palmer v. Day & Sons [39] . However, I consider that no more was meant than that there may only be a set-off in respect of "all such credits and dealings as in the natural course of business would end in debts" to use the words of Montague Smith J. in Naoroji v. Chartered Bank of India [40] ; see also per Keating J. The modern authorities favour this view — that it is enough that the dealing would naturally, and does, terminate in a debt. It is well understood that the law which relates to the set-off of mutual dealings in bankruptcy, which has a long history, exists to prevent the injustice of a man who has had mutual dealings with a bankrupt from having to pay in full what he owes in respect of such dealings while only receiving a dividend on what the bankrupt owed him in respect of them: see Ex parte Barnett; In re Deveze [41] . On the other hand it would be unjust to the creditors of the bankrupt if a debtor of the bankrupt could after the bankruptcy buy up liabilities of the bankrupt for the purpose of setting them off against his own indebtedness. Both injustices can be avoided by the application of the principle stated in Hiley v. Peoples Prudential Assurance Co. Ltd. In my opinion that decision should be followed and it governs the present case.
1. (1938) 60 C.L.R., at p. 497.
2. (1818) 8 Taunt. 499, at p. 506 [129 E.R. 477, at p. 480].
3. (1868) L.R. 3 C.P. 444, at p. 450
4. (1869) L.R. 4 C.P. 714, at p. 722.
5. [1895] 2 Q.B. 618, at p. 622.
6. (1868) L.R. 3 C.P., at p. 452.
7. (1874) 9 Ch. App. 293, at p. 297.
For these reasons I consider that the respondent was entitled to the set-off and that the appeal should be dismissed.
Stephen J.
I have had the advantage of reading the reasons for judgment of Mason J. with which I am in full agreement, both as to his resolution of the point in issue in this case and also concerning the question of the relevant time for the ascertainment of whether, for the purposes of s. 86 (1), mutual dealings exist.
I would accordingly dismiss this appeal.
Mason J.
In this appeal the Court is called upon to resolve a controversial point concerning the entitlement under the provisions of s. 86 of the Bankruptcy Act 1966 Cth ("the Act") of persons involved in mutual dealings, where one or both becomes bankrupt, to set off against each other sums due from one party to the other.
The facts are not in dispute. On 18 October 1976 the respondent granted a mortgage to Esanda Ltd. ("Esanda") over its leasehold estate in certain land in the Northern Territory. The mortgage was given in consideration of any loans, advances, credits or accommodation made or given by Esanda to the respondent or to the appellant. The appellant was referred to in the mortgage as the "borrower". A term of the mortgage provided that the respondent as mortgagor and the appellant as borrower undertook personal liability to pay the principal and interest payable under the mortgage. The mortgage was executed by both the respondent and the appellant.
Also on 18 October 1976 the appellant applied to Esanda for a loan. The application was accepted by Esanda on 29 November 1976. The amount of the loan was $100,000 and it was to bear interest of 17.5 per cent per annum, repayable in monthly instalments over one year. In the form of loan document, which was headed "Memorandum of Contract for Loan", the appellant requested Esanda to disburse the amount of the loan by paying $99,750 to Arizona Virginia Jape and John Sidney Greenleaf and $250 to the solicitors for Jape and Greenleaf. The payments were made on 29 November 1976 and it was agreed that they were made for the use and benefit of the respondent. The payment to Jape and Greenleaf was made in order to discharge a mortgage over the land in relation to which the respondent gave the mortgage to Esanda.
The contract of loan between the appellant and Esanda stipulated that in the event of a default the unpaid principal and the interest calculated up to the date of demand by Esanda were to become due and payable on the day following the demand. The principal and interest payable were stated to be secured by the mortgage given by the respondent to Esanda.
A further event occurring on 18 October 1976 was the execution by the respondent and certain individuals of a guarantee in favour of Esanda, whereby they guaranteed the payment of all sums of money, interest and damages to which the appellant should become indebted or liable to Esanda. On 3 June 1977 the respondent executed a further guarantee similar in terms to the earlier guarantee.
On 18 May 1978 an order was made that the appellant be wound up. The appellant was by that time in default under the contract of loan of 18 October 1976, the entire principal sum being still outstanding. The appellant came under a liability to pay that amount at the end of November 1977, regardless of any demand by Esanda.
On 6 June 1978 the appellant demanded the repayment by the respondent of the sum of $100,000. This was the sum borrowed by the appellant from Esanda and paid at the appellant's request to Jape and Greenleaf. The primary judge, Gallop J., found this sum to be owing by the respondent to the appellant as a debt, this finding arising from the agreement of the parties that the payment to Jape and Greenleaf was made for the use and benefit of the respondent. His Honour's finding was not challenged. The respondent failed to discharge this debt.
On 2 August 1979 Esanda demanded the payment by the respondent of loans, advances and credits made or afforded by it and secured by the mortgage of 18 October 1976. As a result, payments were made to Esanda before 16 November 1979 by or on behalf of the respondent in total discharge of its indebtedness to Esanda. The total sum paid was $212,032.56. Included in this sum was the sum of $100,000 borrowed by the appellant from Esanda, the respondent, as surety under the two guarantees, being obliged to make good the appellant's default. Thus the $100,000 is no longer owing to Esanda by either the appellant or the respondent. Consequently Esanda has not lodged, and could not lodge, a proof of the debt in the appellant's liquidation.
The appellant sued the respondent in the Supreme Court of the Northern Territory to recover the $100,000 which was paid by Esanda at the request and direction of the appellant and used by the respondent to discharge the mortgage to Jape and Greenleaf. Gallop J. held that the respondent was entitled to set off against this claim the sum of $100,000 paid by the respondent to Esanda as surety pursuant to the guarantees given by the respondent to secure advances to the appellant [42] . An appeal to the Full Court of the Federal Court was dismissed by majority (Forster and McGregor JJ.; Sheppard J. dissenting [43] ). From that decision the appellant now appeals to this Court.
1. (1980) 5 N.T.R. 22.
2. (1981) 54 F.L.R. 277; 34 A.L.R. 595.
The only question for decision is whether the Full Court was correct in holding that the respondent was able to bring itself within the provisions of s. 86 of the Act, sub-s. (1) of which provides:
Subject to this section, where there have been mutual credits, mutual debts or other mutual dealings between a person who has become a bankrupt and a person claiming to prove a debt in the bankruptcy—
(a) an account shall be taken of what is due from the one party to the other in respect of those mutual dealings;
(b) the sum due from the one party shall be set off against any sum due from the other party; and
(c) only the balance of the account may be claimed in the bankruptcy, or is payable to the trustee in the bankruptcy, as the case may be.
Section 86 (1), along with other bankruptcy provisions, applies in the liquidation of companies by virtue of s. 291 (2) of the Companies Act 1963-1978 N.T..
The opening words of s. 86 (1) are satisfied. The appellant does not dispute that there were "mutual credits, mutual debts or other mutual dealings" between the parties. And the respondent is a company claiming to prove a debt in the appellant's winding up, the proof of debt for the sum of $100,000 as a contingent liability being lodged on 8 June 1978. The problem which confronts the respondent is that the liability remained contingent until the payment to Esanda in late 1979. The appellant went into liquidation on 18 May 1978. On that date the appellant was under no actual or fixed liability to the respondent. The authorities universally accept that the relevant time for ascertaining whether there are mutual debts, mutual credits or other mutual dealings between the debtor and other persons for the purposes of s. 86 (1) is the date of liquidation of the company: see Hiley v. Peoples Prudential Assurance Co. Ltd. [44] ; In re Fenton; Ex parte Fenton Textile Association [No. 1] [45] ; In re Daintrey; Ex parte Mant [46] . Whether this means the date when the liquidation is deemed to commence, i.e., the date of presentation of the petition, or the date when the administration of the winding up commences, i.e., the date of the winding up order, has been a matter of controversy. In Motor Terms Co. Pty. Ltd. v. Liberty Insurance Ltd. [47] , Barwick C.J. [48] favoured the former and Kitto J. [49] the latter. In Stein v. Saywell [50] , their Honours reaffirmed their conflicting views [51] . Subsequently, in In re Northside Properties Pty. Ltd. [52] , Street J. concluded that the view of Kitto J. should be accepted in preference to that of Barwick C.J. and that the date of the winding up order is the date for determining what debts are provable [53] . See also Re H. & S. Credits Ltd. [54] . I agree, for the reasons given by Kitto J., which I need not repeat, that his view is to be preferred to that of Barwick C.J. Like Street J., I find it difficult to accept that all debts incurred after presentation of the petition are not provable. Although in the present case the controversy does not require to be resolved, it is as well that I express my opinion in view of the practical importance of the point.
1. (1938) 60 C.L.R. 468, at pp. 480, 487, 490, 495-496.
2. [1931] 1 Ch. 85, at p. 105.
3. [1900] 1 Q.B. 546, at pp. 555, 572.
4. (1967) 116 C.L.R. 177.
5. (1967) 116 C.L.R., at p. 179.
6. (1967) 116 C.L.R., at p. 180.
7. (1969) 121 C.L.R. 529.
8. (1969) 121 C.L.R., at pp. 538, 555.
9. [1971] 2 N.S.W.L.R. 320.
10. [1971] 2 N.S.W.L.R., at p. 323 et seq.
11. (1969) 90 W.N. (Pt 1) (N.S.W.) 495.
The real question to be resolved is whether, notwithstanding that the relevant date is the date of the commencement of the liquidation, it is sufficient that at that date the liability of one of the parties is merely contingent and only at some time later becomes a fixed liability. It is at precisely this point that the difference of opinion in the present case arose between, on the one hand, Gallop J. at first instance and Forster and McGregor JJ. in the Full Court and, on the other hand, Sheppard J. in the Full Court.
This question has been the subject of much discussion in the cases. It will be necessary to examine this body of case law and then to consider whether the answer suggested by the authorities conforms to legal principle and to the purpose and policy which underly the statutory provisions.
An appropriate starting point is Re Moseley-Green Coal & Coke Co. (Ltd.); Re Joint-Stock Companies Acts 1856 and 1857; Ex parte Barrett [55] . In that case a company entered into a contract for the purchase of mines, which were subject to a £7,000 mortgage. Barrett, a shareholder in the company, was a surety to the mortgagee for the original mortgagor (the vendor of the mines). The company failed to pay off the mortgage as stipulated by the agreement and they gave the mortgagee a promissory note for £7,000 at six months dated September 1862. In October 1862 the company was wound up. In February 1863 the mortgagee pressed for his money from Barrett, and Barrett induced his sister to pay off the debt. The promissory note was transferred to Barrett's sister and shortly after fell due and was dishonoured. Barrett then arranged a transfer of the company's promissory note from his sister, giving her a promissory note of his own. Calls were made on Barrett as a contributory of the company. Against the claim for unpaid calls Barrett sought to set off his claim on the company's promissory note. It was held that Barrett was entitled to so set off. Lord Westbury L.C. said [56] :
Does the contract of suretyship, incurred as it was by Barrett anterior to the winding-up order, with its attendant rights, give such retroactive force to Barrett's possession and ownership of the note as to enable him to refer it back to that contract or relation, before the winding-up order was made? My present impression is that it will .
The report then states that the Lord Chancellor later adhered to that "impression".
1. (1865) 12 L.T. (N.S.) 193; 4 De G. J. & S. 756 [46 E.R. 1116].
2. (1865) 12 L.T., at p. 195; 4 De G. J. & S., at p. 560 [46 E.R., at p. 1118].
The next case to which reference should be made is Fenton [57] . Fenton guaranteed advances by certain banks to a company (in which he was interested). He became insolvent and executed two deeds of arrangement. The company went into liquidation. Fenton was indebted to the company and the company proved for these debts in Fenton's estate. The trustee of Fenton's estate sought to set off against the debts the sums advanced to the company by the banks for which Fenton was surety. It is important to note that the banks proved against Fenton's estate under the guarantees but received no payment. It was held by the Court of Appeal that no set-off was possible. The decision is based on two grounds, neither having any direct relevance to the present case. First, where nothing is ever paid to the principal creditor by the surety the liability remains contingent. Only payment can transform it into a fixed liability which can be the subject of a set-off. That position may be contrasted with the circumstances of the present case — where payment has been made, but only after liquidation. The second ground of the decision was that where no payment has been made to the principal creditor by the surety the rule against double proofs prevents a set-off. It is a well established rule of bankruptcy that there cannot be two claims in respect of the same debt, and to allow the set-off in Fenton would have raised that possibility. The judgments in Fenton rest on a combination of these two principles. However, they also contain relevant dicta.
1. [1931] 1 Ch. 85.
Lord Hanworth M.R. [58] seems to have accepted the decision in Barrett . He summarized it in this way [59] :
The Lord Chancellor clearly laid stress not only on the fact that the liability was outstanding at the date of the winding-up, but had in fact been fulfilled by payment which turned the surety into an actual creditor, and he was, therefore, no longer merely under a contingent liability.
His Lordship continued:
Thus, so far as the cases go, it had been decided that a surety is entitled to a right to prove if (a) his liability arose under a guarantee given before the date of the receiving order or winding-up order, and (b) he has in fact paid to the creditors the sum that he seeks to set off.
However, in a later passage the Master of the Rolls [60] appears to have asserted the surety had no right of set-off unless he had paid the debt "at the date of the liquidation when his rights became determined".
1. [1931] 1 Ch., at pp. 106-107.
2. [1931] 1 Ch., at p. 107.
3. [1931] 1 Ch., at p. 109.
Lawrence L.J., speaking of the case where the principal debtor is bankrupt, said [61] :
In such a case the claim of a surety, who has been called upon to pay but has not yet paid anything to the principal creditor, is in effect a claim for damages for the breach by the principal debtor of his obligation to indemnify his surety on the ground that his bankruptcy has rendered it impossible for him to perform his obligation and has made it possible to estimate the amount which the surety can properly claim by way of damages. The reason why, in my opinion, such a claim (although it apparently has the requisite attributes for a set-off under the section and although it is one from which the principal debtor would be released by the order of discharge) cannot be set off is because so long as the estate of the principal debtor remains liable to the principal creditor the surety will not be permitted to prove against the estate of the principal debtor, as such a proof would be a double proof for the same debt, and would therefore be inadmissible as being contrary to the established rule in bankruptcy.
Romer L.J. [62] took a similar view, saying that the only reason why the surety "is prevented from proving his claim is that his claim is in respect of the same debt as is that of the banks" (the principal creditors) "and as between him and the banks the latter have the prior right of proof", there being no evidence that the latter had renounced their right to prove. To the extent that the decision in Fenton rested on the judgments of Lawrence and Romer L.JJ., it turned on the rule against double proofs. As I read their judgments, the surety would have been entitled to a set-off once he made payment of the principal debt.
1. [1931] 1 Ch., at p. 114.
2. [1931] 1 Ch., at p. 120.
The question arose indirectly in this Court in Hiley [63] . Hiley borrowed money from a life assurance company in which he was a policy holder, and as security for its repayment he gave a mortgage over certain land and deposited his policy. The company transferred the mortgage by way of security to another company, and that company transferred the mortgage as security to a bank. The assurance company was wound up and the official liquidator gave notice to Hiley that the company would not carry out its obligations to him under the policy. After the commencement of the liquidation the bank retransferred Hiley's mortgage to the assurance company. The liquidator sued for a declaration that Hiley's mortgage was valid and subsisting. Hiley sought to set off against the mortgage debt the damages sustained by him by reason of the company's repudiation of its obligations under the policy. It was held that the mortgage was valid and subsisting and that Hiley was entitled to the set-off.
1. (1938) 60 C.L.R. 468.
Latham C.J. dissented, holding that the debt due from Hiley to the asurance company was not a debt which existed at the time of liquidation, but arose rather from a transaction subsequent to the liquidation. Only in the former situation would Hiley be entitled to a set-off, since only then would there be a debt against which he could set off the debt due to him. But his Honour made it clear that a debt arising after winding up out of a contract made before could become the subject of a set-off saying [64] :
it is sufficient to justify a set-off if at the date of the winding up there existed contractual obligations the enforcement of which might give rise to a claim provable in the winding up.
1. (1938) 60 C.L.R., at p. 483.
Rich J. said that the principle that "the line is drawn" at the date of the receiving order [65] :
does not mean that at the time when the winding up commences there must exist claims which then and there can be made the subject of account and set-off (In re Daintrey; Ex parte Mant [66] ). Rights must be vested in the creditor and in the company which, without any new transaction, grow in the natural course of events into money claims capable of forming items in an account or capable of settlement by set-off.
1. (1938) 60 C.L.R., at p. 487.
2. [1900] 1 Q.B., at pp. 571, 574.
Daintrey was a case where the price of a business was to be payable three years from the purchase date, to be calculated as a proportion of the profits in that time. Sheppard J. in the Full Court thought that the case therefore concerned a fixed debt, the precise amount of which remained to be quantified. For my part, Daintrey is indistinguishable. There may in fact have been no profits and no debt may ever have become payable. The debt was truly contingent.
In Hiley Dixon J. said [67] :
the general rule does not require that at the moment when the winding up commences there shall be two enforceable debts, a debt provable in the liquidation and a debt enforceable by the liquidator against the creditor claiming to prove. It is enough that at the commencement of the winding up mutual dealings exist which involve rights and obligations whether absolute or contingent of such a nature that afterwards in the events that happen they mature or develop into pecuniary demands capable of set off.
In support of this proposition Dixon J. cited Naoroji v. Chartered Bank of India [68] ; Astley v. Gurney [69] ; Palmer v Day & Sons [70] ; and Daintrey [71] . Sheppard J. in the Full Court thought that these cases did not stand for the proposition for which they were cited. Again his Honour sought to distinguish them as dealing with claims involving fixed, as opposed to contingent, liabilities. He referred to constant references in the judgments in Naoroji , Astley and Palmer to the fact that the claims in question "must", rather than may, have resulted in a debt.
1. (1938) 60 C.L.R., at pp. 496-497.
2. (1868) L.R. 3 C.P. 444, at pp. 451-452.
3. (1869) L.R. 4 C.P. 714.
4. [1895] 2 Q.B. 618, at p. 622.
5. [1900] 1 Q.B., at pp. 568, 574.
What was meant by these statements is, I think, illustrated by the remarks of Byles and Montague Smith JJ. in Naoroji . Byles J. said [72] :
Mutual credits I conceive to mean simply reciprocal demands which must naturally terminate in a debt. It seems to me that the transaction described in this case would naturally terminate in a debt. (Emphasis supplied.)
1. (1868) L.R. 3 C.P., at p. 451.
Montague Smith J. [73] said:
The object of the enactment seems to me to have been, that, where merchants have had mutual dealings, each giving credit to the other, relying upon each other's solvency, in the event of the bankruptcy of one of them, the account shall be taken between them of all such credits and dealings as in the natural course of business would end in debts, and the balance shall be the debt due from the one to the other.
(emphasis supplied). It is enough that the transaction would naturally, or in the ordinary course of business, end in a debt, as, for example, when property is delivered with authority to sell it and apply the proceeds in reduction of a liability or for some other purpose. It is sufficient if the sale takes place after liquidation and before the account is taken to ground the right to a set-off. The right is not defeated by the possibility at the date of liquidation that there may be no sale. It is not necessary that the transaction must of necessity result in a debt.
1. (1868) L.R. 3 C.P., at p. 452.
Moreover, Dixon J. in Hiley recognized that the more recent authorities extended the principle to contingent liabilities as well as to fixed or absolute liabilities. He rightly regarded Lee & Champman's Case [74] as an instance of the application of the principle to "future obligations" [75] . And he said that the decision in Barrett "justifies, if it does not require, this conclusion" [76] . Reference should also be made to In re National Benefit Assurance Co. [77] and Sovereign Life Assurance Company v. Dodd [78] where future debts under insurance policies maturing on the happening of a future event were the subject of a set-off. In the second of the two cases, Charles J. [79] said that it was sufficient if at the commencement of the winding up there was a contract "which would probably result — and has in fact resulted — in a debt due to him", that is, the defendant bankrupt by the plaintiff company then being wound up. And in In re West Australian Lighterage, Stevedoring and Transport Co., Ltd.; Ex parte Bank of New South Wales [80] , the Full Court of the Supreme Court of Western Australia held that if a liability exists at the date of commencement of the bankruptcy it is not necessary that the amount should be immediately payable on that date, it "is sufficient if the account can be taken when the set-off arises".
1. (1885) 30 Ch.D. 216.
2. (1938) 60 C.L.R., at p. 498.
3. (1938) 60 C.L.R., at p. 500.
4. [1924] 2 Ch. 339.
5. [1892] 1 Q.B. 405.
6. [1892] 1 Q.B., at pp. 411-412.
7. (1903) 5 W.A.L.R. 132, at p. 137.
This brings me to the main thrust of the appellant's case — the decision in Re a Debtor; Ex parte the Debtor v. Trustee of the Property of Waite [81] . In that case Clark borrowed money from a bank to purchase goods which he supplied to Waite on credit. In consideration of the granting of credit Waite guaranteed Clark's overdraft up to £200. On 1 October 1954 a receiving order was made against Waite. At this time the amount of the price of the goods sold to Waite by Clark remaining undischarged was said to be some £101. On 20 July 1955 Waite's trustee in bankruptcy paid the amount of Clark's overdraft, approximately £133, to the bank. On 6 October 1955 the trustee obtained leave to sign judgment against Clark for this amount plus costs, totalling about £150. A bankruptcy notice, with which Clark failed to comply, was issued in respect of the judgment debt. On 9 February 1956 a receiving order was made against Clark. Clark appealed against this order, claiming to set off against the judgment debt of £150 the £101 which Waite owed him, thereby reducing the debt to less than the £50 required to support the petition. It was held that Clark was not entitled to the set-off.
1. [1956] 3 All E.R. 225.
In his judgment Lord Evershed M.R. posed the question of whether there was on the date of the receiving order against Waite anything "due" from Clark to Waite under the equivalent provision of s. 86. He stated [82] :
In my judgment, there was not. The rights of Mr. Waite against the appellant were the special but contingent rights of a surety who had not been called on to make any payment by the principal creditor and had not exercised what has been called the protective right of a surety to require the principal debtor to relieve him of his liability by paying the debt owed to the principal creditor. Nor was the case one in which all that remained to be done was to quantify the extent of an obligation already incurred, the amount of the indebtedness when finally ascertained being exclusively referable to an obligation to pay that sum entered into prior to the relevant date, such as was the case in Re Daintrey; Ex p. Mant [83] If and when a sum certain became due from the appellant to Mr. Waite or his trustee, that debt would be referable to the contract of guarantee with the bank or to the rights flowing from such contract, entered into by Mr. Waite with the bank subsequently to and independently (albeit in consequence) of the mutual dealings between himself and the appellant.
1. [1956] 3 All E.R., at pp. 227-228.
2. [1900] 1 Q.B. 546.
Lord Evershed, after examining Barrett [1] , seemed, for reasons not specifically spelt out, to regard that case as anomalous and dependent "on its own special facts" [2] . He also considered Fenton [3] . In a curiously contradictory statement [4] , he said that that case:
is clear authority for the proposition which I have earlier invoked — that, if at the relevant date a guarantor has not paid the principal creditor (and has not taken any other step to enforce his rights against the principal debtor), and so long, at least, thereafter as that situation continues, there is no "debt due" to the guarantor from the principal debtor capable of forming the subject of a set-off
The words "and so long, at least, thereafter as that situation continues" are contrary to the very essence of Lord Evershed's judgment.
1. (1865) 12 L.T. (N.S.) 193; 4 De G. J. & S. 756 [46 E.R. 1116].
2. [1956] 3 All E.R., at p. 229.
3. [1931] 1 Ch. 85.
4. [1956] 3 All E.R., at pp. 229-230.
Lord Evershed [5] concentrated on the later observations of Lord Hanworth M.R. in Fenton [6] and concluded that the judgments in Fenton were "more consonant" with the principle which he expounded than not [7] . Hodson L.J. [8] came to the same conclusion with regard to Fenton .
1. [1956] 3 All E.R., at pp 230-231.
2. [1931] 1 Ch., at p. 109.
3. [1956] 3 All E.R., at p. 231.
4. [1956] 3 All E.R., at pp. 234-235.
We should not follow Re a Debtor . The clear and persuasive dicta in Hiley were not referred to in Re a Debtor . Viewed in the light of the earlier case law it is an anomalous development. The decision in Barrett is not, despite the attempt of the Court of Appeal in Re a Debtor , readily distinguishable. The interposition of Barrett's sister in the events in that case was not relevant to the principles which were applicable. In his capacity as surety Barrett paid the debt of the principal debtor pursuant to the guarantee, albeit indirectly. It was still a payment pursuant to the guarantee and it was made after the date of the receiving order against the principal debtor. Dixon J. in Hiley [9] clearly saw Barrett as such a case.
1. (1938) 60 C.L.R. 468.
The appellant's case derives no support from the decision in Re Bruce David Realty Pty. Ltd. (In Liq.) [10] . The surety never paid the debt which it had guaranteed. In accordance with the principles applied in Fenton , a surety in that position is not entitled to a set-off. However, Adam J. said [11] :
The principle of mutual dealings does not permit of a surety setting off his claim to be indemnified by the bankrupt principal debtor, save to the extent that at the commencement of the bankruptcy the surety has paid the guaranteed debt to the principal creditor.
Although this sentence reflects the view accepted in Re a Debtor , it was not based on an examination of Re a Debtor , Hiley or Barrett and, accordingly, I attach little importance to it. The same comment necessarily applies to the earlier decision of the Ontario Court of Appeal in Lyall & Sons Construction Co. v. Baker [12] .
1. [1969] V.R. 240; (1968) 14 F.L.R. 56.
2. [1969] V.R., at p. 243; (1968) 14 F.L.R., at p. 60.
3. (1933) 2 D.L.R. 264.
In In re Northside Properties Pty. Ltd. [13] Street J. said "The date for determining whether a set-off is to be struck is the same as the date as at which the determination must be made of what debts are provable". This comment was based on the remark of Rich J. in Hiley [14] that "the commencement of the liquidation is the date at which the existence of "mutual credits, mutual debts, or other mutual dealings" must be ascertained for the purposes of set-off". In my view this comment does not compel the conclusion that the debt sought to be set off must actually arise before the commencement of the liquidation; cf. MPS Constructions Pty. Ltd. (In liq.) v. Rural Bank of New South Wales [15] .
1. [1971] 2 N.S.W.L.R., at p. 323.
2. (1938) 60 C.L.R., at p. 487.
3. (1980) 4 A.C.L.R. 835, at p. 845.
The language of s. 86 supports the Hiley view. Paragraphs (a) and (b) of s. 86 (1) are expressed in the present, not the past, tense, indicating that the ascertainment of what is due and the allowance of the set-off is to take place at the time of the taking of the account. This is inconsistent with what we would have expected s. 86 (1) to have referred to, namely what "was" due and what "was" payable to the trustee in bankruptcy (i.e. at the date of bankruptcy), if the Re a Debtor approach were correct, yet par. (a) requires the taking of account of what "is" due and par. (c) refers to what "is" payable. The surety's right to a set-off may be subject to the rule against double proof but that rule has no application in this case.
The conclusion which I have reached is reinforced when we consider the policy or purpose which underlies the statutory provisions. In Fenton [16] Lord Hanworth M.R. made clear that the essential notion of s. 86 is the protection of those who engage in mutual dealings with the bankrupt. The section protects the surety by relieving him from the necessity of proving in the bankruptcy for the debt owed to him with the likelihood of receiving only a proportion of it, whilst he remains fully liable for the debt he owes to the bankrupt. The view taken in Re a Debtor [1] severely limits this protection. Default by the principal debtor may often take place a very short time before his bankruptcy so that the surety has little or no opportunity to pay the principal creditor before the date of bankruptcy. If s. 86 operated so as to strictly draw the line at the date of the bankruptcy, the surety would remain liable to the principal creditor on his guarantee with no opportunity to avail himself of the set-off provisions in relation to his mutual dealings with the bankrupt, except in those cases in which he happened to pay the creditor before bankruptcy. Moreover — and this is an even more telling point — default by the principal debtor may occur after the date of bankruptcy, and then on the basis of Re a Debtor the surety would have no opportunity at all to make the payment to the principal creditor so as to bring himself within the set-off provisions. Although, as Romer L.J. said in Fenton [2] , the hardship on the surety who is disentitled to the set-off provisions "is one that he has brought upon himself by becoming surety for the debts of a person who is unable to pay them as they fall due", this does not justify a restrictive interpretation of s. 86. It is reasonable to impute to Parliament an intention that the provision, which is a protective provision, be given "the widest possible scope": see Eberle's Hotels and Restaurant Co. v. Jonas [3] .
1. [1931] 1 Ch., at pp. 104-105.
2. [1956] 3 All E.R. 225.
3. [1931] 1 Ch., at p. 121.
4. (1887) 18 Q.B. 459, at p. 465.
Section 82 (1), though not directly advancing the respondent's case, does provide some indirect assistance. The sub-section provides:
Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he may become subject before his discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his bankruptcy.
It is not disputed that the surety may prove in the bankruptcy of the principal debtor for his (the surety's) claim for his indemnity. The fact that the liability is future or contingent at the date of bankruptcy because the principal creditor has not been paid is not to the point; it is a liability to which the bankrupt may become subject before his discharge. As the surety's claim is a provable debt under s. 82 (1), it is natural that it should also be capable of being set off under s. 86, provided of course that it has become an actual liability by the time the account is taken.
I acknowledge that until the surety pays the principal debt he has only a future chose in action since, until default, he has nothing more than a prospect or expectancy that the principal debtor will default on the payment of the debt which is guaranteed. In the words of Latham C.J. in Bakewell v. Deputy Federal Commissioner of Taxation (S.A.) [4] :
It cannot in any sense be described as a debt The liability may, it is true, be described as a contingent debt, but the phrase "contingent debt" merely means the possibility of a debt. Until the possibility becomes an actuality there is no debt .
After default, the possibility remains that the principal debtor may himself discharge his liability to the principal creditor. Until the surety makes payment he (the surety) is owed no debt at all. But this does not matter. The important factor is that, by virtue of a guarantee given before bankruptcy or liquidation as the case may be, the surety has undertaken an obligation which on payment to the principal creditor will result in a debt owing to him (the surety) by the principal debtor. There is no reason why the liability thus undertaken, once payment is made, should not ground the right to set off the debt created by the payment.
1. (1937) 58 C.L.R. 743, at p. 754.
In this case payment had been made by the respondent to Esanda at the time of the claim to the set-off. At that time there was clearly a debt "due" from the appellant to the respondent. And it is at the time of the claim to the set-off, and no earlier, that the respondent needed to establish the existence of the debt. The respondent had also to establish the existence of mutual dealings at the date of liquidation. The existence of mutual dealings at that date was satisfied by the giving of the guarantee in the circumstances already outlined. The giving of the guarantee resulted in a debt which came into existence by the time when the account was taken and this was enough to ground a set-off.
The Full Court was correct in upholding the trial judge's decision that the respondent was entitled to a set-off under s. 86. For the reasons which I have given the appeal should be dismissed.
Murphy J.
The decision of Gallop J. was clearly correct. The legislative scheme is that mutual dealings between the creditor and the company in liquidation prior to the winding up order are subject to set-off (s. 86, Bankruptcy Act 1966 Cth). These are ascertained by an account of what "is due", that is, due by the completion of the accounting. If any mutual dealing raises a liability which is contingent only at the date of the winding-up but at the accounting has ceased to be contingent, and becomes "absolute" and due, it is taken into account.
In the Federal Court of Australia Sheppard J. dissented from the affirmation of Gallop J.'s decision. Although expressing misgivings, he considered that " we should not depart from a decision of the English Court of Appeal unless we are convinced that it is wrong " and stated that this was the duty of the Federal Court as well as of the Appeal Courts of the States. This statement is of considerable importance. It explains his Honour's dissent from what otherwise seemed to be a clear cut case, especially in the light of the earlier observations by judges of this Court (see Hiley v. Peoples Prudential Assurance Co. Ltd. (In liq.) [5] even if they were not strictly binding. It is a strong statement about the judicial duty of the members of the Federal Court and one with which I so strongly disagree that it should not be allowed to pass unquestioned. It is understandable because of similar statements made in this Court. His Honour referred to Barwick C.J.'s statement that as a general rule the Supreme Court of a State would be well advised to follow the decisions of the English Court of Appeal (see Public Transport Commission (N.S.W.) v. J. Murray-Moore (N.S.W.) Pty. Ltd. [6] ) and to Gibbs J. in the same case that the New South Wales Court of Appeal should have treated a decision of the English Court of Appeal "as an authority binding upon them" although Sheppard J. thought that "it may be that the latter view goes too far".
1. (1938) 60 C.L.R. 468.
2. (1975) 132 C.L.R. 336, at 341, 349.
Such attitudes were appropriate to the colonial era (see Trimble v. Hill [7] ). Perhaps the most extreme expression of this attitude occurred in this Court in Waghorn v. Waghorn [8] . In an earlier case, Crown Solicitor (S.A.) v. Gilbert [9] , the High Court interpreted a certain provision of the Matrimonial Causes Act 1929 S.A. (the provision and the correctness of the interpretation are irrelevant). Later, Merriman P. of the English Divisional Court, although aware of Crown Solicitor (S.A.) v. Gilbert interpreted similar provisions in the English Act contrary to the decision by the High Court (Herod v. Herod [10] ) and the English Court of Appeal without referring to Crown Solicitor (S.A.) v. Gilbert did likewise (see Earnshaw v. Earnshaw [11] ). The same issue came again before the High Court in relation to the New South Wales Act — Waghorn v. Waghorn. The Court (McTiernan J. dissenting) followed the English Court of Appeal. Of the majority, Dixon J. stated that he still believed in the correctness of the High Court's previous decision in Crown Solicitor (S.A.) v. Gilbert, but would defer to the English Court of Appeal. He stated "English courts cannot be expected to receive the decisions of the Dominions with the traditional respect which the courts of the Dominions pay to the decisions of the English courts" but found it " disappointing that the Court of Appeal did not take an opportunity of considering Crown Solicitor (S.A.) v. Gilbert" [12] . He concluded that in the circumstances " it is better that we should give up our own view" [13] ). Rich J. said that as one of the justices (Dixon J.) who decided Crown Solicitor (S.A.) v. Gilbert " is willing to give up his own view, I shall not stand in the way" [14] . Williams J. [15] , for the reasons given by Dixon J., thought it advisable to follow Herod's Case. Starke J. thought Crown Solicitor (S.A.) v. Gilbert was erroneous and should not be followed. McTiernan, on the basis that Crown Solicitor (S.A.) v. Gilbert was correctly decided, declined to depart from it stating that if it were necessary to alter the law to achieve uniformity, this was the province of the appropriate legislature. Thus, a majority of the High Court refused to give effect to what they were convinced was the authentic will of the New South Wales Parliament, because a single English Judge and an English Court of Appeal having no authority over them thought otherwise.
1. (1879) 5 App.Cas. 342, at p. 345.
2. (1942) 65 C.L.R. 289.
3. (1937) 59 C.L.R. 322
4. [1939] P. 11.
5. [1939] 2 All E.R. 698.
6. (1942) 65 C.L.R., at pp. 297-298.
7. (1942) 65 C.L.R., at p. 299.
8. (1942) 65 C.L.R., at p. 293.
9. (1942) 65 C.L.R., at p. 305.
The approach taken by the majority (except Starke J.) in Waghorn's Case is, in my opinion, inconsistent with the Constitution, Ch. III, Judicature. Under the Constitution, the duty of the courts in the interpretation and application of Acts and State Acts is (subject only to those judicial authorities binding on them) to give effect to their own opinion of the meaning and effect of the Acts.
The only judicial authorities binding on courts in Australia are Australian courts. I leave aside the anomalous relationship of State Supreme Courts to the authority of the Privy Council in cases which, according to Southern Centre of Theosophy Incorporated v. South Australia [16] can still be appealed to that body, which itself claims that it is not an English or United Kingdom institution but is part of the judicial system of the place appealed from. (See Ibralebbe v. The Queen [17] ). Otherwise no Australian court is bound by any English or other foreign court. Of course the decisions of English courts as well as the courts of Scotland, Ireland, New Zealand, Papua New Guinea, United States of America and others are regarded with respect. Apart from the special respect accorded to individual judges because of their reputation, the intermediate or ultimate courts of England are entitled to no more and no less respect than those of the courts of other countries.
1. (1979) 145 C.L.R. 246.
2. [1964] A.C. 900, at pp. 921-922.
The decisions of other common law countries, especially their ultimate tribunals, are persuasive. The courts of Australia are right to turn to them as well as to textwriters and others for assistance in arriving at a correct interpretation of Acts or a wise common law rule. But having decided the true interpretation of an Act, it is a denial of judicial duty to fail to give effect to that decision because a foreign court, however eminent, thinks otherwise. It is just as bad as altering one's decision because an executive officer, local or foreign, thinks otherwise. It is wrong, although not to the same degree, to adopt a practice of declining to depart from the decisions of a foreign court (especially on the interpretation of an Act) "unless convinced that it is wrong". Subject only to the binding authority of the Australian judicial system, though no doubt assisted by the views of any foreign court, the judicial duty is to arrive at the court's own view free of any doctrine that it must follow the decisions of the English Court of Appeal (or other court) unless convinced that they are wrong. There is no justification for treating the English courts as superior in some way to courts of all other countries. No one would suggest that the Federal Court or a State Court of Appeal should, in construing an Act or State Act, refuse to depart from the view taken by an intermediate appellate court of New Zealand (or any other country) unless convinced that it was wrong.
The appeal should be dismissed.
Aickin J.
In this appeal I have had the advantage of reading the reasons for judgment prepared by the Chief Justice and those prepared by my brother Mason. I agree with their reasons for concluding that this case is governed by the principle applied by this Court in Hiley v. Peoples Prudential Assurance Co. Ltd. [18] and there is nothing that I can usefully add. I would therefore dismiss the appeal.
1. (1938) 60 C.L.R. 468. |
high_court_of_australia:/showbyHandle/1/11837 | decision | commonwealth | high_court_of_australia | text/html | null | Jones v The Queen [1997] HCA 12 | https://eresources.hcourt.gov.au/showbyHandle/1/11837 | 2024-09-13T22:51:10.702815+10:00 | High Court of Australia
Brennan CJ Gaudron, McHugh, Gummow and Kirby JJ
Jones v The Queen
ORDER
1. Appeal allowed.
2. Set aside the order of the Court of Criminal Appeal. In lieu thereof the appeal to that Court is allowed; the convictions on counts 1 and 3 are quashed and, in lieu thereof, verdicts of acquittal are entered.
The following written reasons for judgment were published:—
2 December 1997
Brennan CJ.
The meaning of the phrase "open to the jury to convict" when used to determine whether a verdict of guilty is unsafe and unsatisfactory was considered by this Court in M v The Queen [1] . Different approaches were taken to the application of the test. The majority (Mason CJ, Deane, Dawson and Toohey JJ) proposed as a general criterion a doubt about guilt experienced by the appellate court. Their Honours said [2] :
In most cases a doubt experienced by an appellate court will be a doubt which a jury ought also to have experienced.
Their Honours stated the exception thus:
It is only where a jury's advantage in seeing and hearing the evidence is capable of resolving a doubt experienced by a court of criminal appeal that the court may conclude that no miscarriage of justice occurred.
Gaudron J accepted the correctness of this formulation of the test [3] . I was unable to accept this formulation, saying [4] :
The appellate court's function is to make its own assessment of the evidence not for the purpose of concluding whether that court entertains a doubt about the guilt of the person convicted but for the purpose of determining whether the jury, acting reasonably, must have entertained a reasonable doubt as to the guilt of the accused.
1. (1994) 181 CLR 487.
2. M v The Queen (1994) 181 CLR 487 at 494.
3. M v The Queen (1994) 181 CLR 487 at 508.
4. M v The Queen (1994) 181 CLR 487 at 502.
The difference between the two approaches may not be great in practice but it still appears to me to represent a fundamental difference in principle. The majority approach accords with the approach of Barwick CJ in Ratten v The Queen [5] :
It is the reasonable doubt in the mind of the court which is the operative factor. It is of no practical consequence whether this is expressed as a doubt entertained by the court itself, or as a doubt which the court decides that any reasonable jury ought to entertain. If the court has a doubt, a reasonable jury should be of a like mind. But I see no need for any circumlocution; as I have said it is the doubt in the court's mind upon its review and assessment of the evidence which is the operative consideration.
This approach was rejected by Dawson J with the concurrence of Gibbs CJ and me in Whitehorn v The Queen [6] :
With the greatest of respect for the view expressed by his Honour, it does not appear to me to be circumlocution to speak in terms of a doubt which ought to have been entertained by any reasonable jury rather than in terms of a doubt which the court has.
In many cases it may be unnecessary to make such a distinction because a doubt experienced by an appellate court will be a doubt which a reasonable jury ought also to have experienced. But the evidence before the appellate court will seldom, if ever, be in the same form as the evidence before the jury. In particular, a court of appeal does not usually have the opportunity to assess the worth of a witness's evidence by seeing and hearing that evidence given. Moreover, the jury performs its function within the atmosphere of the particular trial which it may not be possible to reproduce upon appeal. These considerations point to important differences between the functions of a jury and those of a court of appeal. A jury is able, and is required, to evaluate the evidence in a manner in which a court of appeal cannot.
I adhere to that view because the function of a court of criminal appeal is prescribed by statute and the statute is founded on the principle that the jury, not the court, is the constitutional arbiter of guilt. An equation between a reasonable doubt entertained by a court of criminal appeal and a doubt which ought to have been entertained by a reasonable jury is valid only if the capacity for evaluating the cogency of a witness's evidence and the worldly wisdom of a court of criminal appeal are no less than the collective endowments of a jury. Those skills are as material to the propriety of a verdict as the advantages of seeing and hearing witnesses and sensing the atmosphere of a trial. It is a basic assumption of the criminal process that those skills are not equally shared by judges and juries. Exceptionally, judicial experience is sometimes accorded greater weight than the experience of a jury, in which case a trial judge is required to give the jury a warning that alerts them to what judicial experience has shown [7] . Otherwise the courts accept the jury as the possessor of both the skills and the advantages that are required to reach a proper verdict. In my respectful opinion, any contrary approach denies the importance of trial by jury and is inconsistent with the constitutional function which the jury performs.
1. (1974) 131 CLR 510 at 516.
2. (1983) 152 CLR 657 at 660, 687.
3. Bromley v The Queen (1986) 161 CLR 315 at 324.
Nevertheless, there may be exceptional cases where it appears that, despite its skills and advantages and the due observance of all relevant rules of law and procedure, the jury must have fallen into error. This is one category of those cases where a verdict of guilty is unsafe and unsatisfactory. The true test to be applied to that category was stated by Dawson J in Chidiac v The Queen [8] :
If upon the whole of the evidence a jury, acting reasonably, was bound to have a reasonable doubt, then a verdict of guilty will be unsafe and unsatisfactory. (Emphasis added.)
This was the test which Gaudron J and I applied in Knight v The Queen [9] :
The deference which is due to a jury's verdict, both by reason of the jury's presence at the trial and by reason of its function as the constitutional arbiter of the facts, precludes an appellate court from simply substituting its view of the evidence for the view formed by the jury under proper direction. It is only when an appellate court, giving the verdict appropriate deference, concludes that it was not open to the jury to convict that it is right to set aside a verdict of guilty.
I expressed the opinion in M v The Queen [10] that —
[F]or both constitutional and practical reasons, an appellate court can seldom interfere with the verdict of a jury merely on the ground that the verdict is unsafe and unsatisfactory where there is evidence to support the verdict.
In that case McHugh J [11] denied the appropriateness of the "open to the jury" test precisely because it came "perilously close to applying the test for determining whether there was a sufficiency of evidence to convict the accused". I would respectfully accept the closeness, but not the peril, of the test of "open to the jury". Once it is accepted that there can be no "unwarranted intrusion into the jury's right to determine the facts in a criminal trial" [12] , an adverse determination made on evidence sufficient to support a conviction can seldom be impugned simply because the court of criminal appeal has a different appreciation of the facts. Sometimes an inconsistency in verdicts on the counts in an indictment or a conviction where the inculpatory evidence has been demonstrated to be unreliable may show a verdict to be unsafe and unsatisfactory. But these are relatively rare cases.
1. (1991) 171 CLR 432 at 451.
2. (1992) 175 CLR 495 at 511.
3. (1994) 181 CLR 487 at 502.
4. M v The Queen (1994) 181 CLR 487 at 525.
5. M v The Queen (1994) 181 CLR 487 at 525, per McHugh J.
There are other categories of cases where a verdict of guilty is unsafe and unsatisfactory. These are cases where there has been some failure to apply the rules of law or procedure that are required to ensure a fair trial — for example, a failure to give the jury a warning when a warning ought to have been given, even if the giving of the warning was not generally mandatory. These are cases where there is a substantial risk that the jury may have been misled or misled themselves in some material respect. This appeal falls partly in one category and partly in the other.
The appellant was a gymnasium instructor who conducted a gymnastic academy at Wentworth Falls. The indictment charged him with three acts of sexual intercourse with a female child whom he was instructing at the academy. She was aged eleven during the periods mentioned in the first two counts and twelve during the period mentioned in the third count. The trial took place in February 1996, five years after the period mentioned in the first count. The evidence of the child as to the occasions when the alleged acts occurred and the nature of the relationship between the child and her mother on the one hand and the family of the appellant on the other appears in other judgments. So far as the evidence shows, the child made no allegation to any person against the appellant until more than four years had elapsed from the first alleged act of intercourse. A feature of the child's allegations is that the acts of intercourse to which she deposed took place when there was nobody present but herself and the appellant. The first two acts allegedly occurred in the gymnasium after training sessions, the third in the appellant's house. On week-night training sessions the appellant was accompanied to the gymnasium by his wife, son and daughter. He also had an assistant, Lucia Darvall, who attended the gymnasium with him on Saturday mornings.
The jury acquitted on the second count, but convicted on the first and third counts. Having regard to the convictions on counts 1 and 3, the only possible explanation of the acquittal on the second count was the existence of at least a reasonable doubt in the mind of the jury engendered by the evidence of the appellant's wife, son and daughter. They gave evidence showing that they were invariably present during the week-night training sessions and travelled home with the appellant afterwards. The week-night training sessions were the occasions on one of which the act of intercourse alleged in the second count related. But Lucia Darvall also gave evidence relating to the Saturday morning training sessions in February 1991. These were the occasions to one of which the act of intercourse alleged in the second count related. Lucia Darvall's evidence, apparently cogent, was that she did not leave the gymnasium before the appellant on any of these occasions and that the appellant invariably drove her home afterwards. However, in cross-examination she gave the following answer:
Q. Is it possible that in February '91 you went home by the train?
A. I can't recall, it is possible.
In re-examination, Lucia Darvall gave the following evidence:
Q. Well in February 1991 during the Saturdays then —
A. Yes.
Q. Do you recall ever leaving the hall before everyone else had left?
A. No.
Q. Do you recall walking to the station and getting on the train?
A. No.
Q. On those occasions where it was possible that you went home by train from a Saturday coaching, can you tell us when you left in relation to Mr Jones?
A. I would leave shortly after — shortly before he would leave.
If Lucia Darvall had not acknowledged the possibility that she had gone home by train on a Saturday in February 1991, there would have been no ground for distinguishing between the findings that ought to have been made on the first and the second count. Lucia Darvall's acknowledgment that she had possibly gone home by train was necessitated by the five years which had passed between February 1991 and the giving of her evidence. Most of that period was due to the lapse of time between the alleged events with which the appellant was charged and the making of the allegations by the prosecutrix. That lapse of time and the subsequent lapse of time before the trial required not only a comment but a warning about the danger of convicting without supporting evidence other than the testimony of the child.
In Longman v The Queen [13] , a case of a very lengthy delay in the prosecution of an accused for alleged sexual offences, Brennan, Dawson and Toohey JJ said:
[T]here is one factor which may not have been apparent to the jury and which therefore required not merely a comment but a warning be given to them [14] . That factor was the applicant's loss of those means of testing the complainant's allegations which would have been open to him had there been no delay in prosecution. Had the allegations been made soon after the alleged event, it would have been possible to explore in detail the alleged circumstances attendant upon its occurrence and perhaps to adduce evidence throwing doubt upon the complainant's story or confirming the applicant's denial. After more than twenty years that opportunity was gone and the applicant's recollection of them could not be adequately tested. The fairness of the trial had necessarily been impaired by the long delay [15] and it was imperative that a warning be given to the jury. The jury should have been told that, as the evidence of the complainant could not be adequately tested after the passage of more than twenty years, it would be dangerous to convict on that evidence alone unless the jury, scrutinising the evidence with great care, considering the circumstances relevant to its evaluation and paying heed to the warning, were satisfied of its truth and accuracy. To leave a jury without such a full appreciation of the danger was to risk a miscarriage of justice. The jury were told simply to consider the relative credibility of the complainant and the appellant without either a warning or a mention of the factors relevant to the evaluation of the evidence. That was not sufficient.
The same observation is applicable to the present case, although the lapse of time was shorter than in Longman. The jury was not directed about the danger of discounting the evidence of Lucia Darvall although she had acknowledged the possibility of her travelling home by train simply because the lapse of time precluded her ability to be certain about the subject. Had Lucia Darvall been certain about her mode of transport each Saturday in February 1991, she might well have established the innocence of the appellant on the first count or at least have engendered a reasonable doubt about his guilt. As Lucia Darvall's uncertainty appears to be the only ground on which the verdict of guilty on the first count can be reconciled with the acquittal of the appellant on the second count and as the verdict on the first count was reached without an adequate warning about the difficulty of establishing the defence case after a lapse of four years, the verdict on the first count was unsafe and unsatisfactory.
1. (1989) 168 CLR 79 at 91.
2. See R v Spencer [1987] AC 128 at 141.
3. See Jago v District Court (NSW) (1989) 168 CLR 23 at 31-32, 42-44, 56-57, 71-72.
In determining whether the verdict on the third count was unsafe and unsatisfactory, it must be remembered that the jury were not satisfied beyond reasonable doubt about the appellant's guilt on the second count and may not have been satisfied of his guilt on the first count if they had been adequately directed about the significance of the delay in the prosecution. When that factor is combined with the absence of any complaint by the child until two and a half years after the alleged third act of intercourse and the apparent friendliness which she exhibited to the appellant and his wife during that time, it is clear that the jury could not have properly evaluated the dangers of convicting on the child's uncorroborated evidence so long after the events of which she complained.
The absence of an adequate direction, the acquittal on the second count, the delay in the prosecution and the evidence of the relationship of the child with the appellant and his wife show that the verdicts of guilty on the first and the third counts are unsafe and unsatisfactory. Once the jury decided to acquit on the second count, the only proper verdicts which a reasonable jury could have returned on the first and third counts had they followed the direction that ought to have been given were verdicts of acquittal. In those circumstances, it would not have been reasonably open to them to convict on the first and third counts. Therefore it was necessary to allow the appeal.
For these reasons, I joined in the making of the order allowing the appeal, setting aside the order of the Court of Criminal Appeal, and in lieu thereof ordering that the appeal to that Court be allowed, that the convictions on counts 1 and 3 be quashed and, in lieu thereof, verdicts of acquittal be entered.
Gaudron, McHugh and Gummow JJ.
The question in this appeal was whether the Court of Criminal Appeal of New South Wales erred in holding the appellant's convictions on the first and third of three counts of sexual assault were not unsafe or unsatisfactory. At the conclusion of the argument, the Court quashed the appellant's convictions and ordered that verdicts of acquittal be entered in respect of those counts. What follows are our reasons for joining in the Court's order.
The factual and procedural background
The appellant was presented for trial before the District Court at Penrith in New South Wales on 20 February 1996 on three counts of sexual intercourse with a child under his authority who was aged between ten and sixteen years. The complainant, a girl, was eleven years old during the period specified in the first and second counts of the indictment and twelve years old during the period specified in the third count. The appellant was her gymnastics coach. He pleaded not guilty to each count.
The evidence for the prosecution
The complainant testified that during 1991 and 1992 she attended gymnastics classes conducted by the appellant. At that time, she was living with her mother. She said that the classes were held after school on Tuesdays and Thursdays and sometimes on Saturdays. She claimed that the offence which gave rise to the first count in the indictment took place between 1 February 1991 and 1 June 1991 at the completion of one of the weeknight classes. The complainant said that the appellant had told her that he would give her a rub down to ease her tendonitis. When everyone had left the class, he told her to go into the storeroom and lie down on the mats. The appellant told the complainant to take off her bike pants and massaged her legs. He then asked her to remove her bikini pants. The appellant massaged the complainant's vagina and, when he stopped, she could "sort of see him fumbling around and then he put something in my vagina, and I assumed it was his penis". The appellant then drove the complainant home and told her not to tell anyone about the incident "because this is our thing and no one else will understand". The complainant later felt pain in her vaginal area and noticed blood and "white creamy stuff" in her underpants.
The second offence was alleged to have occurred on a date between 1 June 1991 and 30 August 1991. The complainant said that, after a Saturday class, the appellant had again given her a rub down to relieve her tendonitis. No one else was present at the time. The appellant again asked her to take her pants off and massaged her. He then "started fumbling again" and put his penis in her vagina. The appellant stopped when the complainant told him that he was hurting her, but then she felt "something sort of wet and slimy" go into her vagina. The complainant said that she assumed that it was the appellant's tongue. He then got up, told her to put her pants back on and took her home. She later felt pain when she went to the toilet and noticed blood on her underpants.
The third offence was alleged to have taken place on a date between 1 June 1992 and 4 July 1992, the latter date being the date on which the complainant moved away from the area to live with her father. The complainant said that the appellant had told her that, in order to secure a transfer to another gymnastics club, she would have to take flexibility and strength tests. The appellant met the complainant at school and took her to his home. After she did some stretches, he told her to lie on a table for a rub down. The appellant then told her to remove her tracksuit pants and lie on his bed. He rubbed her inner thighs and vagina, "fumbled around" again and put his penis in her vagina. He then told her to get dressed. On the way back to the school, the appellant told the complainant that he was going to have to find a new favourite and gave her a kiss on the cheek. Later, the complainant noticed blood and a white substance on her underpants.
The complainant's testimony was entirely uncorroborated. She also claimed that sexual incidents between herself and the appellant had occurred on two or three other occasions, but she said that she could not remember much about them.
The complainant's cross-examination revealed that she was mistaken in her testimony about the days of the week on which the first two incidents took place. She had testified that the first incident occurred at night time on a Tuesday or Thursday and that the second incident had occurred on a Saturday. However, her account was inconsistent with an earlier statement that she had made to the police. In that statement, she had claimed that the first incident was on a Saturday and the second on a Tuesday or Thursday. Under cross-examination, she claimed that she had "got the days confused. The first time was on a Saturday, the second Tuesday or Thursday."
Cross-examination of the complainant also revealed that she had not made any complaint of the incidents until 1995. There was therefore a four year delay in respect of the offence charged in the first count of the indictment, a three and a half year delay in respect of the second count and a two and a half year delay in respect of the third count.
Other cross-examination of the complainant revealed that she had sent cards to the appellant after the three incidents were alleged to have occurred. The complainant agreed that, on moving from her mother's home after the last of the alleged incidents, she had given the appellant and his wife a card which read " To Vince and Margot, For all you've done, Love and stuff, [the complainant]." In January 1993, the complainant had also sent the appellant and his wife a postcard from the Sunshine Coast. She said that the cards had been sent at the suggestion of her mother. She also agreed that early in 1993 while on a visit to her mother, she had spoken to the appellant's wife who had invited her to stay the night at the appellant's house. After consulting her mother, she had accepted the invitation.
The evidence for the appellant
The appellant gave evidence in his defence. He denied any wrong-doing with respect to the complainant or that he had any opportunity to commit the offences alleged in the first and second counts. He said that he had been accompanied throughout Saturday training sessions by Ms Darvall, his assistant coach, and that he had always driven her home at the conclusion of each session. The appellant denied that any training sessions had taken place on Tuesdays. He also denied that any session had taken place on weeknights in the absence of his wife and children. He claimed that they went home with him at the conclusion of each session. In cross-examination, he conceded that initially he had asserted that the weeknight sessions were on Mondays and Thursdays. He admitted that it was only in the latter part of 1991 that they were held on Mondays and Thursdays and that in the beginning they had been held on Mondays and Fridays.
The appellant said that his work as a gymnastics coach required occasional massage of the leg and groin muscles of his students. His evidence on this point was supported by Ms Crampton, the Executive Director of NSW Gymnastics, who said that there was nothing untoward in a coach massaging his student in the manner which the appellant had demonstrated while giving his evidence.
Other witnesses supported the appellant's claim that he had no opportunity to commit the offences that were the subject of the first and second counts. As we have said, the first offence was initially alleged to have occurred on a weeknight. The first count specified a date between 1 February 1991 and 1 June 1991. However, the complainant later said that it took place on a Saturday and that it was definitely in February 1991. Ms Darvall testified that she had acted as assistant coach for the appellant on weeknights and Saturday mornings. She said that the appellant usually picked her up for Saturday morning classes and that she travelled home with him after Saturday classes "most of the time". However, she conceded that there were occasions when she travelled home by train. Ms Darvall said that she had attended all the Saturday morning classes in February 1991. On each occasion she had been driven home by the appellant. However, in cross-examination, she conceded that it was possible that she had travelled home from Saturday classes by train in February 1991. In re-examination, she said that she could not recall any occasion in February 1991 when she had left the gymnastics hall before everyone else left, nor did she recall walking to the train station and getting on a train.
The complainant conceded in cross-examination that she was not sure whether Ms Darvall had been present on Saturdays, but she claimed that, if she had been there on the Saturday in question, she "must have" left before the sexual assault occurred.
The appellant's wife supported his assertion that weeknight training sessions took place on Mondays and Thursdays or Mondays and Fridays and never on Tuesdays. She gave evidence that she had not missed any weeknight training sessions in 1991 and that she had never left the sessions without her husband. The appellant's daughter also testified that she had been present at weeknight gym classes in 1991 and had always left such classes with her father. The complainant had agreed in cross-examination that on weeknights in 1991, the appellant's family had attended the gym classes "all the time".
The jury convicted the appellant on the first and third counts in the indictment but acquitted him on the second count. On 22 November 1996, the Court of Criminal Appeal of New South Wales (Mahoney A-CJ, Priestley JA and Sully J) unanimously dismissed his appeal against the convictions.
The power of the Court of Criminal Appeal to set aside a verdict on the ground that it is unsafe or unsatisfactory
Under s 6(1) of the Criminal Appeal Act 1912 NSW, the Court of Criminal Appeal of New South Wales is required to set aside a conviction if it is:
of opinion that the verdict of the jury should be set aside on the ground that it is unreasonable, or cannot be supported, having regard to the evidence, or that the judgment of the court of trial should be set aside on the ground of the wrong decision of any question of law, or that on any other ground whatsoever there was a miscarriage of justice.
In M v The Queen [16] , the majority said that although the phrase "unsafe or unsatisfactory" does not appear in s 6, it allows a verdict to be set aside when the verdict is unreasonable or not supportable on the evidence. In the same case, McHugh J said [17] that a "miscarriage of justice" arises whenever the accused has not had a fair trial according to law or whenever the nature of the evidence, the directions to the jury or the procedures that were followed raise a real doubt as to whether the conviction can be regarded as a safe or just conviction. Having regard to the statements in M , there can be no doubt that "a miscarriage of justice" also occurs when the findings or verdicts of the jury raise a real doubt as to whether a conviction is safe or just.
1. (1994) 181 CLR 487 at 492, per Mason CJ, Deane, Dawson and Toohey JJ.
2. M v The Queen (1994) 181 CLR 487 at 523.
The test for determining whether a verdict is unsafe or unsatisfactory
In M , Mason CJ, Deane, Dawson and Toohey JJ said [18] that the test for an unsafe or unsatisfactory verdict was whether the court thought that, upon the whole of the evidence, it was "open to the jury" to be satisfied beyond reasonable doubt that the accused was guilty. The majority emphasised, however, that it was not the function of the court to answer that question merely by examining the transcript of evidence and the exhibits. Their Honours said that [19] :
in answering that question the court must not disregard or discount either the consideration that the jury is the body entrusted with the primary responsibility of determining guilt or innocence, or the consideration that the jury has had the benefit of having seen and heard the witnesses. On the contrary, the court must pay full regard to those considerations.
1. M v The Queen (1994) 181 CLR 487 at 493.
2. M v The Queen (1994) 181 CLR 487 at 493.
The majority judges explained [20] the application of the test as follows:
In most cases a doubt experienced by an appellate court will be a doubt which a jury ought also to have experienced. It is only where a jury's advantage in seeing and hearing the evidence is capable of resolving a doubt experienced by a court of criminal appeal that the court may conclude that no miscarriage of justice occurred. That is to say, where the evidence lacks credibility for reasons which are not explained by the manner in which it was given, a reasonable doubt experienced by the court is a doubt which a reasonable jury ought to have experienced. If the evidence, upon the record itself, contains discrepancies, displays inadequacies, is tainted or otherwise lacks probative force in such a way as to lead the court of criminal appeal to conclude that, even making full allowance for the advantages enjoyed by the jury, there is a significant possibility that an innocent person has been convicted, then the court is bound to act and to set aside a verdict based upon that evidence.
1. M v The Queen (1994) 181 CLR 487 at 494.
Gaudron J agreed [21] with the majority formulation of the test, as did Brennan J [22] , although his Honour said [23] that the question as to whether it was "open to the jury" to be satisfied of guilt beyond reasonable doubt was to be resolved by asking whether the jury was "upon the whole of the evidence bound to have a reasonable doubt" [24] or whether "the jury, acting reasonably, must have entertained a reasonable doubt as to the guilt of the accused".
1. M v The Queen (1994) 181 CLR 487 at 508.
2. M v The Queen (1994) 181 CLR 487 at 501.
3. M v The Queen (1994) 181 CLR 487 at 501-502.
4. Citing Dawson J in Chidiac v The Queen (1991) 171 CLR 432 at 451.
McHugh J said [25] that the correct test for determining whether a verdict should be set aside on the ground that it was unreasonable was "whether a reasonable jury must have had a reasonable doubt about the accused's guilt". McHugh J did not adopt the "open to the jury" test because his Honour thought that such a test came "perilously close to applying the test for determining whether there was a sufficiency of evidence to convict the accused" and would constitute "an unwarranted intrusion into the jury's right to determine the facts in a criminal trial" [26] . However, the test formulated by the majority in M must now be accepted as the appropriate test for determining whether a verdict is unsafe or unsatisfactory.
1. M v The Queen (1994) 181 CLR 487 at 525.
2. M v The Queen (1994) 181 CLR 487 at 525.
The misapplication by the Court of Criminal Appeal of the test formulated in M
In the Court of Criminal Appeal, Mahoney A-CJ expressed dissatisfaction with the principles governing appellate court review of the safety of jury verdicts. His Honour was of the view that the principles "pose rather than solve the problem which arises in cases of word against word". Mahoney A-CJ expressed discomfort with his decision to dismiss the appeal which he believed was necessitated by the application of these principles. In our view, that discomfort was attributable to a misapprehension by the Court of Criminal Appeal as to the manner in which the test in M should be applied rather than to the terms of that test.
Thus, Sully J who gave the principal judgment in the Court of Criminal Appeal said:
I do not see, in the complainant's evidence anything suggestive of so clear a taint or fundamental flaw as would justify this Court in saying that the jury must have had a reasonable doubt about the acceptability, in the requisite legal sense, of the complainant's version.
In a concurring judgment, Priestley JA said:
As to whether this court should hold that the jury were bound to have a reasonable doubt about the appellant's guilt, I am of the view, similar to that of Sully J, that the complainant's evidence, taken into account with the circumstances of the trial (which included the jury's first hand observation of both complainant and appellant in the witness box) could not be characterised as so weak or flawed as to make it wrong for the jury to accept it. (Our emphasis.)
Mahoney A-CJ, who also agreed with Sully J, referred to a passage from M which contained the "open to the jury" test. However, his Honour said that a Court of Criminal Appeal must make up its mind:
in the sense of deciding whether it is satisfied that the court has or the jury must have had a reasonable doubt as to the accused's guilt.
Sully J also made reference to whether certain conclusions were "reasonably open to the jury", but in addition to that test, his Honour applied the much stricter test outlined above. No other reference was made in the judgments of the Court of Criminal Appeal to the "open to the jury" test formulated by the majority in M .
The adverse impact of the acquittal on the second count
The jury's finding of not guilty on the second count damaged the credibility of the complainant with respect to all counts in the indictment. Implicit in the appellant's acquittal on the second count was a rejection of the complainant's account of the events which were said to give rise to that count. The jury may have acquitted because the unshaken evidence of the appellant's wife and daughter with respect to the absence of opportunity engendered a reasonable doubt about the appellant's guilt on the second count. They may possibly have acquitted because they were of the view that the complainant had fabricated the circumstances giving rise to the second count. Having regard to the convictions on the first and third counts, the latter alternative seems an unlikely explanation of the verdict on the second count. Whatever the explanation may be, however, the jury's rejection of the complainant's account on the second count diminished her overall credibility. The only reasonable conclusion is that the jury were not satisfied beyond reasonable doubt of the truth of her evidence concerning the incident the subject of the second count. Having regard to the terms [27] of the second count, we do not think that the complainant's confusion about whether the offence took place on a Thursday or a Saturday could explain the acquittal on that count. If that was the reason the jury rejected her evidence, they would also have acquitted the appellant on the first count.
1. The second count alleged that the offence took place between 1 June 1991 and 30 August 1991.
It is difficult then to see how it was open to the jury to be convinced beyond a reasonable doubt of the guilt of the appellant with respect to the first and third counts. There is nothing in the complainant's evidence or the surrounding circumstances which gives any ground for supposing that her evidence was more reliable in relation to those counts than it was in relation to the second count.
Moreover, two other factors made it necessary for a reasonable jury to scrutinise the complainant's evidence with considerable care — (1) her delay in making the complaint; and (2) the lack of any corroborative evidence [28] , in particular, the absence of any medical evidence.
1. Although desirable, corroboration was not required as a matter of law: see s 164 of the Evidence Act 1995 NSW.
In sexual offences cases, recent complaint, or its absence, is a factor which is ordinarily of limited assistance. This Court has held [29] that a complaint "does not itself go to establish the facts of which the complainant gives evidence nor does it go to disprove those facts". Barwick CJ said in Kilby v The Queen [30] that a complainant's delay in making a complaint in a sexual offence case has "no probative value as to any fact in contest but, merely and exceptionally constituting a buttress to the credit of the woman who has given evidence of having been subject to the sexual offence". Promptness or delay in complaint is itself relevant only to the credibility of the complainant [31] .
1. Crofts v The Queen (1996) 186 CLR 427 at 444-445.
2. (1973) 129 CLR 460 at 472.
3. Sparks v The Queen [1964] AC 964 at 979.
In this case, the reasons behind the complainant's failure to make a prompt complaint were not examined in cross-examination or otherwise. However, in this Court, the Crown put forward a number of matters which were said to explain the complainant's delay. The Crown contended that the complainant had initially lacked knowledge of sexual matters; that she had trusted the appellant who was in a position of authority in relation to her; that because of this trust she had obeyed the appellant's instruction not to tell anyone of what took place; that at the time of the incidents the relationship between the appellant and complainant was an ongoing one; that the complainant learnt of her sexuality as time went by through school education classes and from things said by her mother; and that the complainant had ceased to live with her mother shortly after the incident giving rise to the third count and had moved away to live with her father. However, while any of these reasons may be the explanation for the delay, the complainant did not rely on any of them at the trial or offer any explanation for the delay. The unexplained absence of a complaint for four years is a matter that made it essential for a reasonable jury to scrutinise the complainant's evidence with great care.
Furthermore, in some cases — and we thought that this was one — the delay in making a complaint may be so long that it hampers an accused person's right to defend him or herself. An innocent person's ability to recall the events which took place at the time of an alleged incident is undoubtedly impeded by any extensive delay in the making of the complaint against him or her. As Mahoney ACJ said in the Court of Criminal Appeal, delay is "a matter of considerable importance to the person accused", and has the effect of relegating the accused from giving an account of what actually happened to "what must have happened" (our emphasis).
As a result of the long delay in this case, the appellant's opportunity to obtain evidence refuting the circumstances of each alleged offence was significantly reduced. The appellant's and the complainant's movements on the day of the alleged incident concerning the third count were material facts. Proof of them would have gone far to support one or other of the opposing cases. Similarly, whether or not the appellant and the complainant were ever left alone after Saturday classes was a critical fact concerning the first count. Evidence that the appellant was left alone with the complainant would have been highly damning. But if the complaint had been made promptly and the appellant was innocent as he claimed to be, he may have been able to obtain evidence that, on each Saturday in February 1991, he had left the classes in the company of others. The possibility of finding a witness or witnesses with a clear recollection of the relevant days inevitably became more remote as the delay in making the complaint became greater.
The difficulty that the delay caused the appellant is illustrated by the concession of Ms Darvall that it was possible that there had been occasions when the appellant had not driven her home from Saturday gym classes in February 1991. Given the time that had elapsed since the alleged incident, her concession was inevitable. While her evidence indicated that the appellant almost invariably took her home from Saturday classes, the delay and its effect on her recollection forced her to concede that she may not have been present on one of the relevant Saturdays. As a result, the appellant may have been deprived of a cast iron alibi that would have brought about his acquittal.
The convictions are unsafe and unsatisfactory
In our opinion, the proper application of the test formulated by the majority of this Court in M required the convictions of the appellant to be set aside on the basis that they were unsafe and unsatisfactory. Given the jury's finding on the second count, it was not open to them, on the whole of the evidence, to be satisfied beyond reasonable doubt of the guilt of the appellant on the first and third counts. Once the jury found that the evidence of the complainant with respect to the second count lacked sufficient cogency to convict, the Crown case on the first and third counts wore a different complexion. For it meant that, when her evidence could be set against other reliable evidence, it failed to carry sufficient conviction to reach the criminal standard of proof.
As we have already said, nothing in the complainant's evidence gave any ground for thinking that the quality of her evidence was higher in respect of the first and third count than it was in respect of the second count. When the credibility factor is combined with the uncorroborated nature of the complaints and the effect of the lengthy and unexplained delay in the making of the complaints, the convictions on the first and third counts can only be regarded as unsafe and unsatisfactory.
Kirby J.
The Court, at the conclusion of the argument in this appeal, announced its orders allowing the appeal and quashing the appellant's convictions [32] . It reserved its reasons. I now state my reasons.
1. The orders were pronounced on 12 August 1997 and are stated in the reasons of the majority.
I disagree with the conclusions reached by the majority that the convictions of the appellant were unsafe or unsatisfactory. As was pointed out in the Court of Criminal Appeal, from which this appeal comes [33] , such differences of opinion are not infrequent. They exist, for example, in the reasoning of the members of this Court in M v The Queen [34] where the Court explained the way in which an appellate court, evaluating for itself the evidence which was before the jury, should perform its functions mindful of the constitutional role of the jury [35] and the advantages which the jury ordinarily enjoys over the appellate court.
1. See R v VRJ (unreported; Court of Criminal Appeal of NSW; 22 November 1996) at 30, per Sully J.
2. (1994) 181 CLR 487, per Mason CJ, Deane, Dawson and Toohey JJ; Brennan, Gaudron and McHugh JJ dissenting.
3. Chidiac v The Queen (1991) 171 CLR 432 at 454; M v The Queen (1994) 181 CLR 487 at 502.
Two points were argued in this appeal. The first related to suggested misdirections, or inadequate directions, given to the jury by the trial judge. The second concerned the argument that the convictions were unsafe or unsatisfactory. It was because the majority concluded that the latter argument was made good that its orders did not direct a retrial. Instead, the Court directed that the appellant be acquitted of the remaining counts. In my view, there was no misdirection or inadequate direction. Nor were the verdicts unsafe or unsatisfactory. The appeal should have been dismissed. The jury's verdicts should have been affirmed.
A gymnastics teacher is accused of sexual offences
In 1991 and 1992, Mr Vincent Jones [36] conducted a gymnastics academy at Wentworth Falls in New South Wales. He did so in conjunction with his wife. Their daughter and son regularly attended the classes. Another pupil who did so, after school mid-week and sometimes on Saturdays, was the complainant whose allegations initiated these proceedings. In February 1991, the complainant was eleven years of age. At the time, she was living with her mother at Blackheath in the vicinity of the appellant's academy. She made no complaint against the appellant until 1995 when, accompanied by her father (who lived separately from her mother) she attended at the Malabar Police Station and made her allegations for the first time to Det Sgt Peter O'Brien.
1. In the courts below the appellant's name was suppressed and he was referred to by his initials "VRJ". In this Court, on 12 August 1997, it was ordered that the anonymity be terminated.
The complainant's relevant allegations referred to three incidents. They gave rise to the three counts of the indictment, each of which charged an offence of sexual intercourse with a child between the age of ten years and sixteen years who was under the authority of the defendant.
The first incident concerned an event which the Crown alleged occurred in February 1991. The complainant's initial testimony at the trial was that, at the completion of a weekday gymnastic class, the appellant had offered to give her a rub down for a condition of tendonitis. This occurred after "everyone else had left". The complainant was told to lie down on mats in the storeroom. The appellant proceeded to massage her legs with baby oil. He then asked her to remove her bikini. After inserting his finger in her vagina, she claimed that she could "sort of see him fumbling around and then he put something in my vagina, and I assumed it was his penis". The complainant described how the appellant "was moving that around for about five minutes and then he started breathing really heavily. And then he stopped and it really hurt" [37] . The appellant then allegedly drove the complainant home. He asked her not to tell anyone about what had happened. When at home she went to the toilet and noticed "white creamy stuff" and spots of blood on her underpants.
1. Evidence of the complaint in the trial. Transcript at 7.
The second incident was described as occurring in the winter of 1991 on a Saturday. The events, as outlined, were similar and occurred "after everyone had left and packed up". Again, the appellant allegedly put his penis into the complainant's vagina. According to her evidence when it hurt, and she complained, he desisted. But he then replaced his penis with what the complainant assumed was his tongue. Again he took her home and again she found blood in her underpants.
The third incident allegedly occurred in June or July 1992 by which time the complainant was twelve years of age. According to the complainant, the appellant picked her up from school and took her to his home. After completing a test on flexibility and strength he told her he would give her a rub down. He asked her to lie on his bed where he massaged her and once again, allegedly, put his penis in her vagina. He then returned her to school. As by this time she had informed him that she was leaving Blackheath for Sydney to live with her father, he allegedly told her that he would have to find a "new favourite". He gave her a kiss on the cheek in the car. When she went to the toilet she again noticed blood and a white substance on her underpants.
The complainant agreed in cross-examination that before leaving her mother's home to live with her father she had given the appellant and his wife a card thanking them for "all you've done". About eighteen months later she sent them a Christmas card which was signed by her with "love". Later still, whilst holidaying, she sent a postcard. In evidence, the complainant claimed that these cards had been sent at the suggestion of her mother.
In his evidence Det O'Brien confirmed that the appellant had cooperated fully with police and, from the outset, had denied the complainant's allegations. An interview was conducted which was recorded on videotape and played before the jury. It was made available to this Court and I have viewed it. The appellant repeatedly denied the accusations of the complainant when they were put to him by police. He asserted that she "used to look up to me like a Dad, like a second Dad I was the only Dad she had in the mountains". Nevertheless, some of his answers were, at least on their face, surprising and less than fully convincing. They included the following:
Q: [T]he police have received information that between 1st of February 1991 to 28th of February 1991, in the storeroom area of the Blue Mountains Grammar School, you sexually assaulted her. What would you like to say about that?
A: Well, I can't remember the dates, but I, I don't recall ever sexually assaulting [the complainant].
Q: I've been informed that you gave her a massage and asked her to remove her bikini pants. What would you like to say about that?
A: Oh, I don't recall.
Q: Right.
A: No I don't recall askin' her ever to do that.
The cross-examination of the complainant elicited changes in her testimony concerning the days on which the first and second incidents had occurred. She was reminded that she had told the police in her statement that the first occasion had been on a Saturday. She then stated that she had confused the dates. The first incident had indeed occurred on a Saturday and the second on a Tuesday or Thursday.
The days of the week when the offences were alleged to have occurred were important to the defence case. The appellant's wife and daughter testified that they were always present for the classes on weekdays. The wife gave evidence that training never took place on Tuesdays and that she always went home with the appellant and their daughter and son in the appellant's car. She stated that, at that time, she did not have a driving licence and relied on the appellant for transport. The daughter confirmed this testimony. The evidence was important because the complainant had stated that the events giving rise to the first and second counts had happened at the academy after everyone had left.
So far as Saturdays were concerned, the appellant called as a witness Ms Lucia Darvall. She was an assistant gymnastics coach who worked with him. She gave evidence that she attended the academy every Saturday session in 1991. She stated that the appellant "would" drive her home. However, she conceded in cross-examination that it was possible that in February 1991, on the occasion of the first incident, she had gone home by train [38] . In re-examination, she stated that she could not recall any occasion in February 1991 when she had left the academy premises before everyone else. Nor did she recall walking to the station or getting onto the train. However, the possibility of a separate and earlier departure remained, conceded by her answer to the cross-examiner.
1. Ms Darvall also appeared to contradict the evidence of the wife of the appellant that she had been present at all evening classes in 1991.
The appellant called the Executive Director of the New South Wales Gymnastic Association to give evidence. She testified that it was common practice for gymnastics coaches to massage their students, including their muscles in the groin area. It was also common for them to use baby oil for this purpose.
The appellant gave evidence on oath denying the accusations. He did not suggest, nor was it incumbent upon him to do so, any reason why the complainant should fabricate such grave allegations against him. He was unshaken in his cross-examination. He made no admissions and was caught out in no inconsistencies. The case presented to the jury depended principally upon whether the complainant was believed or whether the suggested weaknesses in the prosecution case and the affirmative denials of the appellant were sufficient, with proper directions about the onus and burden of proof, to produce not guilty verdicts.
Summing up, convictions and appeal
The trial of the appellant took place in the District Court at Penrith, New South Wales. It was conducted in accordance with the provisions of the Evidence Act 1995 NSW. That Act abolishes the former requirement of the common law for the court to warn the jury generally about the need for corroboration in cases of this kind [39] . No request was made to the trial judge (Judge O'Reilly) to provide a warning, as may still be necessary in the particular circumstances of the case [40] . Nevertheless, in several passages of his summing up, his Honour gave the jury strong directions about the significance of the delay of the complainant and the need to scrutinise the complainant's evidence with great care. He said [41] :
Now [counsel] made mention of — well perhaps I could describe it as late complaint. It is common ground in the trial that there was no complaint made until February 1995, whereas the events charged go back to February '91, winter '91 and then June '92. [Counsel] submits in effect that if these events happened reality dictates that there would have been prompt complaint. You will no doubt give careful thought to that submission. I am required by a section of the Crimes Act to warn you that the absence of complaint or delay in complaining does not necessarily indicate that the allegation that the offence was committed was false, the Crimes Act requires me to tell you that there may be good reason why a victim of sexual assault may hesitate in making or may refrain from making a complaint about the assault.
[I]f the charge related to perhaps a social worker, a lady social worker aged thirty five and the alleged perpetrator was readily identifiable you would expect immediate complaint. Whereas if the victim was perhaps a Grade One primary school girl you might think there may well be no complaint or very, very late complaint because of the bewilderment of the child in not perhaps knowing what way to turn or what had happened or who to tell. As to where on the scale of things the present case slots in is a matter for you to think about using your ordinary commonsense.
Another direction I should give you is this and you might think it is as much a counsel of commonsense as it is of law. That is where, in a serious criminal matter, the Crown case depends entirely on the evidence of one witness that you would need to scrutinise that witness' evidence very, very carefully. Now that is not to say that you would necessarily throw it aside as "C" grade evidence, simply that the principle is that since so much depends on it you would need to look at it very, very carefully.
1. Evidence Act 1995 NSW, s 164.
2. Crofts v The Queen (1996) 186 CLR 427 at 446.
3. Summing up by Judge O'Reilly, R v Jones (District Court of NSW; 26 February 1996) at 4-5 (emphasis added).
At the end of his instructions to the jury, Judge O'Reilly returned to the delay in the making of a complaint. He drew attention to the acknowledgment of the complainant that, at least by June 1992, she knew the nature of the appellant's alleged conduct and that it was wrong. Even then, she had delayed two and a half years before making a complaint. Judge O'Reilly said [42] :
[I]f she did really know as at June 1992, precisely what had taken place to her you would have expected prompt complaint. I have given you direction about complaint.
1. Summing up of Judge O'Reilly at 26.
After the jury retired, they sent a note requesting the transcript of the complainant's evidence. They asked to hear the tape of Ms Darvall's testimony. These requests were clarified and the tape was replayed for the jury. The jury eventually returned with a verdict of guilty upon the first count, not guilty on the second and guilty on the third. The appellant was convicted in accordance with the jury's verdicts. On 11 April 1996 he was sentenced to four years imprisonment with a minimum term of two years imprisonment expiring on 10 April 1998.
The appellant appealed to the New South Wales Court of Criminal Appeal against his convictions. Upon receiving advice of the appeal, Judge O'Reilly wrote a letter to the Registrar of that Court expressing certain criticisms of the failure of trial counsel to call character evidence and to seek leave [43] to cross-examine Ms Darvall when she vacillated over her evidence as to the Saturdays in February 1991 when the appellant had driven her home. His Honour's letter gave rise to a ground of appeal complaining that the trial had miscarried for want of competent legal representation [44] . Trial counsel filed an affidavit explaining his conduct. In particular, he explained that character evidence was not called until the sentencing hearing because it was known to counsel that years before the appellant had been convicted on a charge of indecent exposure. The Court of Criminal Appeal unanimously rejected the ground relating to the adequacy of the appellant's legal representation. That ground was not reagitated before this Court.
1. Evidence Act 1995 NSW, s 38.
2. Applying R v Birks (1990) 19 NSWLR 677.
That left the grounds of misdirection or inadequate direction and that the convictions following the verdicts of guilty were unsafe or unsatisfactory. The Court of Criminal Appeal unanimously rejected the first complaint. The second took Sully J, who gave the principal judgment, into a detailed examination of the evidence and, specifically, into a consideration of whether there was an inconsistency in the verdict of not guilty on the second count but guilty on the first and third counts. In terms of the holding of this Court in M [45] , his Honour ultimately concluded that there was no significant possibility that an innocent man had been convicted, nor that the verdicts were inconsistent, nor "that the jury must have had a reasonable doubt about the acceptability, in the requisite legal sense, of the complainant's version" [46] . Priestley JA agreed that the jury were not "bound to have a reasonable doubt" [47] . Having regard to their "first hand observation of both complainant and appellant in the witness box", his Honour stated that the complainant's evidence "could not be characterised as so weak or flawed as to make it wrong for the jury to accept it" [48] . Mahoney ACJ reached the same view, although not without several expressions of "unease" [49] and "reluctance" [50] .
1. (1994) 181 CLR 487; see also Chidiac v The Queen (1991) 171 CLR 432 and R v McKnoulty (1995) 77 A Crim R 333.
2. R v VRJ (unreported; Court of Criminal Appeal of NSW; 22 November 1996) at 36, per Sully J (emphasis in original).
3. R v VRJ (unreported; Court of Criminal Appeal of NSW; 22 November 1996) at 2, per Priestley JA.
4. R v VRJ (unreported; Court of Criminal Appeal of NSW; 22 November 1996) at 2, per Priestley JA.
5. R v VRJ (unreported; Court of Criminal Appeal of NSW; 22 November 1996) at 1, 2, 8, per Mahoney A-CJ.
6. R v VRJ (unreported; Court of Criminal Appeal of NSW; 22 November 1996) at 9, per Mahoney A-CJ.
Before this Court, the appellant contended that the Court of Criminal Appeal had erred in rejecting the complaints about the adequacy of the directions of the trial judge. He also argued that the Court had adopted an incorrect approach to the complaint that the verdict was unsafe or unsatisfactory. It was submitted that that Court's approach fell short of the vigilance against the risk of miscarriage of justice which the holding of this Court in M's Case requires.
There was no relevant misdirection by the trial judge
None of the matters upon which the appellant claimed that Judge O'Reilly had incorrectly or inadequately instructed the jury were raised for redirection at the trial. Nevertheless, in the Court of Criminal Appeal, the merits of the complaints were fully explored as they were in argument before this Court. I am content to consider them upon the assumption that, if they were made good and a substantial miscarriage of justice were made out, this Court would not withhold relief because of any procedural deficiency [51] .
1. cf Bromley v The Queen (1986) 161 CLR 315 at 325; Carr v The Queen (1988) 165 CLR 314 at 330; Longman v The Queen (1989) 168 CLR 79 at 86; Pollitt v The Queen (1992) 174 CLR 558 at 586, 605.
As ultimately formulated, the complaints of misdirection were three-fold. First, it was submitted that the judge had failed to give a warning concerning the significance of the absence of evidence corroborating or confirming the complainant's testimony [52] . Secondly, it was complained that the judge did not direct the jury that the delay in the making of the complaint should be taken into account in assessing the complainant's credibility and in assessing the evidence available to the defence to respond to, and rebut, the complaint [53] . It was argued that the jury should have been directed that it was likely to be difficult for the defence to obtain unequivocal evidence relating to the circumstances of the incidents years after they were alleged to have taken place. Thirdly, it was submitted that the judge should have warned the jury "above all" to be careful about reading too much into the fact that Ms Darvall had conceded the possibility that, in February 1991, she had not always gone home with the appellant.
1. Relying on Kilby v The Queen (1973) 129 CLR 460; Crofts v The Queen (1996) 186 CLR 427.
2. Relying on Longman v The Queen (1989) 168 CLR 79.
It is important in all cases of this kind to consider the adequacy of judicial directions to a jury in the light of the issues which were contested at the trial, bearing in mind the ex tempore character of most such judicial instruction and the reliance which a judge can ordinarily place in the vigilance of counsel to call to notice errors or inadequacies seen as significant at the time.
The delay in making a complaint was a major feature of the appellant's defence. Directly and indirectly, questioning of the complainant made reference to it. Although she was never expressly asked by either counsel to offer an explanation for the delay, many questions were addressed both to the complainant and to her mother concerning the complainant's maturity and level of sexual knowledge and understanding at specified times relevant to the alleged offences. In the passages which I have quoted, from both the beginning and the end of Judge O'Reilly's instruction to the jury, his Honour laid emphasis upon the delay. However, he left it to the jury, as the law and commonsense required, to evaluate the significance of such delay in the particular circumstances of this case.
The reasons for delay on the part of young complainants in bringing to notice complaints of sexual misconduct are many [54] . Those reasons are well documented. They may include (in the case of younger victims) ignorance about the nature, quality and character of the act performed upon them; a feeling of powerlessness (particularly where, as is usually the case, the offender is a family member or close acquaintance); shame and embarrassment; and fear (often well founded) of discouragement or disbelief on the part of family and of officials [55] . Complainants will sometimes be reluctant to raise these excuses at trial. Their reluctance to provide detailed explanation should not unduly undermine their credibility. Of course in some cases the delay or other circumstances may suggest the unreliability of the complaint. It remains open to the defence to explore the issue in cross-examination although sometimes that will be a risky process. Although the law, police and prosecution procedures and court practice have changed in recent times to ensure that making of proper complaints by young victims of sexual offences is easier for them, they have also changed to discourage pressure for recantation and to promote accurate fact-finding. Nevertheless the prosecution of crimes of this character continues to present major challenges to the criminal justice system. Those challenges include the proper trial of such serious allegations but in a context which still assures the accused of the right to a fair trial which it remains the judge's overriding duty to uphold.
1. M v The Queen (1994) 181 CLR 487 at 515, per Gaudron J; R v Seaboyer (1991) 83 DLR (4th) 193 at 206; but see R v G [1994] 1 Qd R 540. See also Cull, Sexual Abuse Prosecutions — Complainant Delay [1997] New Zealand Law Journal 273 where New Zealand cases are collected and explained; Cashmere, The Prosecution of Child Sexual Assault: A Survey of NSW DPP Solicitors, Australian New Zealand Journal of Criminology, vol 28 (1995) pp 32, 34; Bates, Child sexual abuse and the fact-finding process — some thoughts on recent developments, Canberra Law Review, vol 1 (1994) 181; Brown and Finkelhor, The Impact of Child Sexual Abuse: A Review of the Research (1986) Psychological Bulletin 66; Mullis, Compounding the Abuse? The House of Lords, Childhood Sexual Abuse and Limitation Periods, Medical Law Review, vol 5 (1997) 22, at pp 24-29 (The Psychological Effects of Child Sexual Abuse).
2. Palmer, Child Sexual Abuse Prosecutions and the Presentation of The Child's Story, Monash University Law Review, vol 23 (1997) 171; cf Australian Law Reform Commission, "A matter of priority — Children and the legal process" DRP 3 (1997), pp 37-38.
This is not a case, as Crofts v The Queen [56] was, where the judge misdirected the jury as to the effect of the amended terms of the legislation. Nor is it a case where the judge failed to alert the jury at all to the overall significance of the delay of complaint and the special significance of the delay following the third incident, by which time the complainant acknowledged that she knew that the appellant's alleged conduct was wrong. The circumstances of this case fall far short of those in Longman v The Queen where the delay was of the order of twenty-one to twenty-five years [57] . Nevertheless, the delay was significant and it was obvious. It was also expressly referred to in the judge's charge. Whilst it is always, in my view, preferable for some express reference to be made to the difficulty which delay ordinarily presents to the defence in rebutting such allegations, in the context of this trial, I do not regard the judge's instruction to the jury as inadequate. The appellant called the witnesses who were relevant to his rebuttal of the incidents mentioned in the first and second counts. There were no other persons present at the appellant's home at the time of the incident mentioned in the third count. The judge's warnings of the need for very close scrutiny of the complainant's evidence were suitably repeated and emphatic.
1. Crofts v The Queen (1996) 186 CLR 427 at 433-434.
2. Longman v The Queen (1989) 168 CLR 79 at 83, 91.
So far as the suggested failure of Judge O'Reilly to refer to the need for care in considering the evidence of Ms Darvall, it is unsurprising that no request was made at the trial, on behalf of the appellant, for a re-direction along these lines. Any such re-direction would have drawn attention to the possibility which Ms Darvall's testimony had opened up. This was that, on the particular occasion when the first incident allegedly occurred, she could "possibly" have taken the train home, leaving the appellant and the complainant alone together at the academy. The matter was squarely left for the assessment of the jury. The fact that the jury asked for the evidence of Ms Darvall to be replayed shows that they gave her testimony particularly close attention.
I see no misdirection, or inadequacy of direction, that suggests that the trial miscarried or was conducted otherwise than in accordance with law. I favoured rejection of that ground of appeal.
The verdicts were not unsafe or unsatisfactory
The foregoing conclusion presents for decision the matter upon which I differ from the majority. I do so with hesitation because I recognise that in this case, as in most cases which reach this Court on such a question, the accused has various arguments to contradict the prosecution's case and to suggest a risk of a miscarriage of justice which it is the duty of appellate courts to guard against.
None of the allegations of the complainant against the appellant was corroborated. However, as a matter of law, corroboration was not required [58] . To adopt a position that a case which comes down to "word against word" [59] is necessarily, and without more, unsafe would be to contradict both common experience and the reforms which the legislatures in this country and elsewhere have adopted in recent years. It is of the nature of many crimes, most sexual crimes and virtually all sexual crimes against children that they are committed in a way designed to escape detection and the prying eyes of potential corroborating witnesses. Offenders take pains to cover their tracks and to avoid detection. The absence of corroboration was therefore not unique. It was not fatal to the prosecution's case.
1. Evidence Act 1995 NSW, s 164; cf Evidence Act 1995 Cth, s 164; Crimes Act 1958 Vict, s 51; Evidence Act 1929 SA, s 12a; Evidence Act 1906 WA, s 106D; Criminal Code 1924 Tas, s 136; Evidence Act 1939 NT, s 9C.
2. R v VRJ (unreported; Court of Criminal Appeal of NSW; 22 November 1996) at 8, per Mahoney A-CJ.
Next, the appellant relied upon the confusion on the part of the complainant about the days and circumstances of the first and second incident on which the offences allegedly occurred. However, given the passage of time, the age of the complainant and the circumstances of the trial, this confusion was not altogether surprising. In the end, to a very large extent, the complainant removed it by correcting her evidence, in a way that it was open to the jury to accept. Clearly, they did so by accepting the complainant's testimony relevant to the incident charged in the first count.
Then, it was submitted that the verdicts were inconsistent with the testimony of the appellant's wife and daughter and of Ms Darvall. So far as the wife and daughter are concerned, it seems probable that the jury's verdict on the second count is explained by a conclusion on their part that their evidence left a reasonable doubt about the proof of the offence alleged to have occurred on a weekday after school. However, Ms Darvall's evidence certainly left it open for the jury to conclude, as they did, on the first count. If they accepted that, on the day of the offence referred to in that count, Ms Darvall had left the gymnasium in advance of the appellant, to travel home by train, that would indeed have left him alone with the complainant, as she had testified. It would remove the evidentiary obstacle to convicting the appellant if the jury accepted the evidence of the complainant, as clearly they did in relation to the first incident.
Then it was submitted that it was implausible that the complainant would not have seen the appellant's penis being inserted in her vagina in the first incident when, on her evidence, she was left to "presume" that this was what had occurred. Far from undermining the complainant's testimony, I consider that her evidence on this score to have been wholly believable. Not only did the description of the mats upon which the act of sexual penetration was alleged to have occurred confirm the possibility that the complainant could be positioned as described, making visual identification difficult. It would have been so easy for the complainant to say that she saw the appellant's penis. Yet she did not. The testimony she actually gave had a ring of truth and authenticity which it was open to the jury to accept.
Next, the appellant complained about the delays in the making of the complaint and the difficulties which these presented for his defence. It is true that the delays were relevant, as they virtually always are. However, this issue was squarely placed before the jury and it was clearly a major plank in the defence attack advanced by trial counsel. As I have already pointed out, it was twice adverted to by the trial judge in his instructions to the jury.
Then reference was made to the greeting cards which were sent by the complainant to the appellant and his wife — acts which, it was suggested, were inconsistent with a feeling of a serious wrong — which feeling certainly existed, on the complainant's evidence, by the time the cards were posted. However, it would have been open to the jury to accept the complainant's statement that the cards were sent by her on the suggestion of her mother at a time when she had not brought herself to report the incidents and complain to her parents. Although the mother gave evidence at the trial, she was not questioned about this matter. The significance of the cards was left to the jury to unravel.
Then it was argued that the appellant had emphatically denied the offences, cooperated fully with police, permitted a search of his home and acted in every way consistently with innocence. These matters too were known to the jury.
Counsel took this Court to a passage in M [60] :
In most cases a doubt experienced by an appellate court will be a doubt which a jury ought also to have experienced. It is only where a jury's advantage in seeing and hearing the evidence is capable of resolving a doubt experienced by a court of criminal appeal that the court may conclude that no miscarriage of justice occurred.
1. (1994) 181 CLR 487 at 494.
That passage acknowledges the advantages enjoyed by juries in evaluating testimony and other evidence which goes to the credibility of witnesses. These advantages extend beyond merely experiencing "the atmosphere" of the trial or the "tenor of evidence". The jury have the advantage of seeing the appellant and the complainant give their respective testimony. Some scientific research casts doubt upon the weight which should be given to the trial court's advantage of viewing the demeanour of witnesses in judging the reliability of their testimony [61] . However, the conventional assumption of the trial system in Australia, in both civil [62] and criminal [63] trials, is that the evaluation of truth-telling is ordinarily to be performed by the tribunal of fact. It is that tribunal which sees witnesses and hears the entirety of the trial whereas the appellate court typically reads transcript and is taken by the parties to selected parts of the evidence, commonly read out of sequence, as the extracts seem best suited of supporting their respective arguments [64] . Neither party in this case mounted a frontal attack upon this basal assumption of the trial system so often referred to by this Court. It has frequently been said that juries play a particularly important role in cases involving sexual offences [65] . The appellate court is bound in law to recognise and respect the advantages to the jury in this regard. This Court must continue to affirm the primacy of the position, and the forensic advantages, of the primary triers of fact — in this case the jury.
1. Wellborn, Demeanor, Cornell Law Review, vol 76 (1991) 1075.
2. Abalos v Australian Postal Commission (1990) 171 CLR 167; Devries v Australian National Railways Commission (1993) 177 CLR 472; cf Powell and Wife v Streatham Manor Nursing Home [1935] AC 243 at 255.
3. Whitehorn v The Queen (1983) 152 CLR 657 at 687; Chamberlain v The Queen [No 2] (1984) 153 CLR 521 at 608; Chidiac v The Queen (1991) 171 CLR 432 at 443; M v The Queen (1994) 181 CLR 487 at 502; Cutter v The Queen (1997) 71 ALJR 638 at 648-649; 143 ALR 498 at 511-513.
4. Lend Lease Development Pty Ltd v Zemlicka (1985) 3 NSWLR 207 at 209-211.
5. M v The Queen (1994) 181 CLR 487 at 508, per Brennan J; R v Francois [1994] 2 SCR 827 at 842-843, per McLachlin J.
The Court was taken to four issues which were said to fall outside the "exception" in M relating to the advantages of juries — the uncorroborated nature of the allegations, the evidence from Ms Darvall and the appellant's wife and daughter concerning the opportunity which the appellant had to commit the offences, the delay in making the complaint and the consistent denials of the appellant. However, the strength of each of these points is closely linked to an assessment of the credibility of the witnesses. The evaluation of these issues clearly falls within the deference to be paid to jury verdicts contemplated in M . Furthermore, if there were weaknesses in the case of the Crown, the jury were entitled to evaluate those considerations against their assessment of the strength of the testimony of the complainant, the absence of any apparent motive to lie and the inclusion by her of details which would not ordinarily be included by someone who aimed to fabricate that evidence.
The majority judgment in this case has raised the issue of the correct approach to determining if a jury's verdict is unsafe or unsatisfactory. In my view the approach taken by the Court of Criminal Appeal in this case was not incorrect. The test for determining an unsafe or unsatisfactory verdict, as enunciated by Mason CJ, Deane, Dawson and Toohey JJ in M , is whether the appellate court thinks that it was "open to the jury" to be satisfied beyond reasonable doubt that the accused was guilty [66] . In the separate judgments of Brennan and McHugh JJ in M there was some debate as to whether that test included an inquiry as to whether the jury must have had a reasonable doubt as to the guilt of the accused [67] or whether such an inquiry constituted an entirely separate test [68] . The debate seems to arise from the phrasing of the majority approach. To be properly understood and applied, the question which the appellate court must actually ask is whether it was not open to the jury to convict the accused. Implicit in such an inquiry would seem to be the issue of whether the jury were bound to have a reasonable doubt as to the guilt of the accused.
1. M v The Queen (1994) 181 CLR 487 at 493.
2. M v The Queen (1994) 181 CLR 487 at 501-504, per Brennan J.
3. M v The Queen (1994) 181 CLR 487 at 524-525, per McHugh J.
Whether or not the approaches are in fact interchangeable [69] , I see nothing in the reasons of the members of the Court of Criminal Appeal which indicate error in applying the test in M . Mahoney A-CJ correctly cited the passage in M which expressed the "open to the jury" test [70] , Sully J repeatedly used the phrase "open to the jury" [71] and Priestley JA considered whether the jury were "entitled" to accept the evidence of the complainant [72] . The emphasis of the Court of Criminal Appeal on whether the evidence was too flawed to be accepted, or whether the jury were bound to have had a reasonable doubt was a necessary part of their Honours' evaluation of the safety of the jury's verdict. I see nothing in the reasons given to suggest that the Court felt that it was not open to the jury to convict the accused. Nor can I accept that an increased emphasis on the words "open to the jury" would have led the Court of Criminal Appeal to a different conclusion and thus demonstrates error.
1. See Chidiac v The Queen (1991) 171 CLR 432 at 443, 451, 458, 461-462, cited by the majority in M v The Queen (1994) 181 CLR 487 at 495; see also Whitehorn v The Queen (1983) 152 CLR 657 at 686, 688; Morris v The Queen (1987) 163 CLR 454 at 472-473.
2. R v VRJ (unreported; Court of Criminal Appeal of NSW; 22 November 1996) at 3.
3. R v VRJ (unreported; Court of Criminal Appeal of NSW; 22 November 1996) at 34, 35, 36.
4. R v VRJ (unreported; Court of Criminal Appeal of NSW; 22 November 1996) at 2.
Inconsistency of verdicts
This leaves the final, and principal, argument advanced during the hearing of the appeal. Although no separate ground of appeal was expressed, either before the Court of Criminal Appeal or in this Court, complaining that the verdicts of guilty on the first and third counts should be quashed because they were inconsistent with the verdict of not guilty on the second count, the appellant submitted that the apparent incompatibility of the verdicts was sufficient to raise the possibility that an innocent person had been convicted and that the guilty verdicts were unsafe or unsatisfactory.
It was suggested that the prosecution case against the appellant depended throughout upon the jury's acceptance of the complainant's evidence. If she was rejected on the second count (where her evidence was not materially distinguishable from that given in support of the first and third counts) it would follow that the jury had erred in the distinction which they drew by their verdicts. This would suggest that the verdicts represented a compromise and that the convictions of the appellant were unsafe or unsatisfactory. Using this argument, the appellant persuaded a majority of this Court that the sense of unease and hesitation expressed in the Court of Criminal Appeal by Mahoney A-CJ, and possibly reflected in some of the remarks of Sully J, ought to have been given effect in verdicts of acquittal.
I regret that I cannot accept these arguments. There is a perfectly rational explanation for the differentiation of the jury's verdicts. The jury were repeatedly and correctly instructed by Judge O'Reilly that they must bring in separate verdicts upon each of the counts of the indictment. Each of those counts was differentially explained to them. The possibility of separate verdicts was never contradicted and, logically, could not be so for each count referred to a distinct and separate incident to which evidence of the complainant, the appellant and other witnesses was relevant. Before the jury could convict upon any of the counts, they were instructed that they had to be satisfied beyond reasonable doubt that the prosecution had proved the facts necessary to establish each offence. It would have been perfectly open to the jury to have a reasonable doubt about whether the prosecution had proved the facts necessary for a conviction on the second count. While the indictments were phrased generally, the Crown presented its case on the basis that one incident had occurred on a weeknight and one on a Saturday morning. The incident referred to in count 2 was alleged to have occurred after school, mid-week. Evidence suggested that at the relevant time the appellant's wife and children had invariably driven home with him. That evidence contradicted the evidence of the complainant that the appellant and the complainant were left alone. Either on the basis of the uncertainty and confusion about when this incident occurred or, more likely, on the footing that it had not been proved to the requisite standard, the jury, conforming to their duty, could have rejected that count without necessarily rejecting the complainant's testimony as a whole. For example, they might have considered that the incident probably did occur but, in conformity with the instruction about the standard and burden of proof, they could properly conclude that they should acquit on that count.
Any other hypothesis would require a conclusion that, in all cases of this kind, complainants must be wholly believed or wholly disbelieved. That would put at naught the need for separate verdicts on the separate counts of the indictment and the principle of particularity in the proof of separate offences charged upon such separate counts. That principle necessarily posits the possibility (at least in the way this trial was conducted) that different verdicts may be returned on different counts, as occurred here. It would also overlook the practical way in which juries often approach different charges expressed in different counts of an indictment [73] .
1. cf R v Kirkman (1987) 44 SASR 591 at 593.
Whereas the evidence of the wife and daughter afforded the appellant quite a strong alibi in relation to the incident referred to in the second count, on the first, he had only the equivocal testimony of Ms Darvall. On the third he had no such evidence at all. In those cases, the choice was starkly one for the jury to make. If they believed the complainant, they would convict the appellant. And they did.
I could not, therefore, conclude that the inconsistency was such as to demonstrate a fatal incompatibility between the respective verdicts which the jury returned [74] . Nor could I consider that the other bases advanced for the appellant, taken individually or together, cast such a doubt on the safety of the convictions as to warrant this Court's concluding that the jury must have had a reasonable doubt about the appellant's guilt on counts 1 and 3. There being no relevant misdirection, this Court should have upheld the jury's verdict.
1. MacKenzie v The Queen (1996) 190 CLR 348 at 369-370.
Orders
The Court allowed the appellant's appeal. But in my opinion, for the reasons given, the appeal should have been dismissed. |
high_court_of_australia:/showbyHandle/1/9929 | decision | commonwealth | high_court_of_australia | text/html | null | Pozniak v Smith [1982] HCA 39 | https://eresources.hcourt.gov.au/showbyHandle/1/9929 | 2024-09-13T22:51:10.903291+10:00 | High Court of Australia
Gibbs C.J. Mason, Aickin, Wilson and Brennan JJ.
Pozniak v Smith
[1982] HCA 39
ORDER
Order that the matter be remitted to the Supreme Court of Queensland. Further order that the taxed costs of the applications including reserved costs be paid by the plaintiff to the defendant.
The following written judgments were delivered:—
July 8
Gibbs C.J., Wilson and Brennan JJ.
This is a reference, pursuant to s. 18 of the Judiciary Act 1903 Cth as amended, of an application by the plaintiff to remit a matter now pending in the original jurisdiction of this Court to the Supreme Court of New South Wales. The reference was made by Stephen J. In addition to the application instituted by the plaintiff, there is an application by the defendant for the action to be remitted to the Supreme Court of Queensland. The Court agreed to hear both applications together.
The plaintiff, a resident of New South Wales, claims damages in respect of personal injury suffered by him as a result of the negligent driving of a motor vehicle by the defendant, a resident of Queensland. The accident happened in Queensland. It is a matter within the original jurisdiction of this Court by reason of s. 75(iv) of the Constitution. The defendant has admitted liability, but proposes to claim that the plaintiff was guilty of contributory negligence. This will be a contested issue. The quantum of damage is also in issue.
The applications which are now before the Court seek the exercise of the Court's discretion pursuant to s. 44 of the Judiciary Act. That section provides:
Any matter that is at any time pending in the High Court, whether originally commenced in the High Court or not, may, upon the application of a party or of the High Court's own motion, be remitted by the High Court to any federal court, court of a State or court of a Territory that has jurisdiction with respect to the subject-matter and the parties, and, subject to any directions of the High Court, further proceedings in the matter shall be as directed by the court to which it is remitted.
In Johnstone v. The Commonwealth [1] , this Court held, by a majority, that s. 44 empowers the Court to remit a claim in tort made by a person against the Commonwealth to a court which has jurisdiction in tort and in matters in which the Commonwealth is a defendant, although that court would not have had jurisdiction if proceedings had been instituted there in the first instance. The decision is authority for the proposition that the Court is not limited, in its exercise of the power conferred by the section, to remit to a court that would have jurisdiction independently of the remission; it is sufficient if the remission is to a court "having jurisdiction over the same kind of party and the same kind of subject matter as that over which the High Court has jurisdiction" (per Aickin J. in Johnstone [2] ).
1. (1979) 143 C.L.R. 398.
2. (1979) 143 C.L.R., at p. 408.
In terms, the discretion conferred on the Court by s. 44 is wholly unfettered. It would be unfortunate if the Court were to elevate guiding principles into rigid rules which served to limit what was obviously intended to be a large and general power. A problem arises where there are competing claims to the exercise of the discretion in favour of Supreme Courts in different States. In the case of a claim for damages in tort, the competition will often be between the Supreme Court in the State where the cause of action arose and the Court in another State where the plaintiff resides and where by reason of the likely issues and evidence in the case an application for remission to that Court is based on the balance of convenience. This was the case in Weber v. Aidone [3] . There the Full Court affirmed a decision of Aickin J. where his Honour had held that the balance of convenience was slightly in favour of the remission of the action to the Supreme Court of Victoria, notwithstanding that the accident from which the cause of action arose had occurred in South Australia. The Court acknowledged, however, that the fact the accident occurred in South Australia was an important consideration in the exercise of the discretion.
1. (1981) 55 A.L.J.R. 657.
On the other hand, in two other cases — Guzowski v. Cook [4] and Robinson v. Shirley [5] , decided by Gibbs C.J. and Brennan J. respectively — the matters were remitted to the Supreme Court of the State in which the cause of action arose. In the former case, the plaintiff, being resident in Victoria, sought a remission to the Supreme Court of that State. The application was based on the balance of convenience. While recognizing some inconvenience to medical witnesses if the action were not heard in Victoria, the Chief Justice found it appropriate to remit the matter to the Supreme Court of Queensland. He was led to that conclusion by the consideration that at the time of the collision which gave rise to the cause of action the plaintiff was resident in Queensland and suffered a nervous breakdown, allegedly as a result of the accident, in Queensland, and by the further consideration that if the proceedings had not been instituted in the High Court the "overwhelming likelihood" was that they would have been instituted in Queensland.
1. (1981) 149 C.L.R. 128.
2. (1982) 149 C.L.R. 132.
In Robinson v. Shirley the choice was between the Supreme Courts of Queensland and New South Wales. There were two actions, Mr. and Mrs. Robinson having each suffered personal injury in the same accident in 1974. Mr. Robinson died in 1980, and Mrs. Robinson in her capacity as executrix of the will of Mr. Robinson was named as a party to carry on the action for the benefit of his estate. Brennan J. noted that in such an action the law of Queensland prescribes different measures of damage from those prescribed by the law of New South Wales. He observed that where the action is a claim for damages in tort, there are powerful reasons for adopting the law of the place where the tort is committed, and then said [6] :
If it were not for the existence of an obligation under that law, no cause of action would be enforceable under any other body of law which might be made applicable to the resolution of the matter. The law of the place where the tort was committed is the law which first gives rise to the cause of action, and it is material that the courts of a State or Territory other than the State or Territory in which the tort was committed would not have jurisdiction unless the defendant were served within the State or Territory or unless he entered an unconditional appearance, for the plaintiff could not otherwise make the defendant amenable to that court's jurisdiction: cf. Weber v. Aidone and Guzowski v. Cook
With respect to the plaintiff's claim that Sydney would be a more convenient venue for trial than Brisbane, his Honour said [7] :
I am not persuaded that convenience in the conduct of the trial is a factor which is capable of affecting the exercise of the discretion which must choose between two systems of law which confer rights of different measures upon the plaintiff. But it is not necessary for me to decide that question in the present case, for the balance of convenience does not clearly favour a trial in Sydney.
In the result, the action was remitted to the Supreme Court of Queensland.
1. (1982) 149 C.L.R., at p. 136.
2. (1982) 149 C.L.R., at p. 137.
Mr. Sharpe, counsel for the plaintiff, argues that the balance of convenience is the most important of the factors affecting the exercise of a discretion pursuant to s. 44. On the other hand, Mr. Jackson, counsel for the defendant, argues that ordinarily in this type of case the remittal should be to the Supreme Court of the State in which the cause of action arose. It is plain that the observations of Brennan J. contained in the first of the two passages which we have cited from Robinson v. Shirley stand in the way of the success of Mr. Sharpe's submission. However, he contends that the proposition put by his Honour is in direct conflict with both the majority decision of this Court in Johnstone and its unanimous decision in Weber . We do not think the argument can be sustained. In Johnstone [8] , the Court was concerned with the scope of the power, not with the manner of its exercise. In Weber , as we have already observed, the Court recognized that the fact the accident occurred in South Australia is an important consideration in the exercise of the discretion. Obviously, it was not seen to be the only consideration, nor necessarily a decisive consideration in every case.
1. (1979) 143 C.L.R. 398.
The present case presents a factor for consideration which has not required determination in any of the cases to which we have referred. It is the question to which Brennan J. alluded but found unnecessary to decide in Robinson v. Shirley. Is the balance of convenience a factor which is capable of affecting the exercise of the discretion when the choice is between two systems of law which confer rights of different measures upon the plaintiff? The question would have arisen in Weber [9] had not the plaintiff abandoned the claim to solatium, a claim which was tenable under the law of South Australia but not under the law of Victoria.
1. (1981) 55 A.L.J.R. 657.
The law of Queensland touching the conduct and determination of actions for damages in respect of personal injury arising out of the negligent driving of a motor vehicle differs in significant respects from the law of New South Wales. It was suggested in argument that the power to remit an action to another court carries with it a power to give directions as to the law which is to be applied by the receiving court, and that in the present case if the remitter were to be made in favour of the Supreme Court of New South Wales, that Court could be required to apply the law of Queensland in the disposition of the matter. Such a construction of s. 44 cannot be countenanced. The phrase "subject to any directions of the High Court" controls the statement in the section which immediately follows it, namely, "further proceedings in the matter shall be as directed by the court to which it is remitted". Clearly, in our opinion, the power in this Court to give directions is confined to matters of procedure. The substantive rights of the parties will be determined by the law of the forum.
Mr. Jackson draws the attention of the Court to three matters of difference between the law of Queensland and the law of New South Wales which he claims could be material in the present case. First, s. 5 of the Common Law Practice Act 1867-1981 Q. requires an award of damages in the form of lump sum compensation for future loss, whether referable to earning capacity or future expenditure, to be the present value of that sum calculated in accordance with actuarial tables at a discount rate of 5 per cent or at such other discount rate as at the time of the award may have been fixed by the Governor in Council. The Governor in Council has made no fixation to date. In similar circumstances, an award determined according to the law of New South Wales would require the application of a discount rate of 3 per cent: Todorovic v. Waller [10] . Secondly, regs 10 and 11 of The Motor Vehicles Insurance Regulations of 1968 (Q.) as amended, provide that the insurer of a vehicle in respect of which a proceeding is instituted is entitled to be joined in the proceeding, and thereafter to conduct the proceedings on behalf of the person against whom the claim is made. Thirdly, pursuant to s. 4C of the Motor Vehicles Insurance Act 1936-1979 Q., there may be circumstances in which, if an injured person has persistently and wilfully refused to comply with an order of the court to submit himself to a personal medical examination, the court may enter judgment against the plaintiff on such terms as it deems fit. It is unnecessary to define precisely, in these second and third respects, the nature of the distinctions which are to be drawn with the law of New South Wales nor the extent of the materiality if any which they may import in the present case. The different discount rates which might apply in the assessment of damages according to whether the remitter is to Queensland or to New South Wales is sufficient to identify the problem. It is a distinction which goes directly to the heart of the matter, and renders the decision of this Court on a remitter application a significant factor in the ultimate result of the action. Assuming that the Queensland discount rate remains unchanged, a decision in favour of New South Wales would have the effect of conferring a fortuitous advantage on the plaintiff and a corresponding disadvantage on the defendant, as compared with the rights of the parties if the case were determined in accordance with the law of the State where the cause of action arose. Is there any principle by which such a result could be justified? It may be helpful to consider what criteria, if any, are available to guide or control the exercise of the discretion.
1. (1981) 150 C.L.R. 402.
Section 75(iv) of the Constitution confers original jurisdiction on this Court in all matters between residents of different States. The provision follows a similar clause in the Constitution of the United States of America (Art. III, s. 2) with the substitution of "residents" for "citizens". In Australasian Temperance and General Mutual Life Assurance Society Ltd. v. Howe [11] , Higgins J. said of the clause:
We might think that the jurisdiction given in matters "between residents of different States" is a piece of pedantic imitation of the Constitution of the United States, and absurd in the circumstances of Australia, with its State Courts of high character and impartiality. According to Story and Black (Constitutional Law, 2nd ed., p. 140), the reason for giving to the Federal Courts jurisdiction of controversies between citizens of different States was the apprehension that a citizen sued in Courts of his own State by a non-resident might be able to prevail unjustly in consequence of his local influence, or the prejudice against citizens of other States, or State pride and jealousy.
(See also per Isaacs J. [12] ; Starke J. [13] .) Whether merely imitative or not, its purpose is to provide an impartial forum: Quick & Garran, Annotated Constitution of the Australian Commonwealth, p. 776; and cf. Guaranty Trust Co. v. York [14] . There is no reason to suppose that its purpose was to provide a different body of law for the resolution of such a matter, even though that may have been the result in the event of the action being heard in the High Court in a State other than that in which the cause of action arose (see s. 79, Judiciary Act). It follows that the criteria we seek are not to be found in a consideration of the source of the jurisdiction of this Court. It is also clear that they cannot be discerned from the terms in which the power to remit is conferred by s. 44 of the Judiciary Act. That provision does no more than create the power, without furnishing any guidance as to its exercise.
1. (1922) 31 C.L.R. 290, at p. 330.
2. (1922) 31 C.L.R., at p. 307.
3. (1922) 31 C.L.R., at p. 339.
4. (1945) 326 U.S. 99, at pp. 111-112 [89 Law. Ed. 2079, at pp. 2087-2088].
As we have said, Mr. Sharpe argues that the balance of convenience provides the most important criterion. The proposition may be examined in the context of the present case. It is said that the balance of convenience overwhelmingly favours a remittal to New South Wales. The convenience upon which Mr. Sharpe relies relates primarily to the likely preponderance of the number of witnesses resident in that State, the difficulties associated with moving a number of specialist medical witnesses from one State to another and physical difficulty which by reason of his injuries the plaintiff would have in travelling to Queensland for examination by the defendant's specialists. It may be conceded at once that these features of the case would be a source of inconvenience in the event of a hearing in Queensland, and that the balance does in fact favour a hearing in New South Wales. But inconvenience is always a question of degree. In the present case, it does not spell impracticability. It does not spell injustice. For example, the defendant has offered to have the plaintiff examined in Sydney, and hence he would not have to travel to Brisbane for that purpose. If the difficulties associated with moving a number of medical witnesses to Brisbane became too great, the plaintiff could invoke the procedure of having their evidence taken upon commission. We do not seek to minimise the relevance of the factor of convenience in a case where the applicable law in the competing jurisdictions is substantially similar. It is then of great importance. However, in our opinion, it cannot go beyond that, unless the circumstances are wholly exceptional. The balance of convenience cannot be allowed to lead to injustice. The only safe course, in a case where the relevant law in the competing jurisdictions is materially different in its effect on the rights of the parties, is to remit to the State whose law has given rise to the cause of action. As Brennan J. observed in Robinson v. Shirley, the power "is intended to facilitate the course of litigation rather than to enhance or diminish a plaintiff's rights or correspondingly alter a defendant's obligations" [15] .
1. (1982) 149 C.L.R., at p. 136.
Accordingly, in our opinion, in a case such as the present, the Court has no real choice, notwithstanding the breadth of the discretion, but to remit the matter to the Supreme Court of Queensland. Only in that forum, as the respective laws now stand, will the parties have their dispute determined consistently with justice according to law.
We would order that the matter be remitted to the Supreme Court of Queensland.
Mason J.
The question at issue is: According to what principle should the Court exercise the discretion given to it by s. 44 of the Judiciary Act 1903 Cth, as amended, to remit an action for damages in tort to one of the courts mentioned in the section, when the choice lies between the Supreme Courts of two States and there is a material difference in the laws of the two States which would affect significantly the plaintiff's rights, in this case the assessment of his damages?
I put to one side cases where there is no material difference in the laws of the States. Then the choice of the court to which the matter will be remitted will be dictated by the balance of convenience (Weber v. Aidone [16] ).
1. (1981) 55 A.L.J.R. 657.
The problem of making a choice of the kind to be made here was enlarged, but not created, by the Court's decision in Johnstone v. The Commonwealth [17] , that it is not necessary that the court receiving the remitter could, independently of the remitter, have jurisdiction to hear and determine the matter — it is enough if it has jurisdiction over the same kind of party and the same kind of subject matter. The problem would still have arisen if the Court had taken a more restricted view of the power to remit than that taken in Johnstone. Residence or presence of the defendant in more than one State and the existence of assumed jurisdiction are but two instances of two or more courts having jurisdiction to entertain the one cause of action. But the effect of Johnstone, which acknowledges that the order of remitter operates as a grant of jurisdiction to the court which is the recipient of the remitter, where it otherwise lacks jurisdiction, is to increase the situations in which there is a need to make a choice of the kind now to be made.
1. (1979) 143 C.L.R. 398.
Apart from Gleeson v. Williamson [18] , a decision on a related but different question, to which I shall refer shortly, the problem seems not to have been the subject of any judicial decision. In essence the problem has its origin in the notion of a federal court deciding a case between residents of different States without having available a specific body of rules specifically designed for its disposition of the case. This gap is filled by s. 79 of the Judiciary Act which requires a federal court, including the High Court, to apply the laws of the State, including the rules of private international law, in which it exercises jurisdiction.
1. (1972) 46 A.L.J.R. 677.
Gleeson shows that before the Judiciary Amendment Act 1976 Cth came into operation the Court was confronted with the problem of deciding where it should hear an action when there was a material difference in the laws of the States in which the action might be heard. By virtue of s. 79 the Court's choice of the place of hearing would effectively determine the applicable law. Section 25 of the High Court Procedure Act 1903-1966 Cth conferred power to direct that the trial shall be had or continued at some particular place, "subject to such conditions (if any) as the Court or Justice imposes". This provision had to be read with s. 6 dealing with proceedings in district registries, s. 7 relating to transfer of causes from one registry to another and s. 8 providing for a temporary transfer of a cause from one registry to another.
The difference between that situation and this is that there the Court in deciding where the case would be heard was determining the law which would be applied. Here the Court, under the new s. 44 of the Judiciary Act, by deciding which court shall hear the case is determining the law which will be applicable.
However, there is something to be said for the view that in making an order for remitter the Court should be guided by those criteria which would influence its decision in determining the place of hearing if the Court, instead of remitting, were itself to proceed to hear and determine the case. It is scarcely acceptable that the Court by its order for remitter should identify as the law to be applied a law which differs from the law which this Court would have applied had it proceeded to exercise the jurisdiction invoked by the plaintiff, a jurisdiction vested in it by the Constitution.
Several possible approaches present themselves. In examining them we need to recall the impact of the rules of private international law which form part of the law of each State and which this Court is bound to apply under s. 79 of the Judiciary Act. The accepted rule is that an action in tort will lie in one State for a wrong committed in another if (1) the wrong is of such a character that it would have been actionable in the State in which the action is brought; and (2) it is not justifiable by the law of the State where it was done (Koop v. Bebb [19] ; Anderson v. Eric Anderson Radio & T.V. Pty. Ltd. [20] ; Boys v. Chaplin [21] ). Whether this rule is merely a preliminary or "threshold" rule or whether it also operates as a choice of law rule has been a matter of vigorous debate. See the discussion in Nygh, Conflict of Laws in Australia, 3rd ed. (1976), pp. 258 et seq. However, as the author indicates, the balance of Australian authority favours the preliminary or threshold view. It also holds that it is the lex fori that determines questions of substance — Koop; Anderson [22] , per Windeyer J.; Kolsky v. Mayne Nickless Ltd. [23] . In the first of these cases this Court specifically rejected the suggestion that the lex loci delicti should be applied as the substantive law [24] . In the United States of America the lex loci delicti is applied as the substantive law in some jurisdictions, although in more recent times there has been growing support for the view that there should be applied as the substantive law the law of the State which has the most significant relationship with the occurrence and the parties, what is often called "the proper law of the tort" (see Babcock v. Jackson [25] ), an approach which Lord Hodson and Lord Wilberforce favoured in Boys [26] . In Koop this Court favoured the application of the lex fori to matters of substance. This has the advantage of making the lex fori apply to issues of substance as well as procedure.
1. (1951) 84 C.L.R. 629, at p. 642.
2. (1965) 114 C.L.R. 20.
3. [1971] A.C. 356.
4. (1965) 114 C.L.R., at pp. 41-42.
5. (1970) 72 S.R. (N.S.W.) 437, at p. 444.
6. (1951) 84 C.L.R., at p. 644.
7. (1963) 12 N.Y. (2d) 473 [240 N.Y.S. (2d) 743].
8. [1971] A.C., at pp. 379-380, 390-392.
For present purposes it is sufficient to say that the selection of the court of one State as the recipient of remitter in preference to the court of another State will be important when there is a material difference in the law to be applied. The significance of this difference is not erased by the rules of private international law because questions of procedure are always to be determined by the lex fori and, according to Koop , so are questions of substance in actions in tort. Quantification and assessment of damages, the principal bone of contention here, are always matters of procedure to be determined by the lex fori (Boys [27] , per Lord Wilberforce).
1. [1971] A.C., at p. 393.
The first possible approach to remitter is that the balance of convenience is the guiding factor. Although traditionally it has been the factor that determines venue, except for Gleeson this has been in a context where no problem of choice of law arises. In Gleeson [28] Barwick C.J. dealt with an application to transfer a cause from the then principal registry in Victoria to the registry in New South Wales and for an order that the venue be Sydney. The plaintiff, a resident of New South Wales, had commenced in the registry of that State his action for damages for personal injury arising out of a motor vehicle accident in Queensland. The defendant, a resident of Queensland, entered an appearance in the principal registry, which, subject to the power of transfer, had the effect of causing the proceedings to proceed in that registry. The defendant's object was to plead that the action was barred by s. 5(6) of the Limitation of Actions Act 1958 Vict., a defence which would not have been available had the action remained in the registry in which it had been commenced and been heard in Sydney. His Honour seems to have thought that the plaintiff had a right to commence his action in the registry of his choice, so long as in so doing he was not "forum shopping", and that the exercise of this right should not be displaced by the filing of an appearance in the principal registry if the cause had no connexion with that registry except a desire to attract the Victorian limitation provision. His Honour then decided on the New South Wales registry and trial in Sydney in preference to Queensland on the balance of convenience.
1. (1972) 46 A.L.J.R. 677.
In deciding between New South Wales and Victoria, whose laws were materially different, his Honour seems to have been influenced, not so much by the balance of convenience, as by the plaintiff's right to choose the place in which he brings his action. However, a balance of convenience dictated the choice between New South Wales and Queensland where once again the laws seem to have been materially different. The decision is perhaps partly to be explained by the specific provisions of the High Court Procedure Act and the importance which attached to the commencement of proceedings in a particular registry.
For my part, however, I would resist the notion that in determining which court shall hear the case when there is a material difference in the laws of the States we should give effect to the so-called right of the plaintiff to select the place of hearing, subject only to the balance of convenience. It is inconsistent with a just result that the plaintiff should be able to select the forum which applies the law most favourable to his cause, so long as he is not "forum shopping".
Although the unfairness of this approach is reduced by making it subject to the balance of convenience, that concept suffers from the shortcoming that it is not designed to operate as a selector of the applicable law and it has no direct relevance to the choice of law. Its one virtue is that it is an objective and independent criterion, leading to a result which in many cases may be reasonable, but in some cases it may lead to a hearing by the court of the State where the medical witnesses reside and that will probably coincide with the State in which the plaintiff resides. Yet the law of that State may have little or no connexion with the cause of action. There is even the possibility that issues will be raised and witnesses called in order to establish a balance of convenience favouring remission to a court of a particular State.
The second approach, that favoured by Brennan J. in Robinson v. Shirley [29] , is to select the lex loci delicti. Rejecting convenience as a criterion, his Honour said [30] :
In making the choice, the rules of private international law provide no binding guidance, for the choice of law follows inexorably from the place where the jurisdiction is exercised. A similar problem arises when this Court exercises a discretion to remit an action for trial by a Supreme Court of a State or Territory: the choice of the court to which the action is remitted determines the body of law which is to be applied to it. Where the action is a claim for damages in tort, there are powerful reasons for adopting the law of the place where the tort is committed. If it were not for the existence of an obligation under that law, no cause of action would be enforceable under any other body of law which might be made applicable to the resolution of the matter. The law of the place where the tort was committed is the law which first gives rise to the cause of action, and it is material that the courts of a State or Territory other than the State or Territory in which the tort was committed would not have jurisdiction unless the defendant were served within the State or Territory or unless he entered an unconditional appearance, for the plaintiff could not otherwise make the defendant amenable to that court's jurisdiction .
1. (1982) 149 C.L.R. 132.
2. (1982) 149 C.L.R., at p. 136.
The attraction of this approach is obvious. It provides a clear and objective test which identifies that law which makes unlawful the act or omission complained of at the time when it occurs. Therefore it is, generally speaking, the law most closely connected with the circumstances giving rise to the cause of action. It immediately concedes to the plaintiff a cause of action against the wrongdoer, assuming of course that he survives.
In saying this I do not indorse the theory that the act complained of gives rise to an obligation by the lex loci delicti and that this obligation follows the actor with a result that it may be enforced against him wherever he is found. This theory, which seems to have originated with Willes J. in Phillips v. Eyre [31] , was elaborated by Holmes J. in Slater v. Mexican National Railroad Co. [32] and Western Union Telegraph Co. v. Brown [33] and by McReynolds J. in New York Central Railroad Co. v. Chisholm [34] , and adopted by Cardozo J. in Loucks v. Standard Oil Co. of New York [35] , though rejected by Judge Learned Hand in Guinness v. Miller [36] . The theory was discarded by Dixon, Williams, Fullagar and Kitto JJ. in Koop . They said [37] "courts applying the English rules of private international law do not accept the theory" and went on to say [38] :
English law as the lex fori enforces an obligation of its own creation in respect of an act done in another country which would be a tort if done in England, but refrains from doing so unless the act has a particular character according to the lex loci actus.
1. (1870) L.R. 6 Q.B. 1, at p. 28.
2. (1904) 194 U.S. 120, at p. 126 [48 Law. Ed. 900, at pp. 902-903].
3. (1914) 234 U.S. 542, at p. 547 [58 Law. Ed. 1457, at p. 1459].
4. (1925) 268 U.S. 29, at p. 32 [69 Law. Ed. 828, at p. 832].
5. (1918) 120 N.E. 198, at p. 201.
6. (1923) 291 F. 769, at p. 770.
7. (1951) 84 C.L.R., at p. 643.
8. (1951) 84 C.L.R., at p. 644.
See also Anderson [39] , per Windeyer J.; Boys [40] , per Lord Hodson; and the discussion of English, Australian and Canadian authority by Lord Wilberforce in Boys [41] . His Lordship, speaking of the theory, said [42] "It can hardly be restored now by anything less than a revolution in thought."
1. (1965) 114 C.L.R., at pp. 41-42.
2. [1971] A.C., at pp. 375-376.
3. [1971] A.C., at pp. 385-387.
4. [1971] A.C., at p. 386.
Some of the criticism that has been directed to the lex loci delicti as the applicable law governing the substance of an action in tort arising out of an act or omission in a foreign country has no relevance to the question now under consideration. The problems, often stressed, of proving what the foreign law is and how it applies to the matter in hand, have no counterpart when we come to apply the law of one State of Australia in the courts of another State. Certainly they can have no operation when the remitter is to the court of the locus delicti.
Yet the question whether the lex loci delicti remains the most appropriate law to be applied in all cases is very much open to debate. What of the case where a passenger in a car is injured by the negligence of a driver in State A and both, being relatives, are resident in State B? Or of the case where X assaults Y when both are on holiday in State A, each being residents of State B? And there are cases in which an alleged wrongful act is connected with many jurisdictions, e.g., "where a negligent act takes place in one country and harm is suffered in another, or a person is defamed through media such as radio or television" (Dicey and Morris on The Conflict of Laws, 10th ed. (1980), p. 933; Gorton v. Australian Broadcasting Commission [43] ).
1. (1973) 22 F.L.R. 181.
In Boys [44] Lord Wilberforce, after noting that most foreign torts relate to personal injuries sustained by persons travelling away from their place of residence, the place where the wrong occurs being fortuitous, stated:
To fix the liability of two or more persons according to a locality with which they may have no more connection than a temporary, accidental and perhaps unintended presence, may lead to an unjust result.
1. [1971] A.C., at p. 388.
The third approach, suggested by these comments, is that the Court should remit to a court in a State whose law has the most significant relationship with the occurrence and the parties, sometimes called the proper law of the tort. In most, though not in all, cases this would result in remitter to a court of the State in which the alleged tort was committed.
The fourth approach is to remit to the court which would ordinarily have exercised jurisdiction in the instant case but for the circumstance that the plaintiff commenced his action in the High Court. One complication here is that courts have assumed, as well as inherent, jurisdiction. In other circumstances one would naturally look to the court which has inherent, rather than assumed, jurisdiction. But, as Brennan J. pointed out in Robinson [45] , the jurisdiction of a federal court is Australia wide and that is the jurisdiction which the plaintiff has invoked here, with the result that in the exercise of its jurisdiction this Court has a discretion to decide where the action should be heard, thus determining the applicable law. If the courts were to adopt a criterion favouring the court which possesses inherent jurisdiction as the recipient of a remitter, the applicable law in the receiving court might well differ from the law which would have applied in this Court, because in fixing the place of hearing this Court, if it declined to remit, would not have exclusive or paramount regard to the State of residence of the defendant. Indeed, underlying the wide scope accorded to the power to remit in Johnstone was a recognition of the desirability of minimizing the effect of the strict jurisdictional limits of State and federal courts, limits which might materially constrain the choice of this Court in selecting a recipient. By adopting a broad construction, the Court ensured that a hearing and determination after remitter would, as nearly as possible, approximate a hearing in this Court. It would not be consistent with that approach to now adopt a criterion which would restrict the exercise of the discretion to a court having inherent jurisdiction. This would be to undo the good work already done in Johnstone.
1. (1982) 149 C.L.R., at p. 136.
All that I have said induces me to conclude that it would be a mistake to say that in every case of the class now under consideration we should apply an inflexible approach. We should preserve the width of the discretion, the object of which is to do justice between the parties. That will be done if, generally speaking, we select in personal injury cases, if not in all tort cases, the courts of the State where the injury occurred, so that the law of that State, the lex loci deliciti, will determine the rights and liabilities of the parties, unless, with respect to the particular issue, some other State has a more significant relationship with the occurrence and the parties, in which event the case will be remitted to that State and its law will be applied.
The pursuit of this approach in the present case inevitably leads to a remission to the Supreme Court of Queensland. Queensland was the State of occurrence of the act complained of. Apart from the fact that the plaintiff resides in New South Wales and that he was a temporary visitor in Queensland, a fact at least counterbalanced by the circumstance that the defendant is and has been a resident of Queensland, no other State has any relationship with the occurrence and the parties. Remission to the Supreme Court of Queensland will result in the trial of the action according to the law of Queensland which includes s. 5 of the Common Law Practice Act 1867-1981 Q. requiring the assessment of lump sum damages for future loss at a discount rate of 5 per cent, in lieu of the 3 per cent discount rate which prevails in New South Wales as a result of this Court's decision in Todorovic v. Waller [46] .
1. (1981) 150 C.L.R. 402.
In conclusion I should express my rejection of the submission that the Court could, if it remitted to the Supreme Court of New South Wales, direct that court to apply the law of Queensland. The clause "subject to any directions of the High Court", which appears in s. 44 and is the foundation for the submission, governs "further proceedings in the matter" in the receiving court which, subject to this Court's directions, "shall be as directed" by that Court. It is apparent that the clause empowers this Court to give direction as to pre-trial and trial procedures. It does not arm this Court with a power to instruct the Supreme Court of one State that it shall ignore the law of that State and apply instead the law of another State.
The submission reflects an idea which has been thought by some to be embodied in s. 25 of the High Court Procedure Act 1903-1973 Cth, that Act having been repealed in 1979. Section 25 enabled the Court to fix or change the venue "subject to such conditions as the Court or Justice imposes". In the context of a hearing by this Court, it has been suggested that the Court would change the venue from State A to State B on a consideration of the balance of convenience, subject to the condition that the trial shall be governed by the law of State A — see Pryles and Hanks, Federal Conflict of Laws (1974), p. 183. In Parker v. The Commonwealth [47] , Windeyer J., though the trial of the action took place in Melbourne, delivered judgment in Sydney on the footing that the law of Victoria applied "to avoid keeping the parties waiting until the Court next sits in Melbourne" and "on the view, which both parties urge, that jurisdiction in the case is to be taken as having been exercised in Victoria" [48] .
1. (1965) 112 C.L.R. 295.
2. (1965) 112 C.L.R., at p. 306.
Even assuming, without deciding, that s. 25 enabled a condition of the kind to be imposed, s. 44 stands in a very different situation. It is one thing for this Court to say that it will apply the law of a particular State, a law which it is bound to apply in certain circumstances, when it exercises jurisdiction. It is quite another thing for this Court to say to the court of the State that in the exercise of its jurisdiction it must not apply a law of that State. To do so would be to order the State court to disobey the clear command contained in s. 79. And, as we have seen, the construction of s. 44 points away from the existence of such a power.
In the result I would remit the action to the Supreme Court of Queensland.
[The Honourable Mr. Justice Aickin died before judgment was delivered in this case.] |
high_court_of_australia:/showbyHandle/1/11709 | decision | commonwealth | high_court_of_australia | text/html | null | King v The Queen [1986] HCA 59 | https://eresources.hcourt.gov.au/showbyHandle/1/11709 | 2024-09-13T22:51:17.856827+10:00 | High Court of Australia
Gibbs CJ Mason, Murphy, Wilson, Brennan, Deane and Dawson JJ.
King v The Queen
[1986] HCA 59
ORDER
Application for special leave to appeal refused.
Cur. adv vult.
The following written judgments were delivered:—
Oct. 21
Gibbs C.J.
I would refuse this application for special leave to appeal for the reasons prepared by Dawson J., which I have had the advantage of reading and to which I could not usefully add.
Mason J.
For the reasons given by Deane J. I would grant special leave to appeal and allow the appeal.
Murphy J.
I agree with Deane J.
I wish to make some general observations.
Particulars in a Criminal Trial.
It is the right of every accused person to know, with particularity, the case which the prosecution wishes to prove at trial. As a direct consequence of this right, a prosecutor "clearly should be required to identify the transaction on which he relies and he should be so required as soon as it appears that his complaint, in spite of its apparent particularity, is equally capable of referring to a number of occurrences each of which constitutes the offence the legal nature of which is described in the complaint. For a defendant is entitled to be apprised not only of the legal nature of the offence with which he is charged but also of the particular act, matter or thing alleged as the foundation of the charge": Johnson v Miller [1] per Dixon J.
1. (1937) 59 C.L.R. 467, at p. 489.
In Giorgianni v The Queen [2] , the framing of indictments in the way adopted in this case was said to be "an undesirable practice because it does not make clear the real nature of the case against the accused" and further that "it was plainly preferable, in order to avoid the possible confusion of the jury, to have added sufficient particulars to indicate how it was that the appellant was charged with the offences alleged against him".
1. (1985) 156 C.L.R. 473, at p. 497.
The importance of particulars, not only to the accused, was recently highlighted by the Privy Council in Tsang Ping-nam v The Queen [3] where the charge could have been proved in a number of ways by the prosecution. At trial, it became clear that the prosecution could only prove the charge in the alternative: either the accused committed perjury or he lied to investigating officers. The Judicial Committee held this form of proof unacceptable and in the process commented that "had particulars been sought and ordered, the Crown's dilemma must at once have emerged" [4] .
1. [1981] 1 W.L.R. 1462.
2. ( [1981] 1 W.L.R., at p. 1465.
Duty of Prosecutor.
The duty of a prosecutor is to present the case against the accused fairly and honestly; not to use any tactical manoeuvre legally available in order to secure a conviction. In this regard, I adopt the words of Maxwell J. in R. v Bathgate [5] :
It cannot be too strongly impressed that the obligations of the Crown Prosecutor arise not merely by reference to the attitude adopted by the defence. "Counsel for the prosecution are to regard themselves as ministers of justice, and not to struggle for a conviction, as in a case at Nisi Prius — nor to be betrayed by feelings of professional rivalry — to regard the question at issue as one of professional superiority, and a contest for skill and pre-eminence": Reg. v Puddick [6] . "But it must be remembered that the whole policy of English criminal law has been to see that as against the prisoner every rule in his favour is observed and that no rule is broken so as to prejudice the chance of the jury fairly trying the true issues. The sanction for the observance of the rules of evidence in criminal cases is that, if they are broken in any case, the conviction may be quashed": Maxwell v Director of Public Prosecutions [7] ; and Sugarman's Case [8] .
1. (1946) 46 S.R. (N.S.W.) 281, at pp. 284-285.
2. (1865) 4 F. & F. 497, at p. 499 [176 E.R. 662, at p. 663].
3. [1935] A.C. 309, at p. 323.
4. (1935) 25 Cr. App. R. 109, at p. 115.
When Should a New Trial be Ordered?
Under s. 8(1) of the Criminal Appeal Act 1912 NSW, a new trial should only be ordered where it would more adequately remedy the miscarriage of justice than any other order the court is empowered to make.
A new trial is not the inevitable result of a successful appeal against conviction. The onus rests squarely with the prosecution to show the court that a new trial is the most appropriate remedy. In Cheatley v The Queen [9] , the correct approach is clearly spelled out by Everett J.:
My conclusion is that there is no presumption in favour of a second trial being ordered when an appeal succeeds, and that the discretion of the court must be exercised on a consideration of all the relevant facts and circumstances. The accused should be accorded neither more nor less personal consideration than the overall justice of the case requires in recognition of the public interest in the fair and impartial administration of criminal justice. I do not accept the counter argument on behalf of the prosecution that "the ordinary course should apply". I do not consider, for reasons I have expressed, that there should be any "ordinary" course. Each case is individual and should be determined on the basis of the facts and all relevant considerations which apply to it — not to a different case. It is a negation of the wide discretion vested by statute in the Tasmanian Court of Criminal Appeal to suppose that a common mould exists and that all cases should be judged within its framework.
(Section 404(1) of the Criminal Code Tas is in substantially similar terms to s. 8(1) of the Criminal Appeal Act NSW.)
1. [1981] Tas. S.R. 123, at pp. 137-138.
Where there was insufficient evidence at the original trial to warrant a conviction or if the evidence that will be available at any new trial is insufficient then it would be contrary to the interests of justice to order a new trial. The appellant is entitled to an acquittal as of right: Reid v The Queen [10] ; R v Wilkes [11] ; Andrews v The Queen [12] ; Gerakiteys v The Queen [13] ; Director of Public Prosecutions (Nauru) v Fowler [14] ; Cheatley [15] .
1. [1980] A.C. 343, at pp. 349-350.
2. (1948) 77 C.L.R. 511, at p. 518.
3. (1968) 126 C.L.R. 198, at p. 211.
4. (1984) 153 C.L.R. 317, at p. 321, 322, 331.
5. (1984) 154 C.L.R. 627, at p. 630.
6. [1981] Tas. S.R., at p. 138.
Apart from such a case, the appeal court must weigh the competing considerations in deciding whether or not a new trial should be ordered. The following cases set out some of the considerations which should be applied: Reid [16] ; Cheatley [17] ; Fowler [18] ; Ward [19] ; Ridgeway [20] .
1. [1980] A.C. at p. 350.
2. [1981] Tas. S.R., at pp. 128, 130, 134-138.
3. (1984) 154 C.L.R., at pp. 630-631.
4. (1981) 3 A. Crim. R. 171, at pp. 179, 195-196.
5. (1983) 9 A. Crim. R. 43, at pp. 52-53.
Special leave should be granted, the appeal allowed, the order for a new trial set aside, and a judgment of acquittal entered.
Wilson J.
I agree with Dawson J. Special leave to appeal should be refused.
Brennan J.
I agree with Dawson J. I would refuse special leave to appeal.
Deane J.
The background facts and issues raised by this application for special leave to appeal are set out in the judgment of Dawson J. While I am conscious of the force of the considerations which have led Dawson J. to conclude that the Court of Criminal Appeal was not in error in ordering a new trial, I have ultimately come to the contrary conclusion. Since the views expressed by Dawson J. represent the views of a majority of the Court, I shall confine myself to a brief statement of why it seems to me that the appropriate order to remedy the miscarriage of justice which occurred on the trial of the applicant was an order directing that a verdict of acquittal be entered.
The charge upon which the applicant stood indicted and on which he was tried was an unqualified charge of murder. Under that charge, it was open to the Crown to prove guilt in a variety of capacities. In fact, by its conduct of the trial, the Crown made it clear that it sought to prove that the applicant was guilty of murder only on the basis that he was an accessory before the fact to the killing of his (the applicant's) wife by his co-accused, Matthews. It was on that basis that both the prosecution and defence cases at the trial were presented and conducted during the course of evidence. It was on that basis that both the Crown Prosecutor and the counsel who appeared for the applicant at the trial addressed the jury. It was on that basis that the learned trial judge approached his summing up.
When the Crown Prosecutor requested the learned trial judge, after an overnight adjournment of the summing up, to put a quite different case to the jury, involving the allegation that, even if Matthews was not the killer, the applicant was nonetheless guilty as an accessory to the killing by some unidentified person, his Honour should have refused so to do. If, in the event of such a refusal by the trial judge, the Crown had then sought a discharge of the jury so that the Crown could try again, his Honour should, in the absence of consent, have refused the application on the ground that it was made much too late. Likewise, if the Crown had then sought an amendment of the indictment so that in the event of an acquittal, the Crown could charge the applicant with the murder of his wife in some other capacity (such as accessory before the fact to murder by a person other than Matthews), his Honour should, in the absence of consent, have refused that application on the same ground. Because the Crown had adopted the undesirable approach of framing its indictment in the broadest terms it had subjected the applicant to the wide jeopardy of a trial on that indictment. But once the Crown elected at the trial to confine its case against the applicant with the result that the trial was conducted on that basis, it could not legitimately expect that it could, after evidence and addresses had been completed, seek, through the trial judge's summing up, to obtain a conviction on some other basis if it became apprehensive that the case which it had presented might be rejected by the jury.
In these circumstances, it becomes necessary to ascertain the implications, from the point of view of the case against the applicant, of the jury's finding of not guilty in the case of Matthews. It was common ground at the trial that the applicant's wife had been murdered. On the question whether Matthews was the person who had killed her, there was, as Dawson J. points out, only one significant difference between the evidence admissible against Matthews and the evidence admissible against the applicant. That was the alleged confessional statement of Matthews himself which was admissible only against him. In that context, whatever may be the theoretical possibilities, it is inconceivable that the jury, acting reasonably, concluded that the evidence admissible against the applicant established that Matthews was the killer when it found that the evidence admissible against Matthews himself was inadequate for that purpose. Indeed, to resolve the present application on the basis of the theoretical possibility that the difference between the jury's verdicts is to be so explained would be to disregard common sense and practical reality. In the context of the evidence about the applicant's efforts to procure, through the agency of another, someone to kill his wife, the verdict of not guilty in the case of Matthews and guilty in the case of the applicant plainly indicates that the jury convicted the applicant on the basis of the case which the learned trial judge left to them but which the Crown had not sought to make against him and which he had no proper opportunity of meeting.
To order a new trial in these circumstances would be to give the Crown a second chance to secure a conviction of the applicant for the murder of his wife, after its election to present its case in a particular way at the trial should have led to an acquittal. The Crown could not have challenged such an acquittal by seeking to retry the applicant and present its case in a different way. It should not be permitted now to achieve a similar result when the first trial would have resulted in an acquittal, had it not been for the Crown's wrongful conduct in persuading the trial judge to leave a different case to the jury. Put differently, the jury's verdict of guilty against the applicant on the basis of a Crown case which was not raised against him until the evidence had been completed, addresses had been made and the summing up was in progress was a miscarriage of justice. That miscarriage of justice occurred because the learned trial judge wrongly acceded to the Crown's request to leave to the jury a case that had never been made against the applicant and that he had had no proper opportunity of answering. But for it, the applicant would have been finally acquitted of the charge of murder. It would be to compound that miscarriage of justice to treat the verdict of guilty which was wrongfully obtained as the basis for subjecting the applicant to a new trial on that charge.
I would grant special leave to appeal and allow the appeal.
Dawson J.
The applicant, Leslie Maurice King, was charged on indictment, together with a man named Matthews, with the murder of his wife. The indictment also contained two counts of conspiracy to murder which were severed by the trial judge. The trial proceeded upon the count of murder alone.
The main witness for the Crown was a man named Siemsen, who had been given an indemnity against prosecution in relation to the murder, save as a principal in the first degree. Siemsen gave evidence that he was asked by King whether he, Siemsen, knew anyone who would be willing to kill King's wife. Siemsen, according to his evidence, subsequently engaged his brother upon the basis that he would be paid a total sum of $15,000 with a deposit of $5,000. The balance was to be paid from the proceeds of an insurance policy upon the wife's life. Subsequently, according to Siemsen, his brother attempted to inject King's wife with potassium cyanide by means of a syringe, but the needle bent and the attempt was unsuccessful. Shortly afterwards the brother died and Siemsen said that he told King that he, Siemsen, would finish the job. He gave evidence that he went to the wife's house armed with a sawn-off 22 rifle and broke in, but was unable to bring himself to kill her. He said that afterwards King spoke to him again and that he told King that Matthews might do it.
Siemsen's evidence was that King helped him to trace Matthews and that he, Siemsen, asked Matthews "if he knew anyone that would be willing to do a job on someone and he said he would check around for me". Subsequently, Siemsen contacted Matthews and Matthews said that he had found someone but that it would cost "[a]bout 15 thou., and they want at least a third up front". Siemsen said that he told King that someone had been found and that he needed a further deposit of $5,000. Again, the balance was to be paid from the proceeds of the insurance policy upon the wife's life. According to Siemsen, King handed the further deposit to him at a hospital in which King was a patient at the time. Previously Siemsen had been to the St. George Building Society to withdraw some money on King's behalf. He subsequently handed to Matthews the money which King had given him.
Siemsen said that he provided Matthews with a sawn-off rifle fitted with a silencer and that before he took it away Siemsen and Matthews tested the weapon by firing it a number of times into the ground. Matthews also requested Siemsen to obtain duplicate keys to the wife's car and Siemsen said that he obtained a set from King and handed them to Matthews. Over a period of some months Matthews kept in contact with Siemsen by telephone, mostly reversing the charges. Then, according to Siemsen, Matthews rang him at 3 a.m. one morning and said "I done it. Three low, one high." Matthews then asked for the balance of the money which, however, was not subsequently paid by Siemsen.
It was not in doubt that Mrs. King had been murdered by someone. She had been shot four times by bullets from a 22 calibre rifle while she was at her home during the night. At the trial the Crown case was presented upon the basis that it was Matthews who actually killed the deceased. It was not suggested, either in the course of the trial or in the Crown Prosecutor's address to the jury, that it was Siemsen himself or any other person who did so. Having regard to the form of indemnity given to Siemsen it was hardly to be expected that the Crown would contend that he was a principal in the first degree. On the first day of his summing up the trial judge directed the jury, in effect, that it was not open to them to bring in different verdicts in relation to King and Matthews: either they were both guilty or they were both not guilty upon the charge of murder. Notwithstanding the way in which the Crown case had been presented, the Crown Prosecutor objected to this direction and submitted that it was open to the jury to be satisfied beyond reasonable doubt that there was an agreement between Siemsen and King to find someone to kill King's wife and that Siemsen did find someone who carried out the killing, but that they might fail to be satisfied that it was Matthews. The trial judge accepted the Prosecutor's submission and on the second day of his summing up, amended the direction he had given the jury. He did so in the following terms:
You remember yesterday I said to you that the Crown case was such that in the case against King, if you were not satisfied that it was Matthews who did the killing and you thought it was somebody else or it was a reasonable possibility that it was somebody else, then King has to be acquitted. I withdraw that. As a matter of law the position is this, that if you are satisfied, first, that King was a party to an agreement that his wife should be killed by some other person and, secondly, that that agreement did result in fact in the murder of the deceased, whether at the hands of Matthews, Siemsen or indeed any other person, then King is liable to be convicted. I do not want to say anything more about it.
The jury brought in a verdict of guilty against King but acquitted Matthews. King appealed to the New South Wales Court of Criminal Appeal, which allowed his appeal upon the basis that the trial had miscarried when, at the instance of the Crown, the trial judge had introduced for the first time in his summing up the possibility that some person other than Matthews had killed the deceased. The element of surprise involved in this course was held to have resulted in possible prejudice to King's case, his counsel having cross-examined Siemsen and addressed the jury in reliance upon the presentation of a case by the Crown that the person who killed the deceased was Matthews. Had King's counsel known that alternatively Siemsen or some other person unknown to the Crown was alleged to be the actual murderer, he may well have cross-examined or addressed in a different way.
No exception was taken before us to the finding of an irregularity or the quashing of the conviction. Indeed, it may be said that the direction given by the trial judge at the behest of the Crown involved such a change in the course of the trial at such a late stage that inevitably the conviction could not be allowed to stand: see Reg. v Laird [21] ; R. v Thompson and Gamble [22] ; McManamy v Fleming [23] ; Gregory [24] ; Falconer-Atlee [25] ; Cross and Channon [26] . The submission made to us on behalf of the applicant was that the Court of Criminal Appeal erred in ordering that King be retried and that it should, instead, have directed that a verdict of acquittal be entered.
1. (1893) 14 N.S.W.R. 354.
2. (1925) 42 W.N. (N.S.W.) 71.
3. (1889) 15 V.L.R. 337.
4. (1981) 77 Cr. App. R. 41, at p. 47.
5. (1973) 58 Cr. App. R. 348, at pp. 355-356.
6. (1971) 55 Cr. App. R. 540, at pp. 545-546.
The power to order a new trial is contained in s. 8(1) of the Criminal Appeal Act 1912 NSW and is as follows:
On an appeal against a conviction on indictment, the court may, either of its own motion, or on the application of the appellant, order a new trial in such manner as it thinks fit, if the court considers that a miscarriage of justice has occurred, and, that having regard to all the circumstances, such miscarriage of justice can be more adequately remedied by an order for a new trial than by any other order which the court is empowered to make.
The section itself lays down the conditions for its own application. The miscarriage of justice to which it refers must be such that it can be more adequately remedied by an order for a new trial than by any other order which the court is empowered to make. But the section nevertheless confers a broad discretion. Matters relevant to the exercise of that discretion have been discussed in the cases: Peacock v The King [27] ; Andrews v The Queen [28] ; Gerakiteys v The Queen [29] ; Director of Public Prosecutions (Nauru) v Fowler [30] ; Reid v The Queen [31] . However in this case the sole reason why it was said that a new trial was inappropriate was that, upon the Crown case as it was presented, the verdict brought in against King was unsafe, being inconsistent with the acquittal of Matthews, and that to order a new trial would be to allow the Crown to remedy the deficiency by presenting a new case against King — that of being an accessory before the fact to the murder of the deceased by some person other than Matthews.
1. (1911) 13 C.L.R. 619, at pp. 641, 675.
2. (1968) 126 C.L.R. 198, at p. 211.
3. (1984) 153 C.L.R. 317, at p. 321.
4. (1984) 154 C.L.R. 627, at pp. 630-631.
5. [1980] A.C. 343, at pp. 348-349.
It is well established that the discretion to order a new trial should not be exercised when the evidence in the court below was not sufficiently cogent to justify a conviction or to allow the Crown to supplement a case which has proved to be defective. In particular, the Crown should not be given an opportunity to make a new case which was not made at the first trial: R. v Wilkes [32] . If the verdict against King in this case was inconsistent with the verdict in favour of Matthews, then the Crown could properly succeed against King upon a retrial only by putting a new case. It certainly ought not be allowed to proceed in any retrial upon a basis inconsistent with the jury's verdict of acquittal of Matthews. However, it does not appear to me that the two verdicts given by the jury were inconsistent.
1. (1948) 77 C.L.R. 511, at p. 518.
Although the Crown, in reliance upon s. 346 of the Crimes Act 1900 NSW, charged both King and Matthews jointly as principals in the commission of the crime of murder, it in fact proceeded against Matthews as the principal and King as an accessory before the fact. Even where two persons are tried jointly upon the one charge as participants in the same degree, it does not inevitably follow that both must be convicted or both must be acquitted: Reg. v Darby [33] . An indictment charging two persons on the one count is both joint and several: Hale's Pleas of the Crown, New 3rd ed. (1800), vol. I, p. 46; Hawkins' Pleas of the Crown, 8th ed. (1824), vol. II, p. 331, s. 89; Reg. v Fenwick [34] ; Reg. v McConnell [35] ; Reg. v Merriman [36] . The evidence may be sufficient to prove the case against one accused beyond reasonable doubt, but be insufficient to prove the case against the other. In that event, the conviction of the one and the acquittal of the other involves no inconsistency. Of course, where there is no material distinction in the evidence admissible against each accused to establish an element to be proved against both, different verdicts may be inconsistent. Inconsistency appears only if the acquittal of one and the conviction of the other is to be accounted for by the making of different findings as to the common element.
1. (1982) 148 C.L.R. 668.
2. (1953) 54 S.R. (N.S.W.) 147, at p. 152.
3. [1977] 1 N.S.W.L.R. 714, at pp. 720-721.
4. [1973] A.C. 584.
In the present case, there would be inconsistency if the conviction of King and the acquittal of Matthews was to be accounted for by inconsistency in the findings as to whether Mrs. King had been murdered. That was a common element which the prosecution sought to prove against both accused by the same evidence. But there is no reason to think that there was any inconsistency between the verdicts in the present case.
If, as in this case, the accessory before the fact is said to have procured the commission of the crime through an agent, the evidence against him is likely to have a different starting point from the evidence against the alleged principal. Evidence may be admitted to prove the complicity of the accessory in the crime which may be different from the evidence admitted to prove the complicity of the principal offender, although much of the evidence which is tendered to prove the actus reus of the principal offence is likely to be common to the case against each.
An exhaustive analysis of the evidence is not necessary to show that the Crown case against King was somewhat stronger than the case against Matthews. Whilst Siemsen was the main witness against both of them, the evidence which corroborated his story differed in relation to each accused.
Against King there was evidence of his separation from, and relationship with, his wife which was said to provide a motive. There was evidence of a claim made upon the insurance policy over his wife's life shortly after her death. There was evidence of the withdrawal of money from a bank account in a manner consistent with the payment of both deposits. And there was evidence of a set of car keys, provided by King to Siemsen and handed by him to Matthews, which were found in the wife's car after it had been stolen, allegedly by Matthews. There was ample evidence admissible against King alone to establish his complicity in the murder of Mrs. King.
On the other hand there was corroboration of the evidence given by Siemsen against Matthews. There were disputed admissions to the police and there was evidence of reverse telephone calls made to Siemsen. In addition, there was evidence that cartridges recovered from the ground where the test firing of the rifle had allegedly taken place, were fired from the same weapon as that which was used to kill the deceased.
It may be conceded that, notwithstanding the differences in the evidence admissible against each accused, the evidence tending to establish the identity of the killer, apart from the admissions said to have been made by Matthews which were admissible only against him, was essentially the same in each case. But the identity of the principal offender was not an essential element in the proof of King's guilt. It was, of course, the issue in Matthews' case. Until his Honour amended his direction to the jury, the case had proceeded as though the identity of the principal offender was an essential element in the case against King, but that was something which was capable of correction and it was corrected. The case which was left to the jury against each accused was different, not only in the evidence admissible to support it but also in the substance of the allegation made.
The Crown during most of the trial presented its case on the basis that King was an accessory before the fact to a killing by Matthews. If that had been the case left to the jury then there would have been substance in the submission made on behalf of King that the jury's verdicts were inconsistent. For the case against King would then have been that Matthews was the principal offender and, that having been rejected by the jury in the case against Matthews, there could be no conviction of King as an accessory before the fact. But a different case against King was eventually, although belatedly, left to the jury as a result of the trial judge's redirection. The different case was that the murder of the deceased was at the hands of some person who may have been Matthews, Siemsen or someone else. The identity of the killer was not essential to King's guilt. That was a case which was open upon the pleading because King was simply charged as a principal. It was open upon the evidence because it was clearly possible for the jury to find that the deceased was murdered without being able to identify the killer. It was not the case which was presented by the Crown up to the point at which the redirection was given. While it was open on the evidence and on the indictment, it ought not to have been concealed until the last moment. For that reason King was entitled to have his conviction quashed. That, however, does not provide any basis for the submission that the verdicts returned by the jury were inconsistent, having regard to the direction which was ultimately given and in accordance with which it must be assumed that they reached their conclusions. It does not mean that the Crown case, as it was eventually put, was defective or that a new trial would give the Crown an opportunity to put a new case which was not made, however late in the piece, at the first trial. The Crown case against King, as it was presented in the end after the redirection given by the trial judge, left the identity of the actual killer at large and there is nothing in the verdict of acquittal entered in favour of Matthews which would require the new trial to be conducted upon a narrower basis.
The difficulties which arose in this case may well have been avoided had the Crown been required to turn its mind to them in the first place when framing the indictment against the accused. Section 346 of the Crimes Act 1900 NSW provides that:
Every accessory before the fact to any such felony may be indicted, convicted, and sentenced, either before or after the trial of the principal felon, or together with such felon, or indicted, convicted, and sentenced, as a principal in the felony, and shall be liable in either case to the same punishment as the principal felon, whether the principal felon has been tried or not, or is amenable to justice or not.
No doubt a count such as the one upon which the accused were charged in this case is permitted by that section, but the legislation from which it is derived was directed against the old distinction between accessories and principals which meant that no accessory could be convicted or suffer any punishment where the principal was not attainted or had the benefit of clergy: see Accessories and Abettors Act 1861 UK, ss. 1 and 2; Stephen's History of the Criminal Law of England (1883) vol. II, pp. 235-236. The section was not intended to give rise to a form of pleading different to that used at common law in which the proper course was to specify the degree of participation of each accused — whether as principal or accessory — when they were joined in the same indictment for the same offence: see Chitty's Criminal Law, 2nd ed. (1826) vol. II, pp. 4a-5a. The aim in framing an indictment should, in fairness, be that everyone, particularly the accused, knows the nature of the charge brought against him. In most cases where an accessory is indicted together with the principal this can best be achieved by charging the accessory in a manner which specifies his participation in the offence. Even where an accessory is indicted alone such a form of pleading is ordinarily preferable: see Giorgianni v The Queen [37] ; Reg. v Maxwell [38] . No doubt there will be cases in which the degree of participation of the offenders is not known so that it is appropriate to charge them all as principals (see Reg. v Sperotto [39] ), but it is not a practice to be followed where it can be avoided. In this case it should have been possible for the Crown to have specified how it was that King was charged with the offence alleged against him.
1. (1985) 156 C.L.R. 473, at p. 497.
2. [1978] 1 W.L.R. 1350; [1978] 3 All E.R. 1140.
3. (1970) 71 S.R. (N.S.W.) 334.
The conclusion must be, however, that there was no error on the part of the Court of Criminal Appeal and special leave to appeal should be refused. |
high_court_of_australia:/showbyHandle/1/9269 | decision | commonwealth | high_court_of_australia | text/html | null | Fisher v The Ship Oceanic Grandeur [1972] HCA 51 | https://eresources.hcourt.gov.au/showbyHandle/1/9269 | 2024-09-13T22:51:24.286779+10:00 | High Court of Australia
Stephen J.
Fisher v The Ship Oceanic Grandeur
Cur. adv. vult.
July 25
Stephen J
. delivered the following written judgment:—
In these two actions, which were, by consent, tried together, the plaintiffs comprise the master, officers and crew of the tanker, Leslie J. Thompson, who claim from the owners of Oceanic Grandeur salvage reward for salvage services rendered by them to that vessel. No claim is made in these proceedings in respect of salvage services to the cargo and the plaintiffs are claiming to enforce rights independent of those of the owner of Leslie J. Thompson, that owner itself makes no salvage claim.
Just after 0300 hours on the morning of 3rd March 1970 the tanker, Oceanic Grandeur, while steaming from Dumai in Sumatra to Brisbane, the weather being fair and the sea calm, struck and passed over an uncharted rock in the Torres Straits and immediately began to take water in her forward tanks. Speed was reduced and while the extent of the damage was being ascertained, she steamed on at reduced speed and came to anchor some thirty minutes later in shallow water some five nautical miles to the east.
By the time the vessel had anchored, it was obvious that her hull forward was holed in several places; sea water had entered a large number of her tanks and she had developed a marked list to port and was also down by the stem with the consequence that aft of the break in the fo'c'sle her deck on the port side was awash for some hundreds of feet, her port side rails being completely submerged for a considerable distance aft of the fo'c'sle.
The Oceanic Grandeur is a very large tanker of Liberian registry with Chinese master and crew, being over 58,000 tons dead weight and whose hull is almost 750 feet long and almost 110 feet broad. She has a total of seventeen large tanks, occupying the whole of her hull space forward of the engine room and crew's quarters, which are situated in the stern of the vessel. Of these seventeen tanks, only thirteen are designed for the carriage of cargo. Two tanks in the bows, the fore peak tank in the extreme bows and the deep tank just aft of it, are used only as ballast tanks. The remaining fifteen tanks are placed, from fore to aft, in five sets of three, each set of three comprising two wing tanks, on the port and starboard, and a centre tank, each of the five sets being numbered from fore to aft. Of these fifteen tanks, all but no. 3 port and no. 3 starboard, which are ballast tanks, were filled with crude oil at the time. The three no. 2 tanks are interconnected so that liquid in any one of these tanks, when it reaches a certain minimum depth, will flow freely over baffles into the other two no. 2 tanks; all other tanks are independent units.
It was found that twelve of the seventeen tanks had taken water and later examination disclosed that the fore peak and deep tank, and no. 1 centre, no. 2 centre, no. 3 centre and no. 4 centre tanks were holed by the pinnacle of rock over which the vessel had passed. In addition, the bulkheads between each of these tanks were no longer watertight and additional bulkhead damage resulted in no. 3 port, no. 4 port and no. 5 port and centre tanks also having sea water entering them. Since all three no. 2 tanks are interconnected the damage to no. 2 centre resulted in no. 2 port and no. 2 starboard, otherwise intact, being also open to the entry of sea water. Since most of the damaged tanks were forward and on the port side this accounted for the vessel listing to port and being down at the stem.
At the time of impact, the Oceanic Grandeur, which was then carrying over 55,000 tons of crude oil, lost a considerable quantity through these holes in her hull but once at anchor there was no further immediate loss and her list and trim remained constant.
At about 0915 hours that morning, Leslie J. Thompson, a vessel of the Ampol Petroleum Ltd. fleet, with Australian officers and a Chinese crew, a smaller oil tanker of some 25,000 tons dead weight, was steaming through Torres Straits in the opposite direction to the Oceanic Grandeur, bound for Dumai, there to pick up a cargo of Dumai light crude oil for transport to Brisbane. Her bridge saw Oceanic Grandeur listed to port and down by the head and Leslie J. Thompson's master, Captain Fisher, recognized her as a vessel which was on charter to Ampol Petroleum Ltd. Captain Fisher immediately established the position of Oceanic Grandeur and had a conversation by radio-telephone with Captain Whish, a senior Torres Straits pilot who had been engaged in piloting Oceanic Grandeur through the Torres Straits and who was then on the bridge of Oceanic Grandeur. Oceanic Grandeur at no stage made any distress signals and when Captain Fisher sought to speak to the captain of Oceanic Grandeur, Captain Gar, he was told that Captain Gar refused to speak to him. Captain Fisher then had conveyed to Captain Gar a message asking whether the latter wished Captain Fisher to "Stand by you in your distress", to which came the reply that Captain Gar did not wish him to stand by until Captain Gar had consulted his owners.
Leslie J. Thompson then circled Oceanic Grandeur, noting her aft draught at thirty-two feet and her forward draught at about fifty-five feet and shortly afterwards anchored nearby.
There then ensued more than twenty-four hours during which matters were at a deadlock. The two ships remained at anchor quite close together; Captain Gar continued to reject or ignore Captain Fisher's repeated offers of assistance; however, both ships were, during this period, in communication with their owners. The weather remained fine and the seas calm and I find that Oceanic Grandeur made no further water in her tanks. Meanwhile public and official concern in Australia about the risk of extensive oil pollution in proximity to the Great Barrier Reef was increasing; so great was the concern that on 5th March the Premier of Queensland, with a number of senior officials, visited the scene. Ampol Petroleum Ltd., as the owner of Leslie J. Thompson and the charterer of Oceanic Grandeur and whose refinery affiliate was the owner of the offending crude oil which comprised Oceanic Grandeur's cargo, was acutely conscious of the need to prevent further spillage. It offered assistance to Oceanic Grandeur's owners and this was accepted, the deadlock between the two captains being thus broken. Leslie J. Thompson then went alongside the Oceanic Grandeur and, as I find, at some peril to herself and after great exertions on the part of members of her crew, engaged in a complex transhipment operation which had the effect of removing a substantial part of Oceanic Grandeur's cargo, raising its bows and correcting its list. The quite ingenious and very arduous method adopted of syphoning oil out of damaged tanks allowed divers to carry out repairs to the hull because, by raising the level of sea water in those tanks, it provided them with a safe barrier of sea water between their operations on the hull and the otherwise dangerous oil. I find the operation to have been almost exclusively planned and executed by officers of Leslie J. Thompson. After taking its first cargo to Brisbane Leslie J. Thompson returned to Oceanic Grandeur and took on board a second cargo; another tanker also took further cargo from Oceanic Grandeur and Oceanic Grandeur, after the temporary repairs had been effected to her hull while she remained at anchor, then sailed to Singapore where permanent repairs were carried out.
This brief narration of events summarizes a very large body of evidence, to some of which I will have to return later in the course of this judgment.
Salvage reward is claimed by the plaintiffs from the owners of Oceanic Grandeur. Such a reward is payable to those rendering salvage services, that is to say, to those whose voluntary services to another vessel either save or assist in saving that vessel when in danger or recover or assist in recovering it from actual loss.
"The awarding of salvage is governed largely by considerations of public policy and by the desirability of encouraging seafaring folk to take risks for the purpose of saving property."—Willmer J. in The Sandefjord [1] . However, although the courts look favourably on claims to salvage reward—The "Sappho" , [2] —there are certain essential features which must be present before an entitlement to any reward can arise. There must be danger to the vessel salved. There must be a voluntary rendering of services in the sense that the services must not have been rendered pursuant to a contractual or official duty owed to the salved vessel. Again, in the absence of special contract, the services must turn out to have been successful, or to have contributed to success, before any reward can be earned.
1. [1953] 2 Lloyd's Rep. 557, at p. 561.
2. (1871) L.R. 3 P.C. 690, at p. 695.
In the present case various aspects of the first two of these three pre-requisites have been put in issue by the defendant which also relies upon two other matters; that there must be consent by the master of the salved vessel to the rendering of services to her and that this was lacking here, and that the services performed by the plaintiffs were performed by them as part of their ordinary duties as the master and crew of the Leslie J. Thompson while it was undertaking a lightening operation involving a tanker-to-tanker transfer of cargo and were in no sense salvage services.
It will be necessary to consider separately each of the points in issue and it is convenient to begin with the element of danger to the vessel. I will summarize what I regard as the most important features of the evidence on this aspect.
Much of the evidence relating to Oceanic Grandeur's plight is beyond controversy and does not involve any conflict of testimony. She was open to the sea in twelve out of seventeen tanks, had a considerable list to port and was down by the head to such an extent that her pilot considered that she could not, in that condition, continue on her way to Brisbane. The jettison of her cargo of crude oil was not a practical possibility because of the resultant pollution. She was lying in a position where she was protected from oceanic swells by surrounding land masses and the northern extremity of the Great Barrier Reef, but there were large areas of open water adjacent to her and waves of up to six feet or so in height did occur in periods of high winds in the locality. The time of year, March, was one in which the weather was unpredictable and bad weather might occur at short notice; however, it was very unlikely that cyclonic storms would occur in close proximity to the vessel's position although the effect of distant cyclones might be felt in terms of high winds. She was anchored in shallow water on a sandy bottom and I find, as indeed counsel for the defendant was inclined to concede, that her bows were aground at low water, although, due no doubt to calm seas and the size of the vessel, this was not apparent to those on board her.
To these facts must be added others which were the subject of some conflict of evidence. First, apart from the captain and first officer, the other deck officers of this very large vessel were very inexperienced and the crew generally appears to have been, for some time at least after 3rd March, in a demoralized condition, displaying, as one witness for the defendant said, "a total lack of initiative, lack of co-operation, failure to supervise operations which were being conducted at the time". The officers of Leslie J. Thompson found them to be, with the exception of First Officer Li, markedly unhelpful and were obliged, with crew members from Leslie J. Thompson, to do many tasks aboard Oceanic Grandeur which they would have expected her own crew to have done. Some indication of the state of affairs aboard may be gained from the fact that the crew had apparently openly accused Captain Gar of being at fault and of endangering their lives by hitting the rock pinnacle. I conclude that the Oceanic Grandeur's crew, apart from her first officer, were in no fit state to act as a seamanlike, disciplined crew ready to cope with the emergency which had arisen.
Secondly, I find that the Oceanic Grandeur was unable to use her main engines so long as she was down by the head to the extent she was before the Leslie J. Thompson began assisting her. The only member of the crew of Oceanic Grandeur called as a witness, First Officer Li, was asked no questions on this point; the expert evidence was in conflict and was, in any event, unsatisfactory since the expert witnesses on each side lacked knowledge of the actual installation on board Oceanic Grandeur. An expert called on behalf of the defendant was familiar with the particular type of engine which from a reading of Lloyd's Register he had concluded was installed on board, and was emphatic that there should be no difficulty in running the engine despite her trim; however, as I say, he lacked all personal knowledge of the actual situation on board Oceanic Grandeur at the time. No evidence was called from what might be thought to be the best source, the engineers of Oceanic Grandeur, but cross-examination of one of the defendant's witnesses elicited, without objection, that in a conversation with the chief engineer, he was told that Oceanic Grandeur could not use her engines because she was down at the head. I accept this evidence and find accordingly.
There were two other matters concerning danger to the Oceanic Grandeur upon which much opinion evidence was given. The first was danger arising from the nature of the cargo carried and the consequences should there be further leakage of that cargo. Dr. Buchanan, an experienced and well qualified consulting chemical engineer with particular knowledge in the petro-chemical field, was called by the plaintiffs. He said that if Sumatran light crude oil were floating on the surface of the sea there would be a "very solid danger of fire" should any spark be present to ignite it, particularly when it first leaked from the vessel. He referred to it in that situation as being intensely dangerous and said that for some time after spillage this dangerous condition would continue. Mr. McDonald, a consulting engineer and naval architect, gave evidence along similar lines.
A Mr. Perkins, a chemical engineer employed by the owners of the Leslie J. Thompson who was familiar with Sumatran light crude and who had studied Dr. Buchanan's evidence, was called by the defendants but no evidence was elicited from him as to the danger from oil spillage on the water.
Spillage from the holed tanks apparently ceased at or soon after Oceanic Grandeur came to anchor; what had spilled was taken away by the current, although it might return with tidal changes of current, and after the initial spills they did not recur until the operation of transferring cargo had begun. However, the evidence is that in any sort of seaway further spillage might easily have occurred and I find that this constituted a real danger should there occur any chance circumstance in which a spark or flame might ignite the gases given off by such spillage. This danger to Oceanic Grandeur persisted so long as she remained at anchor with a damaged hull open to the sea.
Questions of stability, buoyance and stresses on the hull were also dealt with at considerable length by a variety of witnesses. It is sufficient if I state my conclusions. I find that Oceanic Grandeur was, at least at low tide, aground forward and was, because of the size of its beam and its draught, in no danger either of turning turtle or of falling over onto its side. Nor was there any appreciable risk of its becoming submerged in situ. It took no more water after coming to anchor and, although the sort of seas that might at worst have been encountered could have resulted in further oil spillage and the substitution of more water in its tanks in place of the spilled oil, this would not have resulted in any great additional submergence of the vessel despite the fact that the displaced oil would have a lower specific gravity, about 0.85, than would the sea water which would replace it.
There remains the question of damage to the fabric of the vessel due to imposed stresses. Captain Hildebrand, the shipping inspector for the Queensland Department of Harbours and Marine, who visited the scene on 5th March with the Premier of that State and whose evidence I found impressive, was concerned about possible failure of the deck structure above the breached tanks. He was not aware that the vessel was, as I have found, aground at low water; he stated that if it grounded there arose a risk of structural damage due to uneven strain on the whole structure of the ship.
Mr. McDonald, an experienced consultant engineer and naval architect, said that if the vessel grounded forward there was a serious possibility she would open up further and if, when so grounded, waves caused pounding she might break in two. He too emphasized the stresses imposed on decks and viewed with concern the stress concentrations caused by the holes and indentations in the hull.
Mr. Rannard was also a very experienced consultant naval engineer with high qualifications. He said that in her damaged condition no undue strain was imposed upon the decks; however, in cross-examination he agreed that he had made no calculations relating to stresses on the decks and he said that the number of tanks which were open to the sea on Oceanic Grandeur meant that the vessel was fairly close to the safety limits so far as upward stress on her decks was concerned; it was "pretty accurate", he thought, to regard her in her disabled condition as relying for support on about fifty-eight per cent of her decks, the safe design limit being not more than sixty per cent.
I conclude from this body of evidence that there did exist a real risk of the fabric of the vessel being over-stressed so that it might fail under additional stresses such as even quite moderate seas might impose, especially if encountered at low water when she was aground forward. I conclude that the structural safety of Oceanic Grandeur could have been in some real jeopardy had she remained for any length of time in the condition in which Leslie J. Thompson found her.
By way of answer to this view of the evidence, it was said on behalf of the defendant that had there arisen any need to seek a more sheltered anchorage, this could have been found a short distance to the south and that Oceanic Grandeur could have been moved to that position without difficulty. On the evidence I find that to tow her in her listed and bow down position would have presented both difficulty and perhaps also considerable risk of structural damage; having also concluded on the evidence before me that she could not move under her own power until her trim was corrected, it follows that I regard her as immobilized in the position in which Leslie J. Thompson found her until her trim could be corrected.
It was also said that there were means which could have been adopted to correct her trim without the aid of Leslie J Thompson, involving the use of compressed air and a transfer of cargo from no. 1 port tank to no. 3 starboard tank. There was evidence that Oceanic Grandeur had available compressed air and that its engine room took steps, a day or so after anchoring, to install equipment so that compressed air could be pumped into some of the damaged tanks. Had this been done, it should have been possible to force out of the tanks the sea water which had entered. In addition, it would have been possible to transfer oil from the undamaged no. 1 port tank to the sound ballast tank, no. 3 starboard, thereby somewhat correcting the list and the trim of the ship. The carrying out of these steps would have required a degree of care and skill on the part of the officers and crew of Oceanic Grandeur and of any experts brought from the mainland to supplement her very meagre supply of experienced and competent deck officers.
Neither of these courses was in fact attempted and their practicability is therefore not fully established; as one is reminded by the judgment in an American salvage case, The Roanoke [1] , "Wisdom born after the event is the cheapest of all wisdom." It is noteworthy that there was no mention of these possibilities in the course of cross-examination of those of the plaintiffs' witnesses who were officers of Leslie J. Thompson and who took part in the actual operation involving Oceanic Grandeur, nor was the practicability of transfer of oil from no. 1 port to no. 3 starboard referred to in the evidence of the only witness from Oceanic Grandeur, First Officer Li, whose duty it would have been to initiate and carry out this operation had it been undertaken. Expert witnesses who spoke of the use of compressed air stressed the need for careful consideration of stresses on deck members before compressed air is used, involving the obtaining and examination of precise information as to the design strengths of the deck structure before attempting its use. There was, I think, in these possible alternative measures, nothing akin to the situation which, in The Helmsman, [2] , a case on which the defendant relied, led Pilcher J. to conclude that that vessel was in no danger in any relevant sense because it could have readily taken steps to avert danger had any threat of it become acute. Evidence suggests that even if compressed air had been used not simply as an interim measure to move to a safer anchorage but in order to sail to Singapore, it would have been most hazardous to attempt such a voyage relying upon compressed air in the tanks for trim and adequate buoyancy. Neither as a measure to enable the vessel to move to more sheltered waters for temporary repairs nor as a means of enabling her to steam directly to Singapore for complete repairs do these proposals alter my view as to the existence of the necessary element of danger to Oceanic Grandeur when Leslie J. Thompson went alongside her.
1. (1914) 214 Federal Reporter 63, at p. 65.
2. (1950) 84 Ll.L.R. 207.
In salvage law the pre-requisite of necessary danger is customarily described as physical danger to the vessel—Kennedy on Civil Salvage, 4th ed. (1958), p. 14 et seq. However, it is not confined to cases of threatened destruction of or physical injury to the vessel. It includes also cases of threatened loss of the use of that vessel by those lawfully entitled to its use, whether as a result of acts of piracy or of the actions of revolutionaries—Société Maritime Caledonienne v. The Cythera [1] ; and The Lomonosoff [2] . In the former, Macfarlan J. concluded [3] , after an extensive review of the authorities, that the essential element in the case of piracy was not that pirates might destroy or damage the ship but rather that they would deprive the owner of his rights of possession and control. In The Lomonosoff, Hill J. said [4] that the danger to the vessel was that it would be taken out of the possession and use of the owners for an indefinite time and perhaps permanently lost to them.
1. [1965] N.S.W.R. 146.
2. [1921] P. 97.
3. [1965] N.S.W.R. at p. 152.
4. [1921] P., at p. 105.
In the present case, the plaintiffs contended that but for services such as those rendered by them, Oceanic Grandeur would have been immobilized and useless to its owners and that threatened deprivation of use is a factor, additional to danger of physical damage, which must be taken into consideration in determining whether the services rendered are salvage services.
The whole question of danger to a vessel viewed in terms not merely of physical injury or destruction but of loss of use to the owner arose for consideration in two modern cases, The Glaucus [5] ; and The Troilus [6] . In both cases the vessels had been towed to Aden in a disabled condition without motive power; they could not be repaired in Aden and were later towed by other vessels to ports where repairs could be effected. In The Glaucus [5] , Willmer J., having found that the vessel was in a position of danger while at Aden, went on to say [7] that:
quite apart from the physical danger, there is this to be added, that until somebody got her to a place where the necessary repairs could be executed she was completely immobilized. It is no use saying that this valuable property, worth something approaching a million pounds, is safe, if it is safe in circumstances where nobody can use it. For practical purposes, it might just as well be at the bottom of the sea.
Lord Merriman P., in The Troilus [8] , at first instance, followed the decision in The Glaucus [5] , but relied upon the state of possible physical danger to the vessel rather than upon any question of deprivation of use due to immobilization.
1. (1948) 81 Ll.L.R. 262.
2. [1950] P. 92.
3. (1948) 81 Ll.L.R. 262.
4. (1948) 81 Ll.L.R., at p. 266.
5. (1949) 82 Ll.L.R. 681.
6. (1948) 81 Ll.L.R. 262.
On appeal in The Troilus [6] , the Court of Appeal affirmed the decision below. Bucknill L.J. [9] adopted Dr. Lushington's classic description of danger, taken from his judgment in The "Charlotte" [10] :
It is not necessary, I conceive, that the distress should be actual or immediate, or that the danger should be imminent and absolute; it will be sufficient if, at the time the assistance is rendered, the ship has encountered any damage or misfortune which might possibly expose her to destruction if the services were not rendered.
He regarded mere immobility as not necessarily giving rise to necessary danger and inferentially, I think, disapproved of the concept of threatened deprivation of use as being sufficient to found a salvage claim. He was much influenced by what may be called the two towage argument, namely that towage to Aden was clearly a salvage service, and that had onward towage, after a pause at Aden, been undertaken by the original salvor it too would have been, on the authorities, a salvage service despite a call en route at a safe place of anchorage. Somervell L.J. was also largely affected by this two towage argument. However, he gave some recognition to what I have called the deprivation of use concept when he said [1] :
a disabled vessel at a temporary resting place en route, where she cannot be repaired, is still valueless where she is although there may be a safe anchorage for her
Denning L.J. [1] also recognized the factor of deprivation of use when he expressed the distinction between towage and salvage as being dependent upon whether the ship-owner had freedom of choice as to proffered services. If:
the master has no real choice in the matter but must, as a reasonable man, accept them from somebody or lose his ship, or leave it in some remote place;
the service was one of salvage. His Lordship apparently adopted a dual test, risk of loss of the vessel or risk of deprivation of its use.
1. [1950] P. 92.
2. [1950] P., at p. 102.
3. (1848) 3 Wm. Rob. 68, at p. 71; [ 166 E.R. 888, at p. 890].
4. [1950] P., at p. 110.
5. [1950] P., at p. 110.
On appeal to the House of Lords, Lord Porter delivered the leading judgment [2] affirming the courts below and in particular relying upon the two towage argument. His Lordship concluded, contrary to the courts below, that for all practical purposes Troilus was safe enough at anchorage in Aden. He did not adopt the view taken by Willmer J. in The Glaucus [3] , that the lack of motive power was in itself sufficient to constitute danger. He denied the existence of any general rule that simply because a ship is without motive power it is therefore necessarily a proper subject of salvage services, but found it unnecessary to express any concluded view upon the question whether salvage services are involved in a case in which the ship is in a place:
where the ship can lie in physical safety even though she cannot be repaired there and may have to remain for an indefinite time until some problematical tug or tugs can be procured to tow her away at a fixed contract price for the towage service; [1]
1. [1951] A.C. 820.
2. (1948) 81 Ll.L.R. 262.
3. [1951] A.C. at pp. 833-834.
He went on to say [2] , that he did not accept the view that no salvage reward was permissible if the vessel could lie for an indefinite period in physical safety but without any means of egress while it deteriorated and its cargo ultimately perished. The effect of delay on ship and cargo had to be remembered so that:
The answer, in my view, is not the simple one—"Is the ship in a position of physical safety?"
1. [1951] A.C., at p. 834.
It can, I think, be concluded from The Troilus [3] that mere physical safety of the ship is not a fact negativing salvage services being capable of being rendered to her, and that threatened immobilization is a factor to which regard should be had, together with threatened physical danger, in determining whether services rendered are in the nature of salvage services.
1. [1950] P. 92.
In the American decisions, the concept of deprivation of use has been recognized. In The "National Defender" [4] , the United States District Court for the Southern District of New York said:
While every stranding may not give rise to a substantial peril in the factual sense, it is nonetheless undeniably true that a stranded ship which cannot refloat itself unaided is earning no money for its owner, is performing no function for which it was built, and is deteriorating generally in monetary worth, in usefulness, and in reputation. The cases are clear, and the Court so holds, that such a situation as matter of law is peril enough to support an award of salvage.
A number of United States decisions were cited in support of this proposition, including The St. Paul [5] , a decision of the United States Circuit Court of Appeals, Second Circuit, where it was said of the St. Paul, which had been swept ashore by a violent storm [6] :
But even if, as appellant contends, she might have remained there in safety for an indefinite time, we cannot accede to the proposition that she was not thereby exposed to risk of loss. While she lay on the Jersey beach she was making nothing for her owners, either in money or reputation, but quite the reverse, and her value as an ocean liner was certainly exposed to great risk of deterioration.
1. [1970] 1 Lloyd's Rep. 40, at p. 44.
2. (1898) 86 Federal Reporter 340.
3. (1898) 86 Federal Reporter, at p. 343.
Reverting to the question of physical danger, it is clear on the authorities that this need not be acute or imminent. To the test proposed by Dr. Lushington in that passage from his judgment in The "Charlotte" [1] , which has already been set out, need only be added a reference to The "Westminster" [2] , in which Dr. Lushington was concerned with a claim for salvage reward against a cargo owner and said, of a transhipment of cargo from a grounded vessel:
whatever may be the nature of the service which has been rendered in other respects, it is to be considered as a salvage service, and for this reason, that the vessel was grounded on the rocks, and the cargo itself was in danger. The degree of the danger is immaterial, in considering the nature of the service, for if the cargo at all required assistance to remove it into a place of safety, the service then assumes the character of a salvage service
1. (1848) 3 Wm. Rob. 68 [ 166 E.R. 888].
2. (1841) 1 Wm. Rob. 229, at p. 232 [ 166 E.R. 558, at p. 559].
The combination of the risk of fire from spillage and the risk of structural damage was such that I find that there was present that degree of necessary danger as justifies services rendered to her being treated as salvage services. If, as I think is the case, it is proper also to have regard to the fact that without services such as those rendered by Leslie J. Thompson, or other services of different kinds which might be postulated, the vessel would have remained immobilized where she was anchored and there would have been loss of use of the vessel to her owners, this serves to reinforce the plaintiffs' claim to have their services treated as salvage services.
I turn now to the question whether the services rendered were voluntary in the sense in which that term is used in salvage law. There is, of course, no question of the master and crew of Leslie J. Thompson being, by reason of official status, under any duty to aid Oceanic Grandeur. The fact that Oceanic Grandeur was under charter to, and its cargo was owned by an affiliate of, the owner of Leslie J. Thompson, Ampol Petroleum Ltd., has no bearing upon voluntariness—The "Sappho" [3] . Nor was there any contractual duty imposed upon the crew of Leslie J. Thompson to render aid to Oceanic Grandeur unless it be that the agreement between Ampol Petroleum Ltd. and the owners of Oceanic Grandeur was one which bound the crew of Leslie J. Thompson and which obliged them to render the services they did to the Oceanic Grandeur. This is what was argued on behalf of the defendant and it is intimately bound up with the defendant's contention that there was here no question of salvage services but simply the performance by the crew of Leslie J. Thompson of their usual duties in carrying out an undertaking of lightening the Oceanic Grandeur, an undertaking of no particular hazard and which Ampol Petroleum Ltd. had agreed upon with the owners of Oceanic Grandeur.
1. (1871) L.R. 3 P.C., at p. 694.
The evidence of the agreement between Ampol Petroleum Ltd. and the owners of Oceanic Grandeur was that in the afternoon and evening of 3rd March Ampol Petroleum Ltd. had three telephone conversations with Oceanic Grandeur's owners in Hong Kong, represented by a Mr. Tung. In the first, Ampol Petroleum Ltd. offered the use of Leslie J. Thompson to assist Oceanic Grandeur by taking cargo from her, Ampol Petroleum Ltd. stipulating that it would require to be "legally covered for its costs". Later there was another telephone conversation in which Mr. Tung put forward a proposed form of indemnity to meet this requirement and Ampol Petroleum Ltd. countered with its preferred version which Mr. Tung agreed to consider. In a further telephone conversation, he expressed agreement with all but one aspect of Ampol Petroleum Ltd.'s version of the indemnity and Ampol yielded on that aspect. The form of indemnity was then agreed upon subject only to Mr. Tung's solicitors in Hong Kong satisfying themselves as to its terms. Apparently all that was said throughout these conversations about the actual services to be performed by Leslie J. Thompson was that the carriage by her of transhipped crude should be at current market rate, an imprecise term which Ampol intended to have clarified later on.
Upon Mr. Tung giving his word of honour that he would stand by the substance of the form of indemnity as discussed and would send to Ampol a telex copy of it the following day, so as to satisfy Ampol's insurers, Ampol thereupon informed Mr. Tung that Leslie J. Thompson would go alongside.
A telex message setting out the agreed form of indemnity was duly received by Ampol but apart from that there is no evidence of any further agreement clarifying the earlier reference to "current market rate" or, indeed, of any discussions at all between the parties until an exchange of telex messages between Mr. Tung and Ampol between 10th March and 19th March, followed by other communications in April 1970, which finally resulted in agreement upon the details of a formal charter party, which was only executed some time after 15th July 1970.
While it is, in those circumstances, not easy to determine when any concluded agreement was arrived at, the telex messages between 10th and 19th March suggest to me that there was in fact no agreement in concluded form during the period when Leslie J. Thompson was alongside Oceanic Grandeur early in March 1970, at least on anything other than the form of the indemnity. These telex messages reveal that there was actual disagreement upon a number of terms, including the applicable freight rate, the number of hours of lay time and the effect on total freight payable should Leslie J. Thompson not be able to be fully loaded, so that dead freight would be involved. The terms of the indemnity, by which Oceanic Grandeur's owners would fully indemnify Ampol in respect of its action in accepting transfers of crude oil from Oceanic Grandeur and in providing material for and aiding in prevention of pollution by oil spillage from the Oceanic Grandeur, were agreed upon as was the fact that Leslie J. Thompson would go alongside and take cargo off Oceanic Grandeur. The precise terms of remuneration for the subsequent carriage of the transferred crude oil from Oceanic Grandeur to Brisbane, were, it seems, left to be settled by subsequent agreement and nothing at all was agreed as to the actual operation of transferring cargo and otherwise correcting the list and trim of Oceanic Grandeur and so dealing with the level of oil in her holds as to permit divers to carry out temporary repairs. This all appears to have been left to those on the spot.
The attitude of Ampol at and prior to these discussions appears to me to emerge clearly enough; at first it was concerned to protect itself against any expenses or losses which it might incur in going alongside Oceanic Grandeur; it accordingly instructed its master, Captain Fisher, at noon on 3rd March "on no account to hook up until instructed " It later supplemented this instruction by a message, passed through Thursday Island facilities, informing Captain Fisher that before taking any cargo from Oceanic Grandeur, a Lloyd's open form of salvage agreement should first be obtained from the master of Oceanic Grandeur. It did this because of concern as to its legal position should Leslie J. Thompson go to the aid of Oceanic Grandeur. Then followed the telephone negotiations with Oceanic Grandeur's owners to which I have referred. When these had been concluded on the evening of 3rd March, Ampol's representative in a telephone conversation with Captain Fisher informed him that Ampol had come to an agreement with the owners of Oceanic Grandeur and had a form of indemnity from them and that there was accordingly no need for the master of the Oceanic Grandeur to sign any salvage agreement. A radiogram from Ampol to Captain Fisher somewhat earlier on the evening of 3rd March had foreshadowed that instruction by informing him that, following a request from Oceanic Grandeur's owners to lighten cargo, Ampol had agreed to do so and that he was now authorized to take portion of its cargo on board. The following morning Ampol sent a further telegram to Captain Fisher again telling him that there was now no need for a salvage agreement to be signed. From Ampol's viewpoint this was no doubt so; it was satisfied with its indemnity and had done what it could to attend to two matters of great concern to it, the urgent provision of crude oil to its Brisbane refinery, which was running short of crude, and the minimizing of pollution, with which its name was being associated and which had created much publicity and both official and public concern in Australia.
Ampol's position was a curious one. Apart both from its possible embarrassment from adverse publicity concerning oil spillage and pollution, and from its pressing need for supplies of crude oil at the Brisbane refinery, its refining affiliate was the owner of the very valuable cargo on board Oceanic Grandeur, part of which Ampol was arranging to have transported to its destination in Brisbane by its own vessel, Leslie J. Thompson. It would be unreal to suppose that Ampol, as a shipowner and charterer, was not conscious of the possible financial consequences were there to be salvage claims by the master and crew of Leslie J. Thompson not only against the owners of Oceanic Grandeur, but also against its affiliate, the cargo owner, or were salvage claims against the shipowner to result in an obligation to contribute to a general average expenditure in the shape of salvage reward to salvors.
It was in these circumstances that the original concept of no transhipment of oil without the signature of a salvage agreement was, later on 3rd March, superseded by the obtaining of an indemnity in Ampol's favour and by its offering to take a transfer of part of Oceanic Grandeur's cargo aboard Leslie J. Thompson and its transport to Brisbane.
To the extent that the defendant relies on the agreement, either as establishing that the services rendered were not salvage services but a mere lightening operation, or that the only amount agreed to be paid was that paid to Ampol by way of freight, that agreement binding the master and crew, it follows from my finding that there was no concluded agreement other than the indemnity already referred to, that I must reject these submissions. The indemnity did not purport to affect in any way the master and crew of Leslie J. Thompson but was solely concerned with the safeguarding of Ampol's position should Leslie J. Thompson go alongside Oceanic Grandeur. It constituted no binding undertaking by Ampol to render any services to Oceanic Grandeur but merely established the legal position as to losses and outgoings incurred by Ampol; once this was established, Ampol could then proceed, without financial risk, to assist Oceanic Grandeur and to protect its own vital interests by supplying its Brisbane refinery with crude oil and at the same time mitigating any pollution problems.
Accordingly, I find that the plaintiffs' claim for salvage reward cannot be met by reliance upon the terms of any agreement between Ampol and Oceanic Grandeur's owners, nor was there any lack of voluntariness on the part of the plaintiffs in relation to their services to Oceanic Grandeur.
Acting upon the orders of a third party does not deprive salvors of the necessary element of voluntariness—The Sarpen [1] ; The "National Defender" [2] —and the fact that the actions of Leslie J. Thompson and her crew were in conformity with the instructions of her owners affords no ground for denying that the services of the crew were voluntary.
1. [1916] P. 306, at p. 315.
2. [1970] 1 Lloyd's Rep. 40, at p. 45.
If, contrary to my view, the proper conclusion from the evidence is that there was a concluded agreement that Ampol would render lightening services by employing Leslie J. Thompson to take off cargo from Oceanic Grandeur, would that alter the position? I think not.
It is helpful in an examination of this question to preserve a clear distinction between salvage services and salvage reward, as was done by Isaacs J. in his dissenting judgment in The Cartela v. The Inverness-shire [3] .
1. (1916) 21 C.L.R. 387, at p. 404.
The defendant argues that the agreement was one simply for lightening services which Ampol agreed to supply by means of its vessel, the Leslie J. Thompson; that such services are a recognized tanker operation in which a fully loaded tanker's cargo is transferred to an empty tanker, that the plaintiffs did no more than perform their duty as the master and crew of Leslie J. Thompson in carrying out that operation and that no question of salvage services arises.
It is, I think, a misconception to regard services rendered to a vessel as capable of division into neat categories, such as towage, lightening or salvage services, as is revealed by the judgment of Dr. Lushington in The "Westminster" [4] . It is not the physical character of the particular services that is important but rather the circumstances in which they are being carried out; if they involve the necessary elements of salvage, they will be salvage services whether or not they take the form of lightening, towing or any other maritime operation. As was said by Lord Blackburn, at first instance, in Nicholson v. Leith Salvage and Towage Co. Ltd. [5] , " in many cases of pure salvage nothing more is required than towage services "; and see also per Isaacs J. in The Cartela v. The Inverness-shire [1] , and Bergher v. General Petroleum Co. [2] , in which it was held that merely because the respective owners described the service rendered as towage, this was not of moment in determining whether or not the crew of the towing vessel in fact rendered salvage services.
1. (1841) 1 Wm. Rob. 229, at p. 232 [ 166 E.R. 558, at p. 559].
2. [1923] Sc. L.T. 229, at p. 231.
3. (1916) 21 C.L.R. 387, at p. 404.
4. (1917) 242 Federal Reporter 967.
The question is, therefore, not whether the agreement can properly be described as one for lightening services, but rather whether in performing services under it and having regard to all the circumstances, salvage services were in fact rendered by the plaintiffs.
For the defendant, it was contended that just as services under a towage contract do not give rise to claims for salvage unless circumstances arise which operate to terminate for the time being the towage services and substitute for them salvage services—The Leon Blum [3] —so too in the present case, in the absence of any such terminating circumstances, of which there were none present here, services under a lightening contract cannot entitle the plaintiffs to salvage reward.
1. [1915] P. 90, at pp. 101-102.
However, the existence of a contract to tow excludes salvage services only when from the beginning it involves nothing in the way of salvage. In The "Princess Alice" [4] , it was said by Dr. Lushington, and later approved of in the Privy Council in The "Strathnaver" [5] , that
towage service may be described as the employment of one vessel to expedite the voyage of another, when nothing more is required than the accelerating her progress.
But towage may frequently form the whole or a substantial part of salvage services and towage not for the purpose of accelerating the progress of the towed vessel but to avoid risk of danger to her will be a salvage service—The Kangaroo [6] . If, in the present case, towage cases are to be used by way of analogy, it may be apt to describe lightening services as those where one vessel is employed to remove cargo from another when nothing more is required than the transhipment of that cargo so that it may be transported to its destination. Here the transfer of cargo was not by any means undertaken for that purpose alone but rather to assist Oceanic Grandeur, the arrangement between the respective owners taking the form it ultimately did because of the circumstances to which I have already referred. It accordingly appears to me to be erroneous to regard the arrangement as at any time one simply for lightening. In forming this view, I have not relied upon the particular hazards involved in the work itself, but if these be relevant, I find them to have been substantial and far greater than would be encountered in a normal ship-to-ship cargo transfer operation; moreover, apart from danger, the work involved was extraordinarily arduous for the deck officers of Leslie J. Thompson and imposed great responsibility upon her master. It is useful to recall what was said by the Judicial Committee in The "Sappho" [1] :
The true rule appears to their Lordships to be, to consider, whether the services are in themselves of the nature of salvage services; and next, whether they are services which are within the contract which the Seaman originally enters into, so that he receives remuneration for them by his ordinary wages?
Their Lordships concluded that if the first question were answered "yes" and the second "no", there was no good reason why salvage remuneration should not be awarded.
1. (1849) 3 Wm. Rob. 138, at pp. 139-140 [ 166 E.R. 914, at p. 915].
2. (1875) 1 App. Cas. 58, at p. 63.
3. [1918] P. 327.
4. (1871) L.R. 3 P.C., at p. 695.
For these reasons, I do not accept the view that if, contrary to my findings, there existed a concluded agreement, it is of any relevance that the parties to it viewed it as a lightening agreement or that it was in form a simple lightening agreement. Neither of these facts can, of themselves, prevent services rendered under it from being salvage services if they otherwise answer to that description.
In any event, this was not, as between the parties, regarded as a simple lightening agreement or, as counsel for the defendant submitted, simply a contract to shift cargo; on the contary the special position of Oceanic Grandeur was clearly recognized and Ampol successfully insisted upon quite special terms, contained both in the indemnity and in the freight rate finally adopted, because of the situation of danger in which Oceanic Grandeur found herself. The indemnity marked a departure from a normal, every-day shipping transaction and was recognized as such by the parties; the telex message confirming its terms refers to transfers of crude oil "from the damaged vessel Oceanic Grandeur ", and to "damage sustained by that vessel on 3/3/70". Again, in the freight rate negotiations, there are references both to the special position of Oceanic Grandeur and to reliance by Ampol upon that fact in obtaining a higher freight rate than would otherwise apply. Thus, Ampol refers to the diversion of its own vessel "to assist Oceanic Grandeur " and in the reply there is reference to Ampol's "assistance during these difficult times"; Ampol's response refers to the circumstances "caused by Oceanic Grandeur accident and diversion Leslie J. Thompson ". It is also of interest to note that the form of charter-party proposed by Oceanic Grandeur's owners on 14th April 1970 included a clause to the effect that freight earned should be included in the general average adjustment in respect of Oceanic Grandeur's accident on 3rd March and be paid by its hull under-writers after completion of the adjustment. This clause was later deleted at Ampol's request.
The defendant also contended that the agreement operated to bar a claim to a salvage reward by the plaintiffs even if their services were in the nature of salvage services. While it may be that Ampol would be barred from itself claiming salvage reward, a matter I am not called upon to determine, there are two reasons why the alleged agreement cannot, in my view, so operate as against the plaintiffs. First what is said to be the agreement contains nothing in express terms excluding a claim for salvage reward let alone purporting to bind the master and crew of the Leslie J. Thompson to such an exclusion. I see no ground upon which it would be proper to imply into the arrangement such a term as would exclude an otherwise justifiable claim for salvage reward by them. Secondly, even if Ampol had purported to contract not only on its own behalf but also on its master's and crew's behalf and thereby to deprive them of a right to salvage reward, I would not regard Ampol, in the circumstances, as having any power to do so.
The authority of shipowners to bind the master and crew as to matters of salvage reward was examined by Dixon J. in Huddart Parker Ltd. v. The Mill Hill [1] . He concluded [2] , that in the particular facts of that case a limited authority existed, to be implied from the relationship of the master and crew to the owners of the salving tug and from the exigency or the circumstances. Here the task to be undertaken by the master and crew was quite foreign to their normal duties and the agreement entered into by Ampol was one which operated to expose them to considerable risk and arduous labour at no additional remuneration and, on the present assumption, without any entitlement to salvage reward. In the case of The Mill Hill [1] the salving vessel was a tug and the agreement entered into was that form of agreement commonly used by its owners and which did provide for a salvage reward. Moreover the circumstances in which that agreement was entered into and the chronology of agreement and salvage operation were markedly different from the present case.
1. (1950) 81 C.L.R. 502.
2. (1950) 81 C.L.R., at p. 511.
3. (1950) 81 C.L.R. 502.
For these reasons I conclude that, even if I be wrong in finding that at the material time there was no concluded agreement between the respective owners other than the indemnity, any agreement that did exist between Ampol and Oceanic Grandeur's owners provided no obstacle to a claim by the plaintiffs for reward for salvage services rendered by them.
It was also said that the fact that Ampol had instructed Captain Fisher to leave to Captain Gar the responsibility of nominating the unloading programme and that he in fact did so negatived the view that salvage services were rendered. This instruction and its observance does not appear to me to have any real bearing on the matter; the fact is that an important part of the services rendered was involved in the devising of appropriate procedures for unloading cargo from Oceanic Grandeur. It is true that Captain Gar or First Officer Li approved of these procedures; had they not done so the procedures could not have been carried out. But this approval does not, in my view, affect the nature of the services rendered.
The defendant further contends that salvage services entitling salvors to reward can only be undertaken, in the case of a vessel under the control of its master, with the consent of that master and that there was no such consent in the present case. I assume for present purposes that the first part of this proposition is correct—The Solway Prince [1] —notwithstanding what has been said elsewhere as to it sufficing that in all the circumstances a reasonably prudent master would have accepted proffered services which are in fact rendered—The Auguste Legembre [2] and The Kangaroo [3] . The defendant then puts it that the only consent given by Captain Gar, master of Oceanic Grandeur, was a qualified one; he consented only to the rendering of services upon the footing of the agreement made between the respective owners and that agreement, whatever else it was, was not one for salvage services involving salvage reward. Accordingly, when Captain Fisher acted upon that consent and came alongside Oceanic Grandeur, there existed no consent to the rendering of salvage services and nothing occurred thereafter to change that position. It follows, therefore, said the defendant, that no entitlement to salvage reward arises.
1. [1896] P. 120, at p. 126.
2. [1902] P. 123, at p. 128.
3. [1918] P. 327, at p. 331.
It is necessary to examine the evidence of what occurred when Captain Gar's alleged consent was given. The facts are curious and complex. By the close of 3rd March 1970, the owners of each vessel were in agreement that Leslie J. Thompson should go alongside Oceanic Grandeur and assist her in her then condition by transhipment of portion of her cargo. However, the respective masters were themselves far from being in any state of agreement. By the afternoon of 4th March, Captain Fisher had made a total of seven offers to Captain Gar to permit him to render salvage services to Oceanic Grandeur. On none of these occasions did Captain Gar speak to Captain Fisher personally; on the contrary, he seems carefully to have avoided doing so. Sometimes he replied to the messages sent, either rejecting the offers outright or temporizing; other messages he simply ignored.
Then, for the first time, on the afternoon of 4th March, the two captains met on board Oceanic Grandeur after Ampol's representative had arrived from the mainland and it had been decided that the proper course was to go on board Oceanic Grandeur. I have no doubt that, at all times, the attitude of Captain Fisher, and no doubt of his crew, was one of keen desire to obtain the consent of Captain Gar to the rendering to his vessel of salvage services which would, they hoped, earn them substantial salvage reward. This I regard as in no way to their discredit despite the fact that it was not in accord with the wishes of Ampol; the main object of the law of salvage is, by the incentive of monetary gain, to encourage seafarers to render assistance to vessels in danger and the fact that their response is, to a greater or lesser extent, the product of that incentive cannot adversely reflect upon them. It was urged that Captain Fisher exercised undue pressure upon Captain Gar by his repeated offers and by his conduct during his discussion on board; if so, it certainly appears to have produced no result so far as Captain Gar was concerned. Indeed it was insisted on behalf of the defendant that Captain Gar throughout displayed the greatest firmness in refusing the much proffered offers of salvage. I find that there was no such misconduct on the part of Captain Fisher or any member of his crew as would operate to deprive any of them of a right to salvage reward or to diminish the amount otherwise proper to be awarded.
Captain Fisher was, I find, in a somewhat confused and disturbed state of mind when he visited Captain Gar. As soon as he had appreciated Oceanic Grandeur's plight he had thought of possible salvage reward and this prospect was made the brighter by Ampol's initial instruction to secure Captain Gar's signature to a form of salvage agreement. I find as a fact that following that message Leslie J. Thompson received a further message on the evening of 3rd March purporting to originate from Ampol and which reported that Oceanic Grandeur's owners were instructing Captain Gar to sign a form of Lloyd's salvage agreement. This message does not seem to have been authorized by any responsible officer of Ampol; its only relevance is in the effect it had on Captain Fisher's state of mind, followed, as it was, by a further refusal by Captain Gar of proffered salvage services. What must have appeared to Captain Fisher to be inexplicable conduct on Captain Gar's part was swiftly succeeded by Ampol's change of attitude from one involving salvage to the arrangement for an indemnity coupled with a lightening operation. I find, despite his denials early in his cross-examination, that Captain Fisher knew very well when he boarded Oceanic Grandeur that some arrangement of that nature had been made between the respective owners but that he was uncertain of its consequences and mistrusted its effect upon his own and his crew's hopes of salvage reward. In view of the lengthy and conflicting submissions which were made to me on its effect, it is not perhaps surprising that on the scant information available to Captain Fisher he was left in some confusion.
For what took place between the two captains on board Oceanic Grandeur on the afternoon of 4th March I must rely on the evidence of Captain Fisher and of Mr. Lovell, Ampol's representative sent from the mainland. Captain Gar was not called and neither of the ship's first officers were present during the significant stages of these conversations.
It is common ground between Captain Fisher and Mr. Lovell that Captain Gar requested Captain Fisher to bring Leslie J. Thompson alongside and take off cargo and that Captain Fisher agreed to do so; also that Captain Gar said that his owners had not authorized him to sign a Lloyd's salvage agreement. If this were all that was said it would follow that there was consent by Captain Gar to what I have found to be the rendering of salvage services. However, that was clearly not all; according to Captain Fisher's evidence, Captain Gar said that the respective owners had reached a private agreement under which he was agreeing to Leslie J. Thompson coming alongside, to which Captain Fisher replied that he did not know of that private agreement but that he would come alongside and would sort out the matter of private agreements later. On cross-examination Captain Fisher admitted that Captain Gar allowed him to come alongside on the footing of an agreement between the respective owners.
Mr. Lovell's version is significantly different. He said in evidence in chief that Captain Fisher told Captain Gar that Ampol had said that there was no need for a Lloyd's salvage agreement and that he would bring Leslie J. Thompson alongside with no thought of reward or gain.
I do not accept the accuracy of Mr. Lovell's recollection as to the latter portion of this alleged statement by Captain Fisher and this not merely because Captain Fisher denies its correctness. It appears to me to be quite at variance both with the tenor of the captains' conversation as described by Mr. Lovell, with the general context and with Captain Fisher's conduct before and after this part of the conversation took place. Mr. Lovell's evidence was elicited in examination-in-chief without being related to context and it was only in cross-examination that it emerged that Captain Fisher was said to have made this statement almost gratuitously at quite a late stage in the discussions on board Oceanic Grandeur and some time after the two first officers had gone off together to formulate plans for carrying out the lightening operations, after the two captains had together inspected plans of the Oceanic Grandeur's tanks and after Captain Gar had told Captain Fisher what he had seen of the damage to the hull and what he thought might be done about it. Captain Fisher's initial attitude to Captain Gar was clearly not friendly; Mr. Lovell recalled, when cross-examined that quite early in their conversation Captain Fisher accused Captain Gar of procrastination and pressed him to admit, as he then did, that Oceanic Grandeur's owners had informed him of an agreement made with Ampol for transfer of cargo without the need for a Lloyd's salvage agreement. Matters having reached this stage, it seems inherently unlikely that Captain Fisher should, much later in the conversation, make the statement that he would take a transfer of cargo without thought of reward or gain.
Moreover, for him to say so would have seemed to him to be an abandonment of all his prior hopes of salvage reward and those of his crew. It would also be quite inconsistent with the action of Captain Fisher in soon afterwards instituting these proceedings, yet Mr. Lovell, who thereafter remained on quite pleastant terms with Captain Fisher and saw a lot of him, said that he saw nothing inconsistent between these two aspects of Captain Fisher's conduct. This does not appear to me to be credible if Captain Fisher's alleged statement was made in the terms and in the context stated by Mr. Lovell. For these reasons, I accept Captain Fisher's denial that he made that statement.
There are a number of other respects in which Captain Fisher's account of what occurred and that of Mr. Lovell are at variance but they are relatively unimportant serving only, perhaps, to suggest that Captain Fisher either mistakenly understood Captain Gar's reference to a private agreement between the owners as something different from the agreement of which he had been informed by Ampol the previous evening or else knowingly chose to so interpret it.
The result of the evidence is then, I think, that the two captains agreed that Leslie J. Thompson should come alongside and that its officers and crew should assist Oceanic Grandeur to correct its list and trim, for that purpose taking off part of the cargo. The extent of the service to be rendered and the precise methods which would have to be adopted were, as yet, largely undetermined; the captains believed that some sort of agreement had been made between their respective owners which contemplated Leslie J. Thompson taking a cargo from Oceanic Grandeur and, knowing that each of the owners was anxious that the operation should begin without delay, they were content to proceed with whatever steps proved, on investigation, to be called for, leaving in abeyance all question of salvage reward, Captain Gar being content to do so because he knew that his owners had made some appropriate arrangement with Ampol. Nothing was said by Captain Fisher as to the foregoing of a claim for salvage reward nor did Captain Gar stipulate for such a concession as a condition of permitting Leslie J. Thompson to come alongside.
Was there, then, such an absence of consent to the rendering of salvage services, or such a waiver of a right to salvage reward, as to defeat the plaintiffs' claims? I think not. Services were rendered over a period of days to Oceanic Grandeur with the full knowledge and approval of her master; in the absence of any representation that these services were given gratis by the officers and crew of Leslie J. Thompson, so that some estoppel might be said to arise (a contention neither advanced in argument nor open on my findings as to the facts), that approval cannot be treated as limited to the acts performed so as not to extend to their characterization as salvage services. Consent will no doubt be lacking when acts are done in disobedience to a master's orders, but the relevant consent is consent to the acts performed and not to their legal characterization and consequences. It is for the Court to determine whether the acts constitute salvage services; I have decided that they were of that character and so long as the doing of the acts was assented to by the master of the salved vessel the requirement of consent is satisfied. Accordingly, even if, as I have assumed for present purposes, consent is a prerequisite to salvage reward, I find that there existed the necessary element of consent in the present case.
That the conversation between the two captains involved some waiver by Captain Fisher of his and his crew's rights to salvage reward appears to me not to be sustainable. Any such waiver would have to be clearly established on the evidence—The Pride of Canada [1] ; Nicholson v. Leith Salvage and Towage Co. Ltd. [2] ; Squires v. The Ionian Leader [3] . Here, on my findings as to that conversation, there is nothing amounting to such a waiver and I accordingly reject the submission based on this ground.
1. (1863) Br. & L. 208 [ 167 E.R. 338].
2. [1923] Sc. L.T. 229.
3. (1951) 100 Fed. Supp. 829, at p. 835.
I accordingly find that the plaintiffs are entitled to salvage reward, and I turn to the question of the quantum of that reward.
The principles governing the amount of any salvage reward are well established, the factors to be taken into account being discussed quite elaborately in Kennedy on Civil Salvage, 4th ed. (1958) and in a number of the decided cases including three modern Australian decisions, The Tudor [4] , a decision of Taylor J. in this Court, The Korowa v. The Kooraka [5] , a decision of Abbott J., and Société Maritime Caledonienne v. The Cythera [6] , to which I have already referred.
1. [1968] 1 Lloyd's Rep. 500.
2. [1949] S.A.S.R. 45.
3. [1965] N.S.W.R. 146.
In the present case I must give effect to three special circumstances. First, no claim is made on behalf of the salving vessel but only on behalf of its master and crew, and it was suggested to me that the proper course would be to determine what I would have awarded had the shipowner also been a plaintiff and then to determine a proportion thereof, say one quarter, payable to the master and crew, which latter sum would be the subject of my award. On consideration, I have decided not to adopt such a course, although it might well be appropriate in other circumstances. In this case, Ampol, the owner of the salving vessel, is not only not a plaintiff but was the charterer of the salved vessel, was intimately associated with the owner of the salved cargo, and in fact ultimately came to an arrangement with the owners of the salved vessel which, had it joined as a plaintiff in this action, might at the very least have greatly reduced any award in its favour—Kennedy , 4th ed. (1958), p. 225. To attempt, in these circumstances, to arrive at a total award of salvage for ship and crew as a step in assessing the salvage reward to which the plaintiffs are entitled is only calculated to make my present task the harder. I think it better, instead, to assess an appropriate salvage reward payable to the plaintiffs, doing so by disregarding all those factors, such as risk to the very valuable salving vessel and use of its valuable time, which would go to increase very substantially the total reward were Ampol a plaintiff. This was the course adopted in somewhat similar circumstances in The "National Defender" [1] .
1. [1970] 1 Lloyd's Rep. 40, at p. 47.
Secondly, no claim is made by the plaintiffs against the cargo owners for salvage reward and for that reason I am to give judgment only for such an amount as I find to be appropriate for salvage services to the vessel and freight, ignoring what salvage services, if any, were rendered to the cargo—Kennedy , 4th ed. (1958) p. 273 and cases there cited.
Thirdly, the plaintiffs claim that the second visit made by Leslie J. Thompson to Oceanic Grandeur forms part of the salvage services and should be the subject of salvage reward. I have not so far in these reasons referred to that second operation because I do not regard it as, in any relevant way, a salvage operation. I have accordingly restricted myself to the first operation commencing on 4th March 1970. The evidence discloses no necessary element of danger existing in the case of the second operation, nor were the services then undertaken by the master and crew of Leslie J. Thompson to any real extent different from services they might have been called upon to perform in the ordinary course of their service with Ampol. This, while not going to the question of voluntariness, does strongly suggest that the second lightening operation was no more than a simple operation of transfer of a liquid cargo by conventional means from one ship, no longer in a state of danger, to another and, accordingly, not a salvage service. Accordingly, the reward to be assessed will be confined to the first operation.
I should also refer to the fact that Ampol, in recognition of the plaintiffs' services, paid to them substantial ex gratia payments soon after their successful salving of the cargo of Oceanic Grandeur. These amounts, ranging from $1,500 paid to Captain Fisher to two weeks' wages paid to junior members of the crew, were not, of course, payments made by or on behalf of the defendant and I have had no regard to them in considering the salvage reward which is appropriate.
During the course of Leslie J. Thompson's transhipment operation, the possibility of the services of her first and second officers being made available to Oceanic Grandeur on a temporary basis was mooted and these two officers stipulated as an appropriate salary for such work, the sum of $100 per day. Although this cannot throw much light upon what reward should be assessed, it does indicate the value placed by these two plaintiffs upon their services at a time after the initial salvage work had been undertaken.
The facts affecting the salved vessel and relevant to quantum of salvage reward are the danger to it and its crew and its value. There was an element of danger to the crew of Oceanic Grandeur and to the vessel itself due to the possibility of fire should seas cause further oil spillage; there was also a distinct risk of serious structural damage to the vessel which, had it eventuated, might, of course, also have endangered its crew. With these matters I have already dealt. The value of Oceanic Grandeur at any particular time, subject as it was to a charter of long duration with several years still to run, must largely depend upon the yield to its owners from the present charter and the expected yield from a new charter or charters for the balance of its commercial life once the existing period of charter expires. I did not regard as satisfactory the expert evidence of value tendered on behalf of the plaintiffs, which failed to take into account these factors. I prefer to accept the defendant's answers to interrogatories which reveal a salved value of about $3.7 million. I may say that when such high values are in question, the precise value appears to me to be of little significance and a value higher by even half a million would not, in the present case, have any very material effect upon salvage reward. I find that the value of Oceanic Grandeur, as salved, was about $3.7 million after taking into account the cost of repairs effected at Singapore after the conclusion of salvage operations; the freight which Oceanic Grandeur would have earned for the entire voyage was about $115,000 and about seven-elevenths of the voyage had been completed when the vessel struck the rock in Torres Straits.
The relevant facts affecting the salvors in the present case are restricted to the danger involved in the salvage operation, the skill it required of them, the arduous nature of their task and the responsibilities borne by them in performing the services. Because the shipowners are not plaintiffs, the numerous other factors commonly relevant must be disregarded in the present case.
There was, as I find, a quite measureable degree of danger to the whole of the crew of Leslie J. Thompson in the transhipment operation; this arose from the nature of Oceanic Grandeur's cargo of Sumatran light crude, when handled in the circumstances as they existed at the time. These circumstances included the need to syphon crude from the Oceanic Grandeur's tanks, instead of being able to use a closed system of transfer; the necessity of coming alongside the vessel in a strong current and remaining alongside the vessel for a lengthy period, occasionally having to alter Leslie J. Thompson's position alongside, all this with inadequate and improvised fendering material and when friction between the hulls might cause a spark; the particular difficulty involved in approaching and making fast to the vessel when anchored with a tide running and much listed to port; the extent to which the crew of Oceanic Grandeur proved to be unco-operative and unreliable in the course of the transhipment operation; the risk that the necessarily unconventional methods of moving crude might create static electrical charges which could cause a fatal spark. All these were matters investigated in considerable detail in evidence; I do not propose to summarize this evidence, nor to do more than say that I am satisfied that to a greater or lesser degree each of these circumstances contributed to the danger of the operation caused by the potentially hazardous nature of the cargo.
The work undertaken by those of the crew of Leslie J. Thompson actually concerned with the transhipment was required to be done in a careful and skilful way if these dangers were to be avoided; as they, in fact, were. In particular, the skill of the first officer in devising much of the quite complex, imaginative and, to a degree, novel procedures which were employed and of the second officer in carrying out those procedures was considerable, just as was the arduous nature of the work they undertook for very long hours.
Finally, Captain Fisher and, to a lesser degree, his first officer, carried a very considerable responsibility throughout the entire transhipment operation.
This is not a case of any acts of particular heroism nor of the rescue of the salved vessel from an immediate danger of great magnitude but rather the performance of a quite difficult and complex task against a background of the possible risk of a sudden disastrous fire should any one of a number of possible mishaps occur, either through ill luck or through the carelessness or inexperience of any one of those engaged in the operation.
Matters which I treat as indicating a relatively modest award are the extent and measure of the danger facing Oceanic Grandeur and its crew when salvage operations began and the fact that, had Leslie J. Thompson not undertaken the salvage operation, there would have been other possible means whereby Oceanic Grandeur's predicament could have been attended to, albeit not as promptly nor, perhaps, as successfully; on the other hand, the dangers accepted in carrying out the operation and the skill involved in performing the salvage work in novel and unusual circumstances point to a substantial reward being appropriate. The value of the salved vessel not only ensures a sufficient fund out of which to reward the salvors but also constitutes an independent factor tending, in moderation, towards an enhanced award—The "Queen Elizabeth" [1] , per Willmer J. and The Tudor [2] , per Taylor J.
1. (1949) 82 Ll.L.R. 803, at p. 821.
2. [1968] 1 Lloyd's Rep. 500, at p. 504.
Evaluating as best I can the various factors and bearing in mind those aspects of public policy which are established as appropriate to be given effect to in the making of salvage awards, I have concluded that a total sum of $20,000 would, in all the circumstances, be a proper salvage reward.
These two actions were, by consent, tried together but separate orders should be made in each action. In neither action is there any request on the record for apportionment as between the various plaintiffs nor was any such request made in the course of the hearing. However, I am of the view that Captain Fisher and his first and second officers, the three plaintiffs in the first of the two actions, are individually entitled to very substantially more by way of salvage reward than the fifty-one plaintiffs in the second action; accordingly, I propose to award to the former three plaintiffs $6,000 and to the latter $14,000 and there will be judgment accordingly in each action. Should there arise any difficulty over apportionment as between plaintiffs in either action an appropriate application may be made for orders apportioning the salvage reward. There will be an order in each action that the defendant pay the plaintiffs' taxed costs.
Cur. adv. vult.
Oct. 20
Stephen J
. delivered the following written judgment:—
In each of these two actions there has been judgment for the respective plaintiffs and an appropriate order for costs would normally follow the result. There has, however, been a payment into Court by the defendant in each case. In action no. 2 of 1970, in which I gave judgment for the plaintiffs for $6,000, the defendant had paid into Court $10,853.25 and in action no. 3 of 1970, in which I gave judgment for the plaintiffs for $14,000, the defendant had paid in $9,146.75. When these payments in were disclosed to me I reserved the question of costs and have subsequently heard argument as to the orders for costs which should be made. Payment in was made on 30th May 1972 and it is common ground that the only expenses incurred by the parties after that date were expenses associated with the hearing before me.
In the case of action no. 3 of 1970, there is no room for doubt; the plaintiffs have recovered substantially in excess of the amount paid in and should have their taxed costs of the action.
In action no. 2 of 1970 the amount paid in is substantially greater than the amount of salvage reward received; however there is ample authority for the view that in salvage actions this will not in all cases necessarily be decisive of the question of costs—The Lotus [1] , per Sir Robert Phillimore, citing in turn Dr. Lushington's judgment in The William [2] ; The Creteforest [3] . It is a jurisdiction in which the discretionary nature of orders as to costs has been stressed. Not only has it always been regarded as proper in the public interest to encourage salvors in their voluntary role as preservers of the property of others and to pay some regard to this in orders as to costs but the peculiar difficulty of determining what is an adequate reward for salvage services has also long been recognized. It is true that this latter factor applies equally to salvor and to salved. Moreover I must, of course, as the High Court Rules O. 23 r. 6 (2) requires, have regard to the fact of payment in. However in the present case I think it is not wholly immaterial that, looking at these two actions together, the total amount paid in was no more than equal to the total salvage reward; in that sense the amount paid in was barely sufficient and certainly not liberal, to use the language of Sir Robert Phillimore in The Lotus [4] .
1. [1882] 7 P.D. 199.
2. (1847) 2 W. Rob. 520 S.C. 5 N. of Cas. 108 [ 166 E.R. 852].
3. [1920] P. 111, at p. 115.
4. [1882] 7 P.D., at p. 201.
The plaintiffs in action no. 2 of 1970 will in any event be entitled to their costs up until the date of payment in, but should they bear the defendant's costs thereafter? There are in the present case very real practical obstacles to the adoption of such a course. It presupposes the existence of ascertainable items of legal costs incurred by the defendant in relation to action no. 2 of 1970 after the date of payment in and which may, if necessary, form the subject of a taxation of costs. In fact the course which this litigation took makes it improbable that there do exist such items. The two actions were, by consent, heard together, the same counsel representing both sets of plaintiffs and the defendant also appearing by the same counsel in each action and there were, in my view, no witnesses called and no passages of evidence elicited at the trial which could not be said properly to relate to, and be relevant to the determination of issues in action no. 3 of 1970. It was conceded by counsel for the defendant that any attempted segregation of its costs as between the two actions would not be easy. I would prefer the view that anything other than some wholly arbitrary division would be impossible.
The order in favour of the plaintiffs in action no. 3 of 1970 will properly extend to the entirety of the nine days occupied by the proceedings, no part of that time being occupied on any issue foreign to that action and there being no part of those nine days of which it can be said "This was time exclusively spent on the issues in action no. 2, to which an order for the costs in that action can operate."
In all the circumstances it will, I think, do substantial justice if I order that the plaintiffs in action no. 2 of 1970 recover their taxed costs of that action, up until the date of payment in, from the defendant and that there be no order for costs thereafter. An order in this form will prevent the plaintiffs in that action from recovering any counsel's fees or other expenses after the date of payment and which may have been incurred separately from the other set of plaintiffs. It will not, of course, enable the defendant to recover any part of its costs from the plaintiffs in action no. 2 of 1970; however I do not regard this as involving injustice to the defendant since every item of such costs, with the possible exception of brief fees to counsel, of which there may have been some arbitrary, separate allocation to each action, appears to me to have been necessarily incurred by the defendant in its defence of action no. 3 of 1970, in which action its payment into Court proved inadequate.
The plaintiffs in action no. 2 of 1970 thus escape the burden of the defendant's costs but do so only because there are, with the possible exception mentioned above, no costs which the defendant has incurred and which are not attributable to its unsuccessful defence of the other action brought against it.
I refrain from expressing any limitation in the form of order for costs made in action no. 3 of 1970 lest it operate in much the way complained of by the appellants in The Bosworth [No. 2] [1] . However the fact that it is only the costs of the plaintiffs in action no. 3 of 1970 which can be recovered from the defendant ensures that to the extent to which fees on briefs or the like were incurred separately by each of the two sets of plaintiffs only one set of plaintiffs, those in action no. 3 of 1970, will recover theirs on taxation.
1. [1960] 1 All E.R. 729.
Agreement has been reached as between the parties concerning the moneys in Court and to give effect to that agreement and at the same time dispose of the matter of costs I order that in action no. 2 of 1970 by consent the moneys in Court with accretions, if any, be paid out to the solicitors for the defendant and that the plaintiffs recover against the defendant their taxed costs up to the date of payment in but not thereafter. In action no. 3 of 1970 I order that by consent the money in Court with accretions, if any, be paid out to the solicitors for the plaintiffs in part satisfaction of the plaintiffs' judgment in that action and I further order that the plaintiffs recover against the defendant their taxed costs of the action.
There will be, in each action, the usual order as to exhibits. |
high_court_of_australia:/showbyHandle/1/9977 | decision | commonwealth | high_court_of_australia | text/html | null | Commissioner of Taxation (Cth) v Jack Zinader Pty Ltd [1949] HCA 42 | https://eresources.hcourt.gov.au/showbyHandle/1/9977 | 2024-09-13T22:51:25.869959+10:00 | High Court of Australia
Dixon, Williams and Webb JJ.
Commissioner of Taxation (Cth) v Jack Zinader Pty Ltd
[1949] HCA 42
ORDER
Question answered in the affirmative. Judgment for the plaintiff for £311 2s. 1d. with costs.
Cur. adv. vult.
The following written judgments were delivered:—
Sept. 27
Dixon J.
The question for our decision is whether fur coats, stoles, capes and collars formed by remodelling fur garments are, for the purposes of the Sales Tax Assessment Act (No. 1) 1930-1942, goods manufactured and sold.
Section 17 of that Act provides that sales tax shall be levied and paid upon the sale value of goods manufactured in Australia by a taxpayer and sold by him. Section 17A imposes upon a transaction by which one person manufactures goods for another out of that other's material the artificial character of a sale. The section provides that where goods are manufactured for a person wholly or in part out of materials supplied by him the manufacturer of the goods shall for the purposes of the Act be deemed to have sold the goods to the first-mentioned person, at the time of their delivery to him for the amount charged to him by the manufacturer in respect of those goods. Section 18 (1) (c) makes the amount so charged the sale value of the goods for the purposes of the Act. That, however, is subject to s. 18 (5A) and Part IIIa. of the regulations which together operate to reduce the sale value. The word "manufacture" is defined by s. 3 (1) (b) to include the combination of parts or ingredients whereby an article or substance is formed which is commercially distinct from those parts, subject to a qualification that is not in point.
The taxpayer in the present case, a company which is the defendant in the action, carries on business in Sydney as a furrier and repairs and remodels fur garments. The company is registered under the Act as a manufacturer.
The commissioner claims sales tax in respect of fur coats, stoles, capes and collars which the defendant company has remodelled on the ground that the remodelling of fur garments for customers is hit by s. 17A. An inspection of s. 17A will show that the claim depends on the remodelling amounting to a manufacture of goods and upon its being done for the customer "wholly or in part out of materials supplied by him."
"The essence of making or of manufacturing is that what is made shall be a different thing from that out of which it is made" (per Darling J., McNicol v. Pinch [1] ). The first and, it may be thought, the decisive question in the case, is therefore whether the garments which result from the process of remodelling are different things, that is are different "goods," from the garments that the customer hands over. This perhaps is rather a question of fact than of law, but, although the form of the proceeding before us is a case stated, it is stated under s. 18 of the Judiciary Act 1903-1948, which authorizes a reference of both fact and law and no objection has been raised to our drawing inferences of fact. The commissioner distinguishes between repair and remodelling and does not claim sales tax in respect of repair even although it may mean some change in, for example, the length of the garment. We are told that an old or worn fur coat is remodelled into a modern style of coat, that a fur necklet is remodelled into a stole and a fur necklet or fur stole is remodelled into a cape. A full length fur coat may be converted into a "saunter" or the somewhat similar "swagger" coats which are considerably shorter but full and often flared at the bottom. But the conversion may be to a jacket, which is waist length and secured in front by a clasp or a belt, or into a coatee, which is less than waist length and fits more closely and usually is not fastened in front. To effect these changes the collar, sleeves and linings of the coat handed in by the customer are removed, and the remainder of the coat is laid out upon a proper pattern prepared to the customer's measurement and is cut to the pattern. Worn skins are replaced by skins from what is cut off or by new skins. The body of the garment is then dampened and is nailed out on a pattern board to the shape and measurements of the paper pattern. By this means it is stretched and irregularities are removed. Usually the sleeves are remodelled. They and the collar, if one is necessary, are attached and the remodelled garment is lined and finished. Sometimes the lining is new; sometimes the old lining is washed and used.
1. (1906) 2 K.B. 352, at p. 361.
The same or an analogous practice is followed when a necklet is converted into a stole or a necklet or stole into a cape. In a necklet the skin is sewn together so as to form a cylinder of fur and an animal's head is attached at one end and a tail at the other. In a stole, which is often of considerable length, the skin is flat and is lined.
On the side of the taxpayer it is contended that these procedures do not change the identity of the garment but only some of its characteristics. The customer hands in a fur garment and takes away a fur garment. It is altered and renovated but it is still a fur garment; it is her fur garment; it is the fur garment she brought to the furriers. On the side of the commissioner it is said that a different fur garment has been brought into existence. The old fur garment has been used only to provide the materials or some of them from which the new fur garment has been made. It is a thing of a different description both commercially and from the point of view of the wearer. It is a different entity and has a new identity. "Goods" have therefore been produced.
On the whole the commissioner's view appears to be the more correct. The work of the furrier is to use skins to form garments. In skins he works with materials often of great value and usually of some permanence. His skill lies in the use he can make of them and the descriptions of garment he produces. Fashion, commercial usage and his customer's tastes combine to distinguish the various descriptions of garment he makes and to compel the recognization of them as separate categories of "goods." When he takes skins made up into one description of fur garment and produces another, he cannot be treated as having altered an existing thing without producing a new one. He has made a different article.
But on behalf of the taxpayer answers to this position are put forward by way of confession and avoidance. Let it be so, it is said. Nevertheless there is no "manufacture." The process does not amount to manufacture. It is not manufacture within the ordinary meaning of the word nor within the statutory definition. It is a reshaping or reforming of an existing second-hand article. Taking a thing to pieces and putting it together again is not manufacture and putting it together in a different shape is not enough to make applicable the word "manufacture." So runs the argument. The argument is answered by the consideration that, according to the conclusion already stated, the process produces a different article. When that consideration is added to the fact that the actual work done and the procedure employed in producing the new, that is the distinct, article is characteristically a manufacturing process, it must follow that the "goods" are "manufactured" within the ordinary meaning of that term.
But then it is said that the goods are not "manufactured for a person wholly or in part out of materials supplied by him" within the true intention of the expression as it occurs in s. 17A.
To hand in a garment for the purpose of its being altered into another garment cannot, it is claimed, be described as supplying materials to be manufactured into goods. One reason given is that second-hand materials are not within the purview of the provision. But apart from that reason, which really arises from a more general contention calling for separate consideration, it is hard to see why, once it is found that a new or different article is produced, the old garment should not be treated as containing the materials supplied for the purpose of manufacturing the different article.
That leads to the final contention upon which reliance was placed for the taxpayer. The contention is that because the fur coat or other garment handed in is second-hand and because by consequence the resulting "new" or distinct garment is second-hand in the sense that it is made of used or worn skins, therefore the transaction or the goods must fall outside the scope of the tax. It is put in two ways. One is that upon the reasoning adopted in Deputy Federal Commissioner of Taxation (S.A.) v. Ellis & Clark Ltd. [1] the Act does not intend to tax a notional sale of such goods. The other invokes the exception in favour of second-hand goods placed, after the decision, in the definition of goods in s. 3 (1).
1. (1934) 52 C.L.R. 85.
The first ground depends upon the conclusion of the Court in the case of Deputy Federal Commissioner of Taxation (S.A.) v. Ellis & Clark Ltd. [1] that the clear intention of the sales-tax legislation is to take the course of commerce between the first appearance in Australia of goods, whether as a result of importation or of manufacture, and the retail disposal of them and to impose the tax once only upon them, so that the retail price of the goods would be increased by the incorporation in it of one, but not more than one, amount of the tax.
1. (1934) 52 C.L.R. 85.
One answer to this ground is that the application which the commissioner gives to s. 17A in the present case does not offend against the principle. It is no doubt true that the garment handed in has borne sales tax. The skins and other materials of which it consists have borne their due proportion of the sales tax paid originally in respect of the finished garment. On the assumption that, in the course of trade by which the furs and materials were supplied to the manufacturer of the original garment, certificates were properly quoted, the elements of which the garment was made up would have borne sales-tax once only and that as constituent parts of the finished article. For, to repeat what was said in Davies Coop & Co. Ltd. v. Federal Commissioner of Taxation [2] : "What goes into a manufactured article and forms part of its substance is sold as part of it so to speak, and then bears sales tax in its manufactured form and for the first time."
1. (1948) 77 C.L.R. 299, at p. 317.
But the use that the commissioner makes of s. 17A does not mean that any part of the materials will bear sales tax a second time. What is taxed is the cost of the service performed by the furrier for his customer in remodelling the garment, or more correctly a portion of that cost. For that is the notional sale value under s. 18 (1) (c) and (5A) and Part IIIa. of the regulations. As that service ex hypothesi produces a distinct article, it is quite consistent with the policy of the sales-tax legislation and with the principle of the decision in Deputy Federal Commissioner of Taxation (S.A.) v. Ellis & Clark Ltd. [1] to impose a sales tax on a notional price consisting in part of the charge for the service.
1. (1934) 52 C.L.R. 85.
Another answer is that, since that decision, the Parliament has reduced the principle judicially discovered in the legislation to statutory expression. That statutory expression should therefore afford the measure of the application of the principle. It is to be found in the exception in the definition of goods in s. 3 (1). Upon this exception the taxpayer relies as the second ground for the contention that the transactions in question must fall outside the scope of the tax because the garment providing the materials is second-hand. The exception is stated in two alternative paragraphs. The first, par. (a), says that the word "goods" does not include goods which have, either through a process of retailing or otherwise, gone into use or consumption in Australia.
There is a very short answer to the taxpayer's reliance upon this paragraph. It is that the "new" or different garment produced from the old garment, the fur coats, stoles, capes or collars, have not as such gone into use or consumption. The skins of which they are made up have done so, but not the garments produced by remodelling. The skins have borne tax and they will not do so again. The cost of the work done in turning the skins to new account will provide the measure of the sale value taxed. Paragraph (b) of the exception could not be availed of by the taxpayer. For it depends (1) on the goods being sold as second-hand goods, and (2) on the existence of an opinion on the part of the commissioner that parts of the goods (the remodelled garments) retain their character as goods or parts of goods which have gone into use or consumption in Australia. As to (1), the notional sale under s. 17A can hardly be treated as a sale to the customer of her "new" or remodelled garment as a second-hand fur coat or the like. As to (2) the commissioner seems to have held no such opinion.
The taxpayer's contentions therefore fail.
The question in the case stated should be answered in the affirmative, and, in accordance with the agreement of the parties, judgment should be entered for the plaintiff for £311 2s. 1d. and with costs.
Williams J.
The question asked in the case stated is whether the garments referred to in par. 6 of the case, viz.:—fur coats, stoles, fur capes and fur collars are "goods manufactured in and sold in Australia within the meaning of the Sales Tax Assessment Act (No. 1) 1930-1942." The garments referred to in par. 6 are fur garments made by the defendant for customers who supply the materials consisting of existing fur garments which have become so badly worn or damaged that it is impossible to repair them by patch work and they are only usable as material from which the defective parts can be cut out and what is left remodelled into a fur garment which is most suitable or useful having regard to the extent, shape and nature of the available material. Customers' second-hand fur coats are remodelled into modern stoles and coats known as swaggers, saunters, coatees or jackets; their second-hand fur necklets are remodelled into stoles; their second-hand necklets or stoles are remodelled into fur capes; their second-hand fur capes are remodelled into stoles; their second-hand necklets or stoles are remodelled into fur collars; and their second-hand fur coats known as coats, jackets, saunters, swaggers or coatees are remodelled into fur capes by the processes described in the paragraph. Except to a small extent in the case of linings the materials used by the defendant in these processes are confined to those available from the customers' garments. About ninety-five per cent of the linings of the remodelled garments are the old linings. The defendant does not provide individual linings and where linings are necessary requires the customer to supply them.
It is clear that there is no actual sale of the remodelled garments by the defendant to its customers. But the plaintiff relies upon s. 17A of the Act which provides that where goods are manufactured for a person wholly or in part out of materials supplied by him, the manufacturer of the goods, whether he manufactures those goods himself or procures their manufacture by another person, shall, for the purposes of this Act, be deemed to have sold the goods to the first-mentioned person, at the time of their delivery to him, for the amount charged to him by the manufacturer in respect of those goods. This section was first introduced into the principal Act by Act No. 29 of 1934. At the time of its introduction the section contained the words "makes up those goods himself or procures their making up" but Act No. 78 of 1936 omitted these words and inserted in their stead the present words "manufactures those goods himself or procures their manufacture." The section was introduced before the case of Deputy Federal Commissioner of Taxation (S.A.) v. Ellis & Clark Ltd. [1] had come on for hearing in this Court. Section 3 of the Act of 1930 simply defined goods as including commodities and manufacture as including production. In Deputy Federal Commissioner of Taxation (S.A.) v. Ellis & Clark Ltd. [1] it was held that a person who purchased second-hand and other electrical goods (principally electrical motors) and resold them either with or without first repairing them was not liable to sales tax. It was pointed out that the general policy of the sales tax legislation, which must be considered as a whole, is to levy sales tax once and for all upon the last sale of the goods by wholesale, that is upon the sale to the retailer by the last wholesaler, and that to avoid double taxation goods which have gone through the process of retailing into use and consumption in Australia, and in this sense are second-hand, are outside the scope of the legislation.
1. (1934) 52 C.L.R. 85.
2. (1934) 52 C.L.R. 85.
The definitions of goods, manufacture and manufacturer were amended by Act No. 78 of 1936 to adopt and possibly to enlarge the effect of this decision. Section 3 now provides that goods includes commodities, but does not include (a) goods which have, either through a process of retailing or otherwise, gone into use or consumption in Australia; (b) goods which are sold as second-hand goods and are manufactured exclusively or principally from goods which—(i) have, whether alone or as parts of other goods, gone into use or consumption in Australia; and (ii) in the opinion of the commissioner, in their condition as parts of the goods so manufactured, retain their character as goods or parts of goods which have gone into use or consumption in Australia. Section 3 also provides, so far as material, that manufacture includes (a) production (b) the combination of parts or ingredients whereby an article is formed which is commercially distinct from those parts or ingredients, except such combination as, in the opinion of the commissioner, it is customary or reasonably practicable for users or consumers of those articles or substances to undertake. Section 3 also provides, so far as material, that manufacturer means a person who engages, whether exclusively or not, in the manufacture of goods and a person (not being an employee) who manufactures goods, whether or not the materials out of which the goods are manufactured are owned by him. The Act therefore applies in terms to all goods which are goods or commodities in the ordinary meaning of those words except those goods which are excluded by pars. (a) and (b) of the definition. The Act also applies in terms to all goods which are manufactured according to the ordinary meaning of that word or which are manufactured within the meaning given to that word by the definition.
In order that s. 17A may apply there must be a notional sale of manufactured goods within the meaning of the Act, and it was contended for the defendant that the remodelled garments, as they had been made entirely or substantially from second-hand materials, were really second-hand goods and that the policy of the legislation expounded in Deputy Federal Commissioner of Taxation, (S.A.) v. Ellis & Clark Ltd. [1] could only be carried into effect and double taxation avoided if such goods were held not to be goods within the meaning of the Act. There is in my opinion nothing in the judgments in Deputy Federal Commissioner of Taxation (S.A.) v. Ellis & Clark [1] to show that the policy of the Act has this result. Further, the Act has now been amended and the defendant must rely on the exceptions contained in pars. (a) or (b). A similar problem to the present problem was discussed in Adams v. Federal Commissioner of Taxation [1] and I see no reason to alter the view there expressed that the question at issue is one of fact and degree. The exception of goods which have, either through a process of retailing or otherwise, gone into use in Australia can only apply to particular goods whilst they remain such goods and not to what remains of such goods after they have been manufactured into goods which are different goods from their second-hand components. Work which could be fairly described as a mere repair or modification of the goods would not affect their original character. But once the work done causes the goods to lose this character, they become goods within the meaning of the Act. The amended definition of manufacture includes the combination of parts whereby an article is formed which is commercially distinct from those parts. There is nothing in this provision to suggest that the combination must consist exclusively or substantially of a combination of new parts. It includes in its ordinary signification a combination of parts all of which have gone into use in Australia. Paragraph (b) of the definition of goods would appear to have been inserted in the Act to authorize the commissioner to exclude from tax goods sold as second-hand goods which are not goods excluded by par. (a), and therefore to enlarge the exception in par. (a). This paragraph would seem to be confined to cases where the goods sold as second-hand goods are exclusively or principally a mere combination of second-hand articles or parts of such articles.
1. (1934) 52 C.L.R. 85.
2. (1934) 52 C.L.R. 85.
3. (1948) 8 A.T.D. 332.
But it is unnecessary to discover its exact meaning because the defendant does not rely on it, and as at present advised I do not see how it could be applied to s. 17A. The sale value of the goods under the section is the value of the services of the manufacturer of the goods, and these services would have the same value whether the goods were manufactured from new or second-hand materials. The ordinary meaning of the verb manufacture is to work up materials into forms suitable for use. Where new materials are supplied there would plainly be a notional manufacture of goods within the meaning of the Act. Where old materials are supplied there would only be such a manufacture if the work done was more than a mere repair or modification of the old materials and was such as to change the old goods into goods of a different character. The purpose of the customer in leaving an old fur garment with the defendant is not to have that garment repaired or made to fit the wearer but to provide the material required for the making and fashioning of the remodelled garment. It is immaterial whether the customer leaves the old garment complete as a garment or first unpicks the old garment and leaves the pieces of fur and linings with the defendant. The defendant is not concerned to repair or alter the old garment, it is concerned to fashion a different garment out of the serviceable pieces of the old garment or, in other words, to work up this material into a new form suitable for use. This is manufacture within the ordinary meaning of the word. The manufacture goes further than merely combining the parts of the old garments into an article which is commercially distinct from those parts, although this would be manufacture within the meaning of the definition of manufacture in the Act.
For these reasons I would answer the question asked in the affirmative and enter judgment for the plaintiff for £311 2s. 1d. and costs.
Webb J.
I have found this a difficult question of fact. However, I think it more likely than not that the remodelled garment in each case remains a second-hand garment. If the taxpayer bought used fur garments and sold them after remodelling he could not, I think, sell them as new goods without being guilty of misrepresentation. Persons intending to buy new fur garments would expect to be told that these were in fact used garments remodelled, and would, I suggest, be likely to refuse to buy them or to insist on their sale as second-hand goods. If these garments could properly be sold as new goods then so could any used but remodelled wearing apparel, however old, including hats and footwear. I do not suggest that new wearing apparel could never be made out of old materials. That would depend on the nature and extent of the processing of the old materials which themselves might be changed into new materials better and more durable than the old materials. Dr. Hannan submitted that new furniture might be made out of old packing cases. That is so, and the furniture might be better for being made out of seasoned timber. At all events the timber would be planed and polished or varnished. But, apart from any distinction based on permanence or durability, things made of wood or metal belong to a different category from used garments subjected to little or nothing more than re-shaping, repair and, to a minor extent, to laundering, and then continued in use for the same purposes by the same wearer, without any special treatment of the fur skins e.g. by tanning where the skins have not already been subjected to that process. In my opinion such garments remain second-hand goods: they are not commercially distinct from the used garments and so do not attract sales tax on an actual or notional sale.
I would answer the question submitted in the case in the negative and enter judgment for the defendant. |
high_court_of_australia:/showbyHandle/1/9162 | decision | commonwealth | high_court_of_australia | text/html | null | R v Commonwealth Conciliation and Arbitration Commission; Ex parte Printing Industry Employees' Union of Australia [1964] HCA 17 | https://eresources.hcourt.gov.au/showbyHandle/1/9162 | 2024-09-13T22:51:26.451439+10:00 | High Court of Australia
Kitto, Taylor, Menzies, Windeyer and Owen JJ.
R v Commonwealth Conciliation and Arbitration Commission; Ex parte Printing Industry Employees' Union of Australia
[1964] HCA 17
ORDER
Order nisi discharged with costs.
Cur. adv. vult.
The following written judgments were delivered:—
March 20
Kitto J.
In my opinion the order nisi should be discharged. I do not wish to add anything to the judgments about to be delivered by my brothers Menzies and Owen.
Taylor J.
I agree with my brothers Menzies and Owen that the failure to accede to the employers' logs of claims served upon the respective employees' organizations in May and July 1957 gave rise to an industrial dispute, which is still subsisting, and I have nothing to add to their observations.
Menzies J.
It appears to me that because the employer organizations, which were party to the dispute which was settled in part by the Graphic Arts (Interim) Award 1957, had in October 1954 served the unions concerned with a log making provision for annual leave as "the only leave to which the employees shall be entitled because of any period of service or employment" and this had not been conceded, there existed a dispute about long service leave which the unions could not bring to an end by withdrawing claims which they had earlier made for such leave. Accordingly, notwithstanding the unions' withdrawal in July 1958 of their unconceded claims for long service leave, there is still in existence a dispute about such leave arising from non-acceptance of the employers' original claim and re-defined by the service by the employers in July 1957 of a further claim—not conceded—that conditions of employment should be altered by the provision of long service leave upon the terms therein set out.
So far as the dispute between the parties to the Metal Trades Award is concerned, I consider that non-acceptance by the unions of the claim made by the employer organisations in May 1957 that "the wages terms conditions and rights of and arising out of employment under which the employees of their members are at present working should be altered to prescribe the provisions for and in relation to long service leave set out in the accompanying log of claims for all such employees in the States of New South Wales, Victoria, Queensland, South Australia and Tasmania" did give rise to an industrial dispute which the Commission has power to determine. The withdrawal on 3rd July 1957 by the Electrical Trades Union of Australia of its original claim for long service leave—which it is common ground did occur—cannot affect the continued existence of the dispute arising from non-acceptance of the employers' log of May 1957. It is not necessary to consider here whether a demand for an award and nothing but an award of the Commission, without changing existing conditions of employment, could form the basis of an industrial dispute because, as has already been seen, the claim of the employer organisations was for an alteration in existing conditions of employment—and this could certainly give rise to an industrial dispute. Disregard by the unions of that claim did, in my opinion, result in an industrial dispute about long service leave.
In my opinion the order nisi should be discharged.
Windeyer J.
The legal mechanics used by organizations of employers and employees who seek from the Commonwealth Conciliation and Arbitration Commission awards governing conditions of employment are a familiar part of Australian industrial law and of the regulation of Australian industry. The jurisdiction of the Commission must, of course, have, as its constitutional basis, an industrial dispute, existing or impending. This requirement, and the requirement that the dispute extend beyond the limits of any one State, can be satisfied by a "paper dispute" deliberately created. But the Constitution puts limits to artificiality. I referred to this in the Professional Engineers' Case [1] . There must be a real, not merely a fictitous, dispute; and it must be an industrial dispute. That there is such a dispute may be evidenced by the fact that a log of claims put forward by one side is not acceded to by the other. But it does not follow that merely because a particular claim in a log of claims is not formally contested, or as a matter of tactics is withdrawn, a dispute is at an end. Whether or not there be a dispute is a question of fact. And that fact is not necessarily to be determined simply by construing, in terms of offer and counter-offer, written claims and correspondence. Nor is it to be determined simply by examining competing logs as if one were searching for an issue defined by pleadings. In the present case, however, there is not need to look beyond the documents and it is well to remember what the Chief Justice said in Reg. v. Kelly; Ex parte Australian Railways Union [2] : "It is perhaps wise to limit the answer to the particular case. For in questions concerning the artificial conceptions which have promoted the growth of the jurisdiction of the Arbitration Court strange and unexpected combinations of fact are apt to present themselves" [3] . The facts are fully set out in the judgment of my brother Owen, which I have had the opportunity of reading. I agree in his conclusions.
1. (1959) 107 C.L.R. 208, at p. 268.
2. (1953) 89 C.L.R. 461.
3. (1953) 89 C.L.R., at p. 476.
It is, I think, abundantly clear that there was, at all relevant times, a dispute between employers' and employees' organizations as to conditions of employment, including the leave to which employees should be entitled. The employees, who had at first wished for the inclusion of provisions for long service leave in an award, ceased to ask for this when State legislation dealt with the subject. Thereupon the employers, who had earlier opposed any provision for long service leave in the award, changed their ground and wished to have provisions for it included, thinking it better, from their point of view, to have the matter regulated by Commonwealth than by State law. But a change of front by the disputants did not put an end to the dispute. The dispute was, and is, as to long service leave among other conditions of employment. In particular it is as to whether that subject should be regulated by the Commonwealth award governing the conditions of employment generally. We would, I consider, be deserting reality for mere legalisms if we were to hold that there was not a real dispute. In my opinion the dispute is clearly about an industrial matter within the definition in the Conciliation and Arbitration Act, and is an industrial dispute within the meaning of the Constitution.
The order nisi should therefore be discharged.
Owen J.
This is an application by a number of unions of employees to make absolute an order nisi for prohibition directed to the Commonwealth Conciliation and Arbitration Commission and various employer organizations prohibiting the further hearing and determination of applications which are now before the Commission for the variation of two awards by making provision for long service leave for employees on the terms and conditions set out in the applications. The order nisi was granted upon the ground that no industrial dispute on the subject of long service leave exists between the employers and unions. The awards which are sought to be varied are the Graphic Arts (Interim) Award 1957 and the Metal Trades Award 1952 and the same question arises in each instance, namely whether an industrial dispute exists, but in each case the facts differ to some extent and it is convenient to deal first with those relating to the Graphic Arts Award. They are set out in detail in a judgment delivered by Gallagher J., a member of the Commission, which is reported [1] , and for present purposes may be stated as follows:
1. (1959) 92 C.A.R., at p. 556.
In August 1954 The Printing Industry Employees' Union of Australia, one of the applicants for the rule and which I will call the first union, served upon the Printing and Allied Trades Employers' Federation of Australia and The Federation of Master Photo-Engravers of Australia a log of claims for wages and working conditions, including a claim for long service leave. In September 1954 The Amalgamated Printing Trades Employees' Union of Australia, another of the applicants for the rule and which I will call the second union, served upon the same organizations of employers a log of claims relating to wages and working conditions, including a claim for long service leave upon conditions somewhat similar to those claimed in the log served by the first union. In October 1954 the two employer organizations mentioned above and a third employer organization, The Photo-Engraving Employers' Federation of Australia, served upon the first and second unions and upon another union of employees called The Federated Photo-Engravers, Photo-Lithographers and Photogravure Employees' Association of Australia, which I will call the third union, a joint log relating to wages and working conditions. It proposed that provision should be made for annual leave but that this should "be the only leave to which employees shall be entitled because of any period of service or employment". None of the claims set out in these logs was conceded by the organizations upon which they were served and it is admitted that as a result an industrial dispute within the meaning of the Conciliation and Arbitration Act came into existence between the unions and the employers. In July 1957 and before the dispute came on for hearing, the two employer organizations and a third one, The Victorian Chamber of Manufactures, which had not been served with the union logs, served upon the three unions a joint log claiming to vary the earlier joint log of October 1954 by making provision for long service leave upon terms less favourable to the employees than had been claimed by the first and second unions in the logs of August and September 1954. The letter accompanying this claim for a variation stated that "failing acceptance of the accompanying log within fourteen days of the service upon your organization, it is intended to submit the industrial dispute in the industry to which such log relates for settlement in accordance with the Commonwealth Conciliation and Arbitration Act ". The claim for this variation was not acceded to by the unions within the fourteen days specified or at all. Thereafter the claims and counter-claims set out in these various logs were considered by Mr. Commissioner Kelly and in February 1958 he made an interim award for the Printing Industry. The award stated, in cl. 57, that certain matters, including the claims relating to long service leave, were "reserved for further consideration", and this no doubt was done because the power to make an award providing for long service leave is exercisable only by the Commission in Presidential Session (s. 33 (1) (c)). On 7th July 1958, the Industrial Registrar notified the parties concerned that the dispute concerning long service leave would be heard by the Commission in Presidential Session on 29th July 1958 and, following this notification, the first and second unions on or about 25th July 1958 notified the two employer organizations upon which the union logs of 1954 had been served that the claims for long service leave contained in those logs were "absolutely entirely and unreservedly" withdrawn. On 29th July 1958 the matter came before the Commission in Presidential Session and counsel for the unions submitted that, as a result of the withdrawal by the unions of their claims for long service leave, an industrial dispute on that subject no longer existed and that the Commission had therefore no jurisdiction to deal with the matter: Reg. v. Blackburn; Ex parte Transport Workers' Union of Australia [1] . The objection was overruled and the Commission proceeded to consider a further submission made by counsel for the unions, based upon s. 41 (1) (d) (iii) of the Conciliation and Arbitration Act, that the making of an award prescribing long service leave was not necessary or desirable in the public interest. After consideration the Commission reached the conclusion that it "should not discuss the matter but should refrain, until further order, from determining the disputes so far as they concern long service leave". In June 1963 and as the result of a further application made by the three employer organizations, the Commission in Presidential Session decided that it should no longer refrain from hearing and determining the matter of long service leave and, in August and September 1963, that question came on for hearing and judgment was reserved. Thereupon application was made to this Court by the unions for the order nisi for prohibition which it is now sought to make absolute.
1. (1953) 88 C.L.R. 125.
On these facts, it seems to me to be clear that there is an industrial dispute existing between the various parties on the issue of long service leave and the terms and conditions upon which it should be granted. When the unions, in July 1958, withdrew their claims relating to such leave which had been put forward in their logs in 1954, there still remained on foot the claim made by the three employer organizations in their log of July 1957, a claim to which the unions concerned had not acceded. It is plain enough that in 1954 the unions were maintaining a claim for long service leave upon terms and conditions to be settled either by an industrial agreement or, in default of agreement, by an award. The employers, on the other hand, were rejecting that claim and, in turn, contending that no leave other than annual leave should be granted. Later, and as a result of the provisions for long service leave made by legislation in the various States, the parties reversed their attitudes. The employers desired to avoid the obligations imposed by the State laws by having the matter dealt with either by an industrial agreement having the force of a Federal award or, in default of agreement, by an award while the unions' attitude was that they wanted the conditions of long service leave to be governed by the State laws on the subject which, from their point of view, were more favourable than were the conditions put forward by the employers. The withdrawal by the unions of their claims in 1958 left outstanding the claims by the three employer organizations in 1957 that long service leave should be granted upon the terms and conditions set out in the joint log put forward by them in July of that year, and the unions were opposed to that claim.
Counsel for the applicants submitted, however, that a finding should not be made that an industrial dispute now exists on the subject of long service leave. There was, he said, only one dispute on that matter. Its ambit was defined by the logs put forward by the unions in August and September 1954 and the log put forward by two of the employer organizations in October of the same year, as varied by the log put forward by those two organizations and The Victorian Chamber of Manufactures in July 1957. When the unions withdrew their claims against the organizations other than The Victorian Chamber of Manufactures for long service leave in July 1958 whatever industrial dispute on the matter previously existed came to an end. The employers' claim in July 1957 that long service leave should be granted on the terms specified by them was to be regarded as no more than a statement of what the employers were prepared to grant if the unions persisted with their earlier claims. Since they had not done so, the dispute was at an end. But this submission cannot be accepted. The conclusion is clear that the employers' claim that long service leave should be allowed upon the terms specified by them was not made conditionally upon the unions' claims being pressed. It was made for the purpose of obtaining an industrial agreement having the force of an award or, in default of agreement, an award under the Act which would supersede the State laws on the subject, and it is equally clear that the stand taken by the unions was that the more favourable terms and conditions for which the laws of the States provided should continue to apply and that they were not therefore prepared to accept the terms and conditions proposed by the employers. That a dispute about an industrial matter then arose and still exists seems to me to be indisputable.
It was further submitted on behalf of the applicants that the employers' purpose in serving the joint log in 1957 was to obtain a Federal award prescribing the terms and conditions upon which long service leave was to be enjoyed in order to avoid the effect of the legislation in the States and the unions' failure or omission to accede to the employers' claim could not and did not create a dispute on an industrial matter. In support of this submission reliance was placed upon a passage in the judgment of Fullagar J. in Reg. v. Graziers' Association of N.S.W.; Ex parte Australian Workers' Union [1] , in which his Honour said: "The only real disagreement between the parties, if any can be said to have existed, lay in this, that the employers wanted, and the union did not want, the rates of pay of non-unionists to be governed by a federal award. And that is not a disagreement about an "industrial matter" " [2] . Counsel's argument proceeded upon the basis that this statement meant that a dispute between employers and employees as to whether the conditions governing an industry should or should not be laid down by a Federal award could not constitute a dispute about an industrial matter. But when the facts of that case are examined I think it is apparent that the passage quoted was not intended to convey that meaning. The facts were that a demand had been made upon a union by employer organizations that certain minimum rates of pay and conditions of employment should apply to all employees, that is to say to those who were members of the union and those who were not. There was in existence a State award covering both unionists and non-unionists and the purpose of the employers was to obtain a Federal award and thus supersede the State award which provided for higher rates of pay than were proposed in the employers' demand. The union did not accede to the demand. A Conciliation Commissioner purporting to act under the Conciliation and Arbitration Act made an interim award which covered non-unionists as well as employees who were members of the union, and an application for a writ of prohibition was successfully made to this Court to prohibit further proceedings on the interim award but only in so far as it related to employees who were not members of the union. The Court held that since the union represented only its own members, its mere failure to accede to the employers' demand concerning non-unionists afforded no evidence of the existence of an industrial dispute as to the rates of pay and conditions of employment to be prescribed for such persons. Accordingly the Conciliation Commissioner had no jurisdiction to make an award governing the rates of pay and conditions for those who were not members of the union. The fact "that the employers wanted, and the union did not want, the rates of pay of non-unionists to be governed by a federal award" did not constitute an industrial dispute since there could be no such dispute without at least two disputants and this element was lacking.
1. (1956) 96 C.L.R. 317.
2. (1956) 96 C.L.R., at p. 337.
I turn then to the relevant facts relating to the Metal Trades Award. In August 1950 The Metal Trades Employers' Association, The Motor Traders' Association of New South Wales (Incorporated), The Victorian Chamber of Manufactures and The Metal Industries Association of South Australia (Incorporated), all of whom are respondents to these proceedings, served upon a number of the present applicants a log of claims which made no reference to the subject of long service leave. A number of counter-logs by the unions concerned were served on the employer organizations but, with one exception, these contained no provision for long service leave. In the case, however, of a log served by The Electrical Trades Union of Australia a claim was made for what was described as "continuous service leave" which was in fact a demand for long service leave upon terms and conditions set out in the log. The employer organizations did not accede to the union's claim. Later, in May 1957, the employer organizations served a further log upon the unions, including The Electrical Trades Union of Australia, which made provision for long service leave upon terms less favourable than those claimed earlier by the latter union. The unions did not accede to the claims made in the employers' log. The evidence before us does not show that the claim for long service leave put forward by The Electrical Trades Union of Australia was later withdrawn but the parties have informed us that this was the fact and that the withdrawal took place in July 1957. The employers' claim, however, remained and it came on for hearing before the Commission in Presidential Session at the same time as it heard the claim for a variation of the Graphic Arts Award. Here again it is plain that the purpose of the employers' demand was to obtain an agreement having the force of an award or an award which would have the effect of superseding the provisions of State legislation on the subject of long service leave. But, as in the Graphic Arts matter, I think it is clear that an industrial dispute exists in relation to long service leave and the fact that the purpose of the employer organizations was as I have stated does not justify the conclusion that no such dispute exists.
The order nisi should be discharged. |
high_court_of_australia:/showbyHandle/1/10287 | decision | commonwealth | high_court_of_australia | text/html | null | Royal Victorian Aero Club v Commonwealth [1954] HCA 59 | https://eresources.hcourt.gov.au/showbyHandle/1/10287 | 2024-09-13T22:51:29.079913+10:00 | High Court of Australia
Webb J.
Royal Victorian Aero Club v Commonwealth
[1954] HCA 59
Cur. adv. vult.
The following written judgment was delivered:—
Nov. 8
Webb J.
In this action the plaintiff club claims £1,067 16s. 0d. from the defendant Commonwealth for the destruction of the club's aircraft in a crash during a solo flight by an Air Force trainee and for other damage to property caused by the crash. This sum is made up as follows:—
Value of the aircraft £1,000 0 0 Cost of salving 20 0 0 Amount claimed by State Electricity Commission for repairs to high tension wires 47 16 0
The claim is made under an agreement between the parties for the instruction and training by the club of Royal Australian Air Force personnel, including trainees who are to be trained by the club to the standard of private pilot licence, as set out in the Department of Civil Aviation Air Navigation Orders. The Commonwealth denies any liability to the club, and counter-claims for £47 16s. 0d. which it has paid to the State Electricity Commission for repairs to the high-tension wires. No question arises as to the accuracy of these amounts.
The rights of the parties depend on the answer to the question whether a trainee named Graeme Lowe, who was on a solo flight in the aircraft in the course of forced landing practice when it crashed near Laverton, Victoria, and in so doing fouled the high-tension wires, was in the particular circumstances guilty of wilful misconduct in flying below 200 feet, contrary to instructions. If guilty, then judgment is to be entered for the plaintiff club for the amount claimed (except I assume £47 16s. 0d.); if not, then judgment is to be entered for the defendant Commonwealth on the claim and for £47 16s. 0d. on the counterclaim.
Evidence was given for the plaintiff club by its chief flying instructor, Macpherson, and by its flying instructor, Tilbury. The trainee Lowe was also called by the plaintiff after I had intimated at the end of the plaintiff's other evidence that I did not see how the plaintiff could succeed without the assistance of the trainee's evidence. I had previously rejected as inadmissible a report and correspondence said to bear on the circumstances of the crash. As Lowe did not prove to be a hostile witness, he could not be cross-examined by Mr. Mann for the club. On the other hand Mr. McInerney for the Commonwealth had no occasion to subject him to any real cross-examination. The result was that the most important witness was not actually subjected to cross-examination. However, without that assistance, I readily formed the opinion that Lowe was truthful. Mr. Mann said that Lowe appeared to him to be "a very good type of frank young man".
The evidence of these three witnesses, so far as material, was as follows:—
Chief flying instructor Macpherson was in charge of flying training at Laverton. Lowe was allotted to Tilbury, but Macpherson came into contact with Lowe, among other trainees, in the course of discussions on flying sequences, of which there were twenty-eight, beginning with "Familiarity with cockpit layout" and ending with "Formation flying".
Each sequence was taken separately, but as training proceeded it was incorporated in later sequences, e.g., it was necessary for forced landing practice on which Lowe was engaged when the crash occurred to carry out gliding, descending, climbing and gliding turns, and side-slipping, all of which preceded "forced landings" in the sequences. It was very important that a trainee should do many forced landing descents. These were not complete landings: trainees were instructed not to fly solo below 200 feet, i.e., above any obstacles on the ground, if the field for the exercise has been selected by the trainee himself. The trainee's aim was to reach a position 1,000 feet above the ground on the approach side of the field from which point he could carry out a cross-wind descent to 500 feet immediately opposite the approach path into the field, where he completed his turn into the field, then making the simulated forced landing. By the time he reached 200 feet from the ground above obstacles he should have known whether he could safely land in the field if he continued; but whether he knew this or not at that height he should then have opened the throttle and resumed normal flying: he was not at liberty to go below 200 feet to make sure. Before undertaking this solo exercise, the trainees were instructed about this 200 feet limitation, because of "possible dangers of concentrating too hard on final approach". At the stage that Lowe had reached in his training when this crash occurred, a trainee was "well versed and practised in judging a height of 200 feet". Lowe in fact was very near completion of the whole course.
Flying instructor Tilbury supported Macpherson and said that prior to the accident Lowe would have done several periods solo on the forced landings sequence, and that the trainee was fully aware of the importance of not coming under 200 feet at any time during forced landing practice. Lowe had advanced beyond the forced landing sequence. The exercise on which he crashed was his second of the kind that day.
I accept Macpherson and Tilbury as truthful witnesses.
The trainee Lowe said he had instructions in "forced landings" and had carried out that practice several times, both dual and solo. "Dual" means with an instructor. Lectures were given to him not only by Macpherson and Tilbury but also by an officer of the Air Force. The trainees had been told that on solo forced landings on fields of their own selection, they were not to come below 200 feet. The field where the crash took place was one of Lowe's selection. At 2200 feet Lowe throttled back and put the aircraft into a glide and descended so as to position himself at one side of the field at 1000 feet. He came down on a cross-wind to 700 feet on the altimeter, then turned in on the final approach and continued down. At about 200 feet he was not absolutely certain whether he would have made the field had he to come down, or whether he was landing "dead into the wind"; so he came down "slightly" further to check on those two points. At about fifty to seventy feet he noticed two wires running across the boundary fence. He then opened the throttle and pulled back on the stick. This would ordinarily have cleared the wires; but the engine spluttered "and did not come on"; one of the wheel struts hit the wires, and the plane crashed nose down. He was aware that he was flying below 200 feet; it was part of the exercise to be aware of it; but he did not think of the instruction about not coming below 200 feet. This limit was mentioned by Macpherson and by the Air Force officer in lectures. It was a point, but by no means the most important point. It was emphasized, but perhaps no more than landing into the wind. The limit did not occur to him during this exercise; his concentration was wholly on the manoeuvre which required a great deal of concentration. Concentration must be wholly on it; his concentration was solely on it. At no time during the manoeuvre did he remember the instruction about the 200 feet limit. He first recollected it after the crash when he was going to a farm house to telephone Laverton.
As already stated, I accept Lowe as a truthful witness.
It is submitted by Mr. Mann for the club that Lowe was guilty of wilful misconduct within the meaning of the agreement sued on. The effect of that agreement as amended may be summarized as follows:—It provides for the training to the prescribed standard of Air Force trainees by servants of the club and for the suspension or termination of the training by the Commonwealth where the trainee is unsuitable, or for other reasons not necessary to state here. The trainee is required to observe the rules of the club and is subject to the discipline of the Royal Australian Air Force. By cl. 10 the Commonwealth is to pay £4 10s. 0d. for each hour flown by the club aircraft when operating from the club's home base and £5 per hour when operating from any other centre. In addition, the Commonwealth undertakes to set aside 10s. per hour for the purpose of assisting the club in the replacement of aircraft. By cl. 12 when R.A.A.F. personnel are injured during flying training other than as a result of the wilful misconduct of a servant of the club, the Commonwealth accepts liability. By cl. 13 as amended, where damage arises from the wilful misconduct of R.A.A.F. personnel, the Commonwealth undertakes to recompense the club for damage to its aircraft or other property, and indemnifies the club against claims and proceedings against the club. By cl. 14 and subject to cl. 13 the club indemnifies the Commonwealth against claims and proceedings by any person, not being an officer or employee of the Commonwealth, in respect of injuries or fatalities, or damage to property caused by the club or its members or R.A.A.F. personnel.
Mr. Mann submitted that the meaning of "wilful misconduct" depends on the context and subject matter of the particular agreement in which it is found, and that no direct assistance can be derived from the railway consignment note cases for which the meaning has long been settled. He also submitted that "suicide" cases, e.g., those where the trainee might deliberately crash into a building, were not contemplated by the parties to this agreement: the cases the parties had in mind would be on the one hand those arising from accidents, errors of judgment and negligence, which the club should be able to control by careful training and which would be covered by the payment of £4 10s. 0d. or £5 per hour, and on the other hand those arising from the trainee's disobedience of orders, which no efforts or diligence of the club or its servants could be expected to overcome. However, as to this further submission, this is not a satisfactory discrimen, as Mr. McInerney pointed out, because the club and its servants would also be powerless to eradicate a trainee's stupidity or misunderstanding not amounting to disobedience.
In these aircraft cases, whether they deal with the carriage of persons or goods, as in Horabin v. British Overseas Airways Corporation [1] , or with the training of pilots, as in this case, it is of course proper to have regard to the context of the particular contract of carriage by air or other contract in determining the meaning of any term used in it. That we can be sure is just what was done in the consignment note cases. Indeed it should be done in all cases. But subject to that, there is no reason why the meaning given to a similar term in contracts for carriage by railway should not be applied as Barry J. applied it in summing up to the jury in Horabin's Case [1] . His Lordship treated the term "wilful misconduct" as meaning something blameworthy, intentional wrongdoing, as in the railway consignment cases. The consignment note cases have been applied to other forms of contracts, as appears in In re Mayor of London and Tubb's Contract [2] , and In re City Equitable Fire Insurance Co. Ltd. [3] , per Pollock M.R. Mr. Mann himself sought to rely on the cases on the meaning of "wilful default" in contracts of sale and mortgages, as in In re Young and Harston's Contract [4] and In re Hetling and Merton's Contract [5] in which it was held that that meaning also had been settled. In the former case Bowen L.J. said that "wilful" as used in courts of law implied nothing blame-able, but merely that the person of whose act or default the expression was used was a free agent and that what was done arose from the spontaneous action of his will. Mr. Mann relied on this. However in In re Mayor of London and Tubb's Contract [6] Lindley L.J. expressed the opinion that the observations hereinafter set out of Bramwell L.J. in Lewis v. Great Western Railway Co. [7] were quite consistent with Bowen L.J.'s observations in In re Young and Harston's Contract [8] , bearing in mind that Bowen L.J. pre-supposed knowledge of what was done and intention to do it and was not addressing himself to a case of an honest mistake or oversight.
1. (1952) 2 All E.R. 1016.
2. (1952) 2 All E.R. 1016.
3. (1894) 2 Ch. 524.
4. (1925) 1 Ch. 407, at p. 517.
5. (1885) 31 Ch. D. 168.
6. (1893) 3 Ch. 269.
7. (1894) 2 Ch., at p. 536.
8. (1877) 3 Q.B.D. 195, at p. 206.
9. (1885) 31 Ch. D., at pp. 174-175.
For the purpose of this agreement I think the meaning of "wilful misconduct" is best expressed by Brett L.J. in Lewis v. Great Western Railway Co. [1] as follows:—
In a contract where the term wilful misconduct is put as something different from and excluding negligence of every kind, it seems to me that it must mean the doing of something, or the omitting to do something, which it is wrong to do or to omit, where the person who is guilty of the act or the omission knows that the act which he is doing, or that which he is omitting to do, is a wrong thing to do or to omit; and it involves the knowledge of the person that the thing which he is doing is wrong Care must be taken to ascertain that it is not only misconduct but wilful misconduct, and I think that those two terms together import a knowledge of wrong on the part of the person who is supposed to be guilty of the act or omission [2] .
1. (1877) 3 Q.B.D. 195.
2. (1877) 3 Q.B.D., at pp. 210-211.
In the same case Bramwell L.J. had already made the observation referred to by Lindley L.J. in In re Mayor of London and Tubb's Contract [3] that—
1. (1894) 2 Ch. 524.
" "Wilful misconduct" means misconduct to which the will is a party, something opposed to accident or negligence; the misconduct, not the conduct, must be wilful I think it would be wilful misconduct if a man did an act not knowing whether mischief would or would not result from it. I do not mean when in a state of ignorance, but after being told, "Now this may or may not be a right thing to do". He might say, "Well, I do not know which is right, and I do not care; I will do this". I am much inclined to think that that would be "wilful misconduct", because he acted under the supposition that it might be mischievous, and with an indifference to his duty to ascertain whether it was mischievous or not. I think that would be wilful misconduct" [4] .
1. (1877) 3 Q.B.D., at p. 206.
Bramwell L.J. and Brett L.J. gave to the term "wilful misconduct" its natural meaning and not its meaning in a particular context or for a particular subject matter. In fact in none of the English railway cases was the term given a meaning other than its natural meaning. From the first to the last of these cases the particular context or subject matter was never a determining factor: in all cases the natural meaning was given to the term, nothing more nor less. Neither the context nor the subject matter required a departure from the natural meaning.
To employ the language of Johnson J. in Graham v. Belfast and Northern Counties Railway Co. [5] , the question is: did the trainee know and appreciate that it was wrong conduct on his part in the existing circumstances to do or fail or omit to do a particular thing and yet intentionally did or failed to do or omitted to do it? Or to employ the language of Lord Alverstone in Forder v. Great Western Railway Co. [1] : did the trainee act with reckless carelessness, not caring what the results of his carelessness might be? The answer to both questions must be that he did not.
1. (1901) 2 I.R. 13, at p. 19.
2. (1905) 2 K.B. 532.
It is conceded by the Commonwealth, as I understand Mr. McInerney, that the trainee would have been guilty of wilful misconduct if he had recollected as he came below 200 feet that he was acting contrary to his instructions, but still continued to descend instead of going up again.
Reliance is not placed by the Commonwealth on the passage in the judgment of Kitto J. in Transport Commission v. Neale Edwards Pty. Ltd. [2] reading:—
It is nothing to the point that he (the driver of the train) may have been aware that he was infringing restrictions as to speed which were binding upon him, for the accident was not caused by infringing these restrictions; it was caused by allowing the train to enter the curve at a greater speed than that at which it was in fact possible for that train to take that curve. What is to the point is the question whether he was aware that he was subjecting the train to an actual danger of entering the curve at such a greater speed [2] .
1. (1954) 92 C.L.R. 214, at p. 230.
2. (1954) 92 C.L.R. 214, at p. 230.
In the Tasmanian case the speed limit had been fixed for each curve and moreover written notices had been issued by the transport commissioner requiring the train driver to observe those limits in the interests of safety. It was not then merely the case of a general speed limit, such as was sometimes found in traffic Acts or regulations made thereunder, fixed for all places and times and in all circumstances so that a breach would not necessarily create a situation of actual danger in every case. If in that case the commissioner's liability was rightly placed on that narrow ground, then there is no reason why the Commonwealth's liability in this case should not be similarly restricted as the need for the observance of the speed limit was as strongly emphasized in the Tasmanian case as was the 200 feet limit in this case. If the Commonwealth's liability is so restricted, then even if it should be found that the trainee Lowe knew he was disobeying instructions as he flew below 200 feet, still there is no evidence to support a finding that he also knew he was subjecting the aircraft to an actual danger in so doing. In neither case was it shown or suggested that the speed limit or the height limit was in fact more restricted than safety required; but the passage from the judgment of Kitto J. indicates that the onus of proof that the limit fixed the actual danger point was on the plaintiff and it was not discharged.
I think then that the claim fails and that the counterclaim succeeds.
I give judgment for the defendant Commonwealth on the claim and judgment for the defendant Commonwealth for £47 16s. 0d. on the counterclaim.
The plaintiff club will pay to the defendant Commonwealth the costs of the action.
Liberty to apply. |
high_court_of_australia:/showbyHandle/1/11272 | decision | commonwealth | high_court_of_australia | text/html | null | Kezich v Leighton Contractors Pty Ltd [1974] HCA 50 | https://eresources.hcourt.gov.au/showbyHandle/1/11272 | 2024-09-13T22:51:32.614028+10:00 | High Court of Australia
Menzies, Gibbs, Stephen and Mason JJ.
Kezich v Leighton Contractors Pty Ltd
[1974] HCA 50
ORDER
Special leave to appeal granted. Appeal allowed. Order of the Full Court of the Supreme Court of Western Australia, whereby it answered in the affirmative two questions in a case stated by the Chairman of the Workers' Compensation Board of Western Australia, be set aside and in lieu thereof order that the questions in the said case stated be answered in the negative. Order that the respondent pay the applicant's costs of the case stated before the Full Court of the Supreme Court and the applicant's costs of this appeal.
Cur. adv. vult.
The following written judgments were delivered:—
Oct. 22
Menzies J.
I have had the advantage of reading the judgments of Gibbs J., and Mason J. I agree with them.
Gibbs J.
The appellant was on 3rd December 1973 injured while working at Mt Newman as a labourer in the employment of the respondent. As a result he was totally incapacitated. It is admitted that he is entitled to an award of workers' compensation under the legislation of Western Australia. The question for decision is at what rate the award should be made in respect of the period since 27th December 1973 when the amendments made by the Workers' Compensation Act Amendment Act, 1973 W.A. came into force. By cl. 1 (c) (i) of the schedule to the Workers' Compensation Act, 1912-1973 W.A. ("the Act") the amount of compensation payable when total incapacity for work results from the injury is (subject to a proviso which is immaterial for present purposes) "an amount equal to the weekly earnings of the worker computed in accordance with clause 2 of this Schedule". Clause 2 of the schedule is as follows:
For the purposes of this Act, "weekly earnings" means the amount of the ordinary wage or salary (including any over award payment) the worker would have received for the ordinary hours he would have worked, if he were not incapacitated for work as a result of the injury.
The appellant's employment with the respondent was subject to an industrial award — the Building Construction Employees and Builders' Labourers' Award, 1973. Clause 14 of that award provided, inter alia, that "the ordinary working hours shall be 40 in a week to be worked in five days". The award fixed the rates of pay which were to be paid for these "ordinary working hours", and provided an overtime payment, at an increased rate, "for all work in excess of the hours prescribed in clause 14 of this part of this award": cl. 17. In fact the appellant was engaged by the respondent on the basis that he would normally work sixty hours per week while employed by the respondent at Mt Newman; he was to work ten hours six days a week. If he had not sustained his injury his employment would have continued on the same basis, at least until the date on which the Workers' Compensation Board gave its decision on his application for compensation. The question for decision is whether he was, as the Board decided, entitled to an award of $167.50 per week which, it was conceded, should for the purposes of his application be taken as the amount which he ordinarily earned in the employment of the respondent prior to the accident, or whether, as the majority of the Full Court of the Supreme Court of Western Australia held, he was not entitled to an award at a higher rate than $91.40 which represented the pay he would have received if he had worked forty hours per week. The answer to this question depends entirely on the proper construction of cl. 2 of the schedule.
The Act deals with the compensation payable to workers generally; it is not confined in its operation to any particular trade. Moreover, although most workers within the meaning of the Act are no doubt employed in accordance with the terms of an industrial award, that is not a condition of the employer's liability to pay compensation. It would not be legitimate to construe the schedule by placing upon the words "ordinary hours" the meaning which they may happen to bear in an industrial award governing employment of a particular kind. The meaning of the Act cannot be determined by reference to the provisions of the Building Construction Employees and Builders' Labourers' Award, 1973. Indeed, even if it could be established that many industrial awards use the phrase "ordinary hours" and that wherever it appears in any award it has the same meaning, that would not justify referring to a multitude of unrelated documents by different authors as an aid to the construction of a statute. What has to be determined is the meaning that those words have in the Act and since the words "ordinary hours" are common English words they should, in accordance with established principles of statutory construction, be understood in their natural meaning unless the context otherwise requires.
The word "ordinary" means "regular, normal, customary, usual". A man's "ordinary hours" of work are the hours during which it is usual for him to work. There is nothing in the expression "ordinary hours" that connotes payment at any particular rate, and to understand the words as meaning "hours during which work is done for which overtime is not paid" would be to place upon them a meaning which they simply do not bear. The expression "the ordinary hours he would have worked" in my opinion means the same as "the hours he would ordinarily have worked" and it is of course no reason to depart from the proper meaning of the words because the same meaning could have been achieved by a different form of words; in the collocations to which I have just referred the use of the adjective instead of an adverb does not change the sense of the expression.
With respect, I cannot agree with the suggestion that if the phrase is construed in this way the word "ordinary" would add nothing to its meaning. If the word "ordinary" where it appears before "hours" had been omitted from cl. 2, it would not have been clear whether, in the common case in which a workman's hours of employment had varied from week to week, depending upon whether he had worked overtime and on how much overtime he had worked, the hours mentioned were to be determined by ascertaining what hours were ordinarily worked or by taking an average or in some other way. As the clause stands, what has to be determined is what were the hours the workman would ordinarily have worked had he not been incapacitated. The workman is then to be paid the wage he would ordinarily have received for working those hours. The clause is not concerned with the question whether the "ordinary wage" included something extra for overtime, but solely with the question what was ordinary for the particular worker concerned.
In my opinion, the words of cl. 2 of the schedule, when read with cl. 1 (c) (i), on their proper construction have the effect that during total incapacity the workman is to receive as compensation a weekly amount calculated by applying to the number of hours he would ordinarily have worked each week the rate of pay (including overtime) that he would ordinarily have received in respect of those hours. There is nothing in this result that is absurd or inharmonious with the scheme of the Act; on the contrary, construed in this way, the schedule provides what appears to me to be an eminently fair basis of compensation to a workman who has been totally incapacitated by his injury.
On this construction, the application of the schedule to the present case presents no difficulty. In fact, in accordance with the terms of his engagement, the applicant usually worked sixty hours per week. The ordinary hours he would have worked, had he not been incapacitated, amounted to sixty hours per week.
For the reasons I have given, I consider that the questions in the case stated should have been answered as follows:
1. On the facts as found did the Board err in law in holding that the applicant was entitled to an award of weekly payments from 27th December 1973 at the rate of $167.50?
A. No.
2. On the facts as found did the Board err in law in holding that from 27th December 1973 the applicant was entitled to weekly payments at a higher rate than $91.40 per week?
A. No.
I would allow the appeal.
Stephen J.
For the reasons stated in the judgments of my brothers Gibbs and Mason I would grant special leave, allow this appeal and answer in the negative both of the questions asked in the case stated.
Mason J.
This application for special leave to appeal from a decision of the Full Court of the Supreme Court of Western Australia on a case stated by the Workers' Compensation Board relates to s. 13 of Act No. 96 of 1973, which came into operation on 27th December of that year. What the section did was to substitute a new cl. 2 in the 1st Sch. of the Workers' Compensation Act, 1912 W.A., as amended, thereby introducing a new definition of the expression "weekly earnings". The expression is of importance because the entitlement to weekly compensation which the Act confers upon an injured worker who is totally or partially incapacitated for work is necessarily calculated by reference to his weekly earnings "computed in accordance with clause 2".
Clause 2 is in the following terms:
For the purposes of this Act, "weekly earnings" means the amount of the ordinary wage or salary (including any over award payment) the worker would have received for the ordinary hours he would have worked, if he were not incapacitated for work as a result of the injury.
Formerly the clause had contained a series of provisions prescribing rules to be observed in calculating the "earnings" and "average weekly earnings" of a worker by reference to which entitlement to weekly compensation was calculated. Broadly speaking, the repealed cl. 2 was so expressed that an injured worker's entitlement to weekly compensation was calculated by reference to the rate per week at which the worker was being remunerated.
The facts recited in the case are that the applicant commenced employment with the respondent as a builders' labourer at Mt Newman on 21st September 1973. He was continuously so employed until 3rd December 1973 when he sustained an injury at work which has since totally incapacitated him. The applicant was engaged by the respondent on the basis that he would normally work sixty hours per week whilst employed by them, his hours being worked as to ten hours on each of six days in the week. His employment was subject to the Building Construction Employees and Builders' Labourers' Award, 1973. This award provided a rate of pay of $2.15 per ordinary hour of work, being $86 for forty such hours. Clause 14 of the award describes as the ordinary hours of work the hours between 7.30 a.m. and 5.30 p.m. from Monday to Friday inclusive, not exceeding eight hours per day.
It is accepted that the respondent remunerated the applicant as to forty hours at the ordinary rate and as to varying hours at a rate equal to time and a half, double time, and double time and a half, in accordance with the provisions of the award as to overtime. If he had not sustained injury on 3rd December 1973 his employment would have continued on the same basis at least until 17th April 1974. It is conceded that the amount of $167.50 should be accepted as the amount ordinarily earned by the applicant in the employment of the respondent prior to the accident.
Compensation was paid by the respondent up to and including the week ending 31st December 1973 at the rate fixed by the Act then in force.
The case states the following questions:
1. On the facts as found, did the Board err in law in holding that the applicant was entitled to an award of weekly payments from 27th December 1973 at the rate of $167.50?
2. On the facts as found, did the Board err in law in holding that from 27th December 1973 the applicant was entitled to weekly payments at a higher rate than $86 per week?
The figure of $86 in question 2 was altered by consent to $91, the alteration being occasioned by a more recent amendment to the award. By a majority decision the Full Court answered each question in the affirmative.
The applicant's case was that "weekly earnings" as defined means "the amount of wage or salary (including any over award payment) the worker would have received if he were not incapacitated for work by the injury" — an amount calculated in this case by ascertaining the hours which the worker had ordinarily been working in the employment before the injury, at least until 17th April 1974, and the ordinary amount which he would have received or would receive after the injury for those hours of work had he not been incapacitated.
This approach was criticized by Burt J. in the Supreme Court. His Honour pointed out that the applicant reads "the ordinary hours he would have worked" as "the hours ordinarily worked", thereby giving no effect to the apparent limitation introduced by the word "ordinary" where it governs "wage or salary" and "hours he would have worked". To overcome this criticism the applicant now says that the presence of the word "ordinary" serves to exclude from consideration some extraordinary rate of remuneration which the worker might receive on special occasions; likewise, it excludes from consideration additional hours which he might work on particular occasions over and above the hours ordinarily worked. It must be acknowledged that the applicant's approach does involve a change in the syntax of the clause, but this seems to be of little importance when other matters are taken into consideration.
A second criticism is that the applicant's construction gives to cl. 2 the same meaning as had formerly been assigned to the provision which it replaced. In my view this is not a valid ground of criticism, for the old provision consisted of a complex series of rules the effect of which differed, no matter how slightly, from the new provision on the interpretation for which the applicant contends.
The respondent's suggested construction which found favour with the majority in the Full Court produces more formidable problems. According to this view the compensation payable is referable to the ordinary (standard) rate of pay for the ordinary (non-overtime) hours of work in the particular occupation, whether the employment is regulated by an industrial award or not. Where the employment is regulated by such an award it will fix what are the ordinary hours of work and what is the ordinary rate of pay. Where the employment is not so regulated, other evidence will be required to establish what is standard in the relevant occupation.
This approach reads the word "ordinary" in the expression "ordinary hours that he would have worked" as referring to hours which attract no additional payment, i.e. for which overtime is not payable; it thereby avoids the conversion from "ordinary" to "ordinarily". This approach has the attraction of providing a measure of compensation easily calculated when the worker is working the ordinary hours each week under an industrial award. It is, however, a very different story when one moves away from this routine situation.
Special problems arise in the case of a casual or shift worker whose hours of work are remunerated otherwise than by reference to the ordinary rate of pay. Assuming that such a worker intended to continue casual or shift work it could not be said that, if he were not incapacitated, he would have worked any "ordinary hours" in the sense which the respondent gives to that expression. An endeavour was made to vault this yawning chasm by saying that the hours which would have been worked not exceeding the number in a week stipulated in the award should be treated as ordinary hours. However, there is no warrant for this course in the basic interpretation put forward by the respondent.
Faced with a choice between the two alternatives I prefer that advocated by the applicant. It is subject to grammatical criticism, but this so it seems to me is of less importance than the serious criticism that the competing construction does not enable one to calculate compensation for certain classes of workers, except by deserting that construction when that difficulty arises.
In reaching this conclusion I am influenced also by the fact that cl. 2 refers to the amount of the "ordinary wage or salary" which the worker would have received, that is, the aggregate amount of wage or salary payable for a week's work. It makes no reference to ordinary rates of pay, a concept which lies at the foundation of the respondent's argument.
For these reasons I would grant special leave and allow the appeal and answer the questions asked in the negative. |
high_court_of_australia:/showbyHandle/1/10180 | decision | commonwealth | high_court_of_australia | text/html | null | Shepperd v Municipality of Ryde [1952] HCA 9 | https://eresources.hcourt.gov.au/showbyHandle/1/10180 | 2024-09-13T22:51:37.183052+10:00 | High Court of Australia
Dixon, McTiernan, Webb, Fullagar and Kitto JJ.
Shepperd v Municipality of Ryde
[1952] HCA 9
ORDER
Appeal allowed with costs. Order of the Supreme Court of 24th September 1951 discharged. In lieu thereof order that the defendant by its servants and agents be restrained until the hearing of the suit or the further order of the Supreme Court from using or permitting to be used for any purpose other than that of a park the area of land bounded by Perkins Street and Driver Street and being the land shown on a certain plan prepared by the defendant for the purposes of Housing Project No. 4 as bounded by the said streets and thereon described as Park. And that the defendant do pay the costs of the motion notice whereof was dated 24th August 1951.
Cur. adv. vult.
The following written judgments were delivered:—
March 11, 1952
Dixon, McTiernan, Fullagar and Kitto JJ.
This is an appeal by leave from an order of Roper C.J. in Eq. refusing an interlocutory injunction. The interlocutory injunction which the plaintiff-appellant sought was to restrain the respondent Council from using or permitting to be used for any purpose other than that of a park an area of land in the plan of a municipal housing project which was described as a park.
Acting apparently in pursuance of s. 496 of the Local Government Act 1919-1948 N.S.W. the respondent Council put forward a building plan which it called the Ryde Council Housing Scheme. A pamphlet was prepared entitled "Group Housing by Ryde Municipal Council" setting out its attractive features. The pamphlet opened with the statement that the municipal housing programme provided for the erection by the Council of 2,500 attractive homes planned and orientated to suit local conditions and constructed on modern subdivisions complete with all services, children's play areas, park areas, street beautification, roads, footpaths, &c. The separate sections of the scheme seem to have been called projects. That called "Housing Scheme Project No. 4" consisted of a subdivision of a large area of land into streets, park areas and building allotments, of which there were about two hundred and thirty. The names of the streets, the numbered allotments and the sites of the parks were shown on a plan.
The plaintiff-appellant, who wished to buy a home, applied for information at the Council Chambers. An officer, who is described as the clerical assistant of the housing officer, gave him a copy of the pamphlet and a form of application. As a result he made a formal application for a home, and supplied the particulars which were required of him. The same officer, whose duties included taking prospective buyers to inspect houses, showed him one that was available. It did not suit the plaintiff but three months later the town clerk wrote offering him a dwelling erected upon Lot 85 of the Housing Project No. 4 fronting a street called Perkins Street. The plaintiff inspected it and found that opposite to the block there was a park. In fact there were two parks; for a street named Driver Street entered Perkins Street at an angle of about 120° opposite to Lot 85, enclosing on that side one piece of land denoted as a park, and on the side, where Driver Street made an acute angle with Perkins Street enclosing another smaller piece of land so denoted. Both the house and the prospect pleased the plaintiff and his wife. He called at the Council's housing branch and again saw the same officer. He told him that he was interested in Lot 85 and wished to see the plan of that part of the project. A copy of the plan of No. 4 Housing Project Subdivision was produced to him and he saw the two pieces of land marked "Park" opposite Lot 85. He asked to take a tracing of the material part and was supplied with paper for the purpose. He spoke of the attraction the parks meant for him and the officer pointed on the plan to the two pieces of land and said they would both be park areas. The plaintiff took the plan away to consult his wife and a few days later informed the officer that he would buy the house, again mentioning the parks. The Council agreed that he should have the house, which became available for occupation at the beginning of June 1950. A contract was made out and signed on 2nd June 1950. It embodied provisions for the calculation of the purchase money according to an addendum. The calculation was based on the value of the land, the cost of the building, a proportion of the cost of street improvement, architect's fees and administration expenses. The contract provided for a deposit of £1,500 and weekly payments consisting of principal and interest spread over a maximum period of thirty years. What is relevant to the question in this appeal is cl. 1 which contains the parcels. That clause said that subject to the terms and conditions thereinafter contained the vendor should sell and the purchaser should buy all that piece of land situated in Perkins Street, West Ryde in the Parish of Hunter's Hill County of Cumberland State of New South Wales part of the vendor's Housing Project No. 4 and being allotment No. 85 together with the buildings erected thereon at a price to be ascertained as provided in the addendum and to be paid as thereinafter mentioned.
Within a fortnight of the contract the plaintiff entered into occupation of the house he had bought. Nothing was done to make the two areas more park-like; of that however he made no complaint. But about July 1951 the householders and owners of land in the Housing Project learned that the Council intended to subdivide the areas marked on the plan as parks. Through a solicitor they remonstrated, but on 8th August 1951 a resolution was passed by the Council that among other areas the two areas mentioned should be subdivided and that houses should be built on the allotments. A week later the resolution was slightly modified by a decision not to build on the exact corner allotments of this new subdivision, and in some other immaterial respects. Otherwise the Council refused to recede from the resolution and on 24th August 1951 the plaintiff filed his statement of claim and gave notice of motion for an interlocutory injunction. Roper C.J. in Eq. dismissed the motion on the ground that there was no contract to carry out the plan embodying the housing project and that no basis could be found for an injunction in estoppel, if for no other reason, because there was no representation as to an existing fact.
Three views of the case were presented in support of the appeal against this decision. In the first place it was contended that the contract referred to the plan in such a way as to make it part of the contract and that a stipulation was to be implied that the Council would not depart from the plan and destroy an amenity or advantage for which it provided. In the next place an alternative contention was advanced that when through its officer the Council furnished the plaintiff with the pamphlet, and produced to him the plan of the project showing the parks provided, the Council offered a collateral promise that if he would become a purchaser the Council would not use or deal with the land shown as parks for any other purpose. There was thus a collateral contract to that effect the consideration for which was the plaintiff's entering into the contract of purchase. Thirdly it was contended that the pamphlet and the plan amounted together to a representation that the areas shown as parks had been reserved as parks. Such a representation was a representation of existing fact and, having been acted upon by the plaintiff, it estopped the Council from denying that the areas had been so reserved. Upon the footing that they were reserved as parks, the plaintiff was entitled to an injunction against cutting up the parks into building allotments and building houses upon them.
The questions raised by these contentions cannot be made the subject of final decision upon this appeal. What is under appeal is the refusal of an interlocutory injunction and what we are called upon to decide is whether it ought to have been granted.
In order to obtain such an injunction the plaintiff must make a prima-facie case in support of the existence of the right he seeks to enforce or protect. But he is not required finally to establish the issues upon which the existence of the right depends.
It is perhaps desirable to begin the consideration of the question whether the plaintiff has shown a prima-facie case under any of the three foregoing heads by seeing exactly what statutory powers the Council were pursuing in putting forward the housing project and in including in it a provision for parks. Section 496 (1) of the Local Government Act 1919-1951 enables the Council to erect dwellings, shops and buildings and to sell them upon extended terms. Section 348 (1) gives power to a council to provide, control and manage grounds for public health, recreation, convenience, enjoyment or other public purpose of the like nature including (a) parks (c) gardens. It is assumed that a park provided under this power becomes a public park. Section 344 (1) (a) gives to the council the care, control and management of public reserves which are not under the care of or vested in any other body or person. The expression "public reserve" is defined and public park forms part of its meaning: s. 4. Section 518 gives the council a general power of selling land or buildings or other real or personal property vested in or belonging to the council or under its care, control or management, but the power does not authorize the sale of a public reserve. Section 518A makes it clear that the Act contemplates the use of this power for sale for housing purposes.
Apparently it is under a combination of these powers that the Ryde Council proceeded in carrying out its housing scheme. It is quite clear that it was competent to the Council as part of its scheme to appropriate areas of land to form parks and so to constitute them public reserves. What formal steps are necessary before it can properly be said that the Council has "provided" a park within s. 348 may not be very clear, but it would seem enough for the Council to adopt a resolution appropriating specific land of the Council. The land may be acquired for the purpose or may be land not required for some other purpose: s. 347. Whether the Council did or did not adopt by resolution Housing Project No. 4 as a definitive appropriation of the lands to the various uses shown on the plan does not appear. The third of the before-mentioned contentions advanced for the plaintiff-appellant we understand to be based on the view that the Council is precluded by the plaintiff's acting on the representation contained in the plan read with the pamphlet from denying that the areas in question were duly appropriated so as to be provided as parks under s. 348 (1) with the consequence that they may not be alienated under s. 518. This contention we shall not examine. For we think that the plaintiff has made a sufficient prima-facie case in respect of the other two grounds by which his appeal is supported.
It is convenient to state first why we think that he has made out a prima-facie case of a collateral promise or warranty that the areas in question shall be used as a park or parks and not otherwise. The question is very much one of fact. But it appears to us that in formulating Housing Project No. 4 as part of the Ryde Housing Scheme the Council was putting forward something conceived as an entirety. The purpose of such a project, as the pamphlet makes clear, was to provide a design, coherent, integrated and complete in itself, for the forming of a new habitable locality possessing specific features. The basal purpose of the design was to afford an environment and amenities calculated to enhance the living conditions of the inhabitants of the area. The project, on its face, appeared to confer upon the purchaser to whom a subdivisional lot was allocated a share in the enjoyment of the environment so formed. For the purposes of this interlocutory proceeding the inference must be made that this was done with the full authority of the Council and that the housing officer and his clerical assistants at the Council's housing branch were put there to produce the plan and expound the project to intending purchasers. The plan records in diagrammatic form the features of the project of which the subdivision into lots is only a part. When a prospective purchaser was invited to buy a lot with a home erected upon it, it was upon the footing of the project, the existence and effectiveness of which was, as it appears to us, an assumption from which the transaction was intended to proceed. The allocation of an individual lot to the purchaser, his acceptance of the allocation and the execution of a contract for the purchase of that lot necessarily supposed the prior formulation of Housing Project No. 4 as the foundation of the transaction. Unless the main features of the project were fixed, it would be meaningless. It is, we think, a reasonable construction of the Council's action in putting forward the project as the basis upon which the intending purchaser could proceed, if it is treated as amounting to or involving an undertaking or promise by the Council to him that they would adhere to and maintain the project, if he would become a purchaser of a lot which he might select and they might allocate to him. The reluctance of courts to hold that collateral warranties or promises are given or made in consideration of the making of a contract is traditional. But a chief reason for this is that too often the collateral warranty put forward is one that you would expect to find its place naturally in the principal contract. In a case like the present it is, we think, otherwise. Doubtless the main contract might have included a clause by which the Council undertook not to depart from the housing scheme. But it seems to be not unnatural that the parties should treat the contract as devoted to the purchase of the lot which the individual purchaser acquired, the existence and stability of the project of which the transaction was an outcome being presupposed as something antecedent upon which the purchaser might implicitly rely. It is the common intention that he would so rely upon it and on that basis proceed to contract to buy the particular lot allocated to him. It is because of this that the assurance which is embodied in the plan, when it is read in the light of the pamphlet, obtains its effect as a collateral promise. In a case with many analogies a similar conclusion of fact or finding was upheld both by a Divisional Court and the Court of Appeal. It is Jameson v. Kinmell Bay Land Co. Ltd. [1] . The defendant owned land on Kinmell Bay in North Wales and proceeded to develop it as a seaside residential estate. The plaintiff inspected the estate and was minded to buy an allotment. He was told that a road was to be constructed close to the allotment. He entered into a contract to buy it and ultimately took a conveyance which referred to "the frontage to the proposed new road together with a right of way along it". Talbot J. said "It was said that the oral promise relied on was collateral to the written contract for the purchase of the plot. If set out in detail it would have taken the form of an agreement by the defendants that in consideration of the plaintiff's entering into the contract of purchase at the price and on the terms stated the vendors would undertake to make a road on the line shown as Towyn-way on the plan and would complete that road by the time the bungalow was finished. Such a promise could be binding, as appeared from the case of Erskine v. Adeane [1] . The County Court Judge held that the promise was a warranty, as it went to the root of the contract and was collateral to it. He thought that this meant that the promise was the consideration for entering into the contract and that it was in no way contradictory to the conveyance" [2] . His Lordship decided that there was no error in law in this conclusion. Finlay J. was of a like opinion. In the Court of Appeal [3] , Lord Hanworth M.R. said that Erskine v. Adeane [1] and other cases had abundantly proved there might be, as in the case before him, a contract which accompanied a sale of land and yet was separate from it. The Master of the Rolls thought the findings fully justified. Lawrence and Romer L.JJ. agreed.
1. (1931) 47 T.L.R. 410, 593.
2. (1873) L.R. 8 Ch. 756.
3. (1931) 47 T.L.R., at pp. 410, 411.
4. (1931) 47 T.L.R., at p. 594.
5. (1873) L.R. 8 Ch. 756.
There is a number of cases which support the proposition that the mere production by the vendor of a plan of the land and its immediate surroundings at or before the making of a contract of sale of land will not be sufficient ground for importing a term or condition that a particular feature or structure shown on the plan will not be altered by the vendor. These cases are sometimes concerned rather with the implications of the principal contract than with the formation of a separate and collateral contract in consideration of the making of the principal contract. But since an implied term in the principal contract is relied upon by the appellant as his first argument and that is to be next considered and since they are not altogether irrelevant to the topic of collateral promise or warranty, it is convenient now to deal with them. They do not in our opinion govern either branch of this case because in none of them was the plan a formulation of a housing scheme for the development of the neighbourhood providing amenities for the common advantage of the owners of subdivisional allotments and in none did the circumstances and the contents of the plan evince a promissory purpose or intent. In all of them it is important to understand the state of facts to which the reasons relate. The line of cases begins with the Feoffees of Heriot's Hospital v. Gibson [4] . The sale was of an allotment in an Edinburgh street formed by extending under statutory authority an old street. The plan exhibited at the auction sale delineated some existing buildings as intended for removal. The articles of sale referred to the allotments purchased as marked and numbered on the plan. The purchaser refused to pay feu duty because the houses were not subsequently removed, and the issue was whether he was entitled so to refuse pending the removal of the houses. Lord Eldon and Lord Redesdale in the House of Lords expressed themselves strongly against the view that there could be any contract to complete the improvements indicated by the delineations on the plan, both because of the danger of admitting extraneous terms as additions to the written contract and because of the danger involved in saying "that the mere exhibition of the plan should be considered as an engagement that all that was exhibited should be done" [1] . In Squire v. Campbell [2] , the question concerned the eastward extension of Pall Mall across the foot of the Haymarket towards St. Martins-in-the-Fields. When this was done the corner piece of land, on the north-east corner of the intersection had in front of it an open triangle of street where Cockspur Street comes into Pall Mall. The proposal, afterwards carried out, was made that Wyatt's statue of George III. should be placed there. The case relates to an objection by the owners of a lease of the buildings upon the north-east corner. They applied for an injunction against the proposal. They relied upon the fact that upon the treaty for the lease a plan had been produced showing this space as open and as part of the carriage way. Lord Cottenham gave an elaborate judgment in which he excluded the possibility of a separate contract arising from these facts and excluded the inference of a contract or term from the exhibition of the plan.
1. (1814) 2 Dow 301 [3 E.R. 873].
2. (1814) 2 Dow., at p. 312 [3 E.R., at p. 877].
3. (1836) 1 My. & Cr. 459 [ 40 E.R. 451].
Important as these two cases no doubt have been in preventing the growth of a doctrine by which the use of a locality plan at the time of the making of the contract would suffice to tie down the vendor to create or maintain the physical conditions it indicated, they do not in our opinion touch such a transaction as the present, where the plan is the record of a housing scheme or project formulated for the very purpose of providing amenities and advantages to be enjoyed by the inhabitants of the area and thus forming the foundation of the transaction. The same observation may be made on the decision of Kekewich J. in Whitehouse v. Hugh [3] , affirmed in the Court of Appeal on somewhat different grounds [4] . Indeed in the Court of Appeal Vaughan Williams L.J. with whom Romer and Fletcher Moulton L.JJ. concurred, seems disposed to concede that an obligation might have arisen from the plan, but for a reservation [1] . In Hodges v. Jones [2] , Luxmoore J. refused upon the evidence to find a collateral contract for the restriction of the use of some neighbouring allotments to tennis courts. His Lordship [3] said that the purchaser's counsel had placed some reliance on a plan showing the allotments marked as tennis courts and had argued that it was sufficient to establish the collateral contract and on this point had relied on Tindall v. Castle [4] . His Lordship proceeded "It may well be that the evidence in that case was sufficient to justify the decision, but if that case is relied on as establishing the proposition that the exhibition of a plan can by itself amount to a representation that the particular method of laying out or dealing with the land delineated on it must be followed without variation, it seems to me to be contrary to many other decisions which are binding on me." Now the important words in this passage are "the exhibition of a plan can by itself amount to a representation" &c. The view North J. took in truth in Tindall v. Castle [4] began with the fact that there was a building scheme "a common scheme, not for the benefit of the vendor only, but for the benefit of the owners respectively of the property to which the scheme related" [5] . He found on three successive plans, which over eight years had been used in sales, a piece of land shown as a lodge. His Lordship said "I am quite satisfied that these plans were put forward with the intention of representing to purchasers and holding out to purchasers that that piece of land was appropriated as a lodge, and that it was intended to be used for that purpose". The foundation of this decision is in fact the character of the scheme of which the plan is the evidence and the nature of the use made of the plan. It must be borne in mind that when in a building scheme the restrictions are contained only in the covenants of the purchasers with the vendor and there is no covenant or condition or stipulation binding the vendor in respect of the land he retains, an implied contract or covenant is fastened upon him if the intention is considered to be that the restrictions imposed on the purchasers should be for their mutual or common benefit. " it is a question of fact, to be deduced from all the circumstances of the case, whether the restrictions are merely matters of agreement between the vendor himself and his vendees, imposed for his own benefit and protection, or are meant by him and understood by the buyers to be for the common advantage of the several purchasers", per Stirling J. In re Birmingham and District Land Co. and Allday [1] . See further Mackenzie v. Childers [2] .
1. (1906) 1 Ch. 253, at p. 260.
2. (1906) 2 Ch. 283.
3. (1906) 2 Ch., at p. 286.
4. (1935) Ch. 657.
5. (1935) Ch., at p. 669.
6. (1893) 62 L.J. (Ch.) 555; 3 R. 418.
7. (1893) 62 L.J. (Ch.) 555; 3 R. 418.
8. (1893) 62 L.J. (Ch.) 555; 3 R., at p. 423.
9. (1893) 1 Ch. 342, at p. 349.
10. (1889) 43 Ch. D. 265, at pp. 276-278.
The present case is not of course a building scheme based upon restrictive covenants imposed on the land sold. But the line of thought which implies a restriction against the vendor where none is expressed suggests the real distinction to be found in such a case as the present. It lies in the fact that the housing scheme is formulated and presented as one for the common advantage of the several purchasers. It is put forward by a public authority and in other respects also is not of a nature which needs to invoke the mechanism of restrictive covenants imposed on the land sold. But the character of the project and the method by which it is formulated make the common advantage of the several purchasers of the subdivisional lots dependent on the existence of an obligation upon the vendor. As we have said we think that the facts and circumstances make a prima-facie case for understanding the Council as making a collateral promise to adhere to the project and so not to use or permit the use of the areas in dispute for any purpose but a park.
But such an interpretation of what occurred before the execution of the contract is needless if from the document itself, interpreted in the light of the admissible circumstances, an implication arises binding the Council to adhere to the project. The foregoing discussion of the considerations which affect the question of a collateral contract covers much of the ground upon which the propriety of such an implication rests. But the cardinal question is the meaning and effect of the description, in the contract, of the allotment of land sold as part of the vendor's Housing Project No. 4 and being allotment No. 85. If this is only an identification of the block of land, it can raise no implication. By an identification of the land we mean a description for ascertaining precisely where it lies on the earth's surface and what are its dimensions and where are its boundaries. If on the other hand it means to describe the land as possessing attributes or incidents which flow from the project, there may be room for implication. It is to be observed that the expression is "part of the vendor's Housing Project" and not "being allotment 85 on the plan of the vendor's Housing Project". The housing project consists of the scheme or design considered as a planned work or, perhaps, conception. The reference to the project makes it both legitimate and necessary to resort to evidence to ascertain what is the project and what are its constituent parts or features. Moreover it is not until this has been ascertained that the contract should be finally interpreted. The evidence before us as to the nature and identity of Ryde Council Housing Scheme No. 4 is restricted to the plan and the pamphlet on group housing. The latter probably is inadmissible for the purpose of construing the contract. But it may be that for a proper understanding of the scheme further information than the plan is necessary. Be that as it may, once the plan is scrutinized, enough appears to show that the project is a planned development of a housing area according to an entire design with parks reserved as an amenity for the common advantage of the purchasers. For the protection of the purchasers against the destruction of the amenities or diversion of the advantages nothing will suffice short of an obligation to use the land only as parks or else to exercise the statutory powers conferred by s. 348 (1) to provide such parks. Without some such implication the purchaser, unless a collateral contract existed, would have nothing to depend on but the will of the Council for the amenities forming an integral part of the scheme. If "business efficacy" is a test an implication is needed to give it. On the whole we think that there is a prima-facie case for making some such implication.
Obviously if the Council alienates the park areas before the hearing of the suit, the right which the plaintiff asserts would be gravely prejudiced.
We think therefore that an interlocutory injunction should be granted in the form of the notice of motion. We would allow the appeal with costs and make an order for an interlocutory injunction giving the costs of the motion to the plaintiff.
Webb J.
Under the Local Government Act 1919-1951 N.S.W. a municipality can acquire, sub-divide and sell land for residential purposes. In so doing it is in the same position as any other vendor, and its contracts for the sale of the land can be enforced against it in the same way and to the same extent. If the plan of subdivision on the faith of which the land is purchased discloses provision for streets, lanes and other open spaces, including such as are designated "parks", purchasers can insist on these streets, lanes and open spaces being retained as such, as the representation is of an existing fact, that is that the reservations for those purposes have been made, and is not merely a representation of intention to make them. I understand this to be conceded by counsel for the respondent municipality as regards streets and lanes. But there is no distinction in principle between a reservation for a street or lane and a reservation for a "park". All are reservations from house-building operations, and if, as is conceded, the vendor can be restrained from building houses on streets or lanes he can also be restrained from building residences on "parks" or from otherwise using the "park" for purposes inconsistent with its use as a park, although he could not be enjoined to provide a park with its trees, gardens, seats and paths.
In making a reservation for a park in a plan of subdivision for sale the municipality is not necessarily contracting for the exercise of its general statutory powers to provide parks. It is exercising only such powers as any other vendor possesses. It would be different if the reservation were for, say, a bridge over a street, which an individual would not be in a position to provide, and which could be provided only by a municipality exercising its general statutory powers.
Here the contract was for sale of "part of Housing Project No. 4 being allotment 85". What that project was, could be and was proved by the plan of subdivision as it stood at the time of the purchase of allotment 85 by the appellant Shepperd. The plan then showed the "Park" in question.
A suggestion was made that the contract was void for indefiniteness in the provision for ascertaining the amount of the purchase price; but I did not understand that any submission to this effect was made or pressed by counsel for the respondent municipality.
I would allow the appeal. |
high_court_of_australia:/showbyHandle/1/11451 | decision | commonwealth | high_court_of_australia | text/html | null | Johanson v Dixon [1979] HCA 23 | https://eresources.hcourt.gov.au/showbyHandle/1/11451 | 2024-09-13T22:51:37.259214+10:00 | High Court of Australia
Barwick C.J. Stephen, Mason, Murphy and Aickin JJ.
Johanson v Dixon
[1979] HCA 23
ORDER
Application for special leave to appeal refused.
Cur. adv. vult.
The following written judgments were delivered:—
1979, May 30
Barwick C.J.
I have had the advantage of reading the reasons for judgment prepared in this application for special leave by my brother Mason. I agree entirely with those reasons and with the conclusion that the application for special leave be refused. I find no need to add anything on my own behalf.
Stephen J.
I have read and am in agreement with all that is said in the reasons for judgment of Mason J. and of Aickin J. concerning this application for special leave.
I would refuse special leave accordingly.
Mason J.
The applicant was convicted at the Fitzroy Magistrates' Court on 21st April 1976 on two counts of habitually consorting with reputed thieves contrary to s. 6 (1) (c) of the Vagrancy Act 1966 Vict. and sentenced to twelve months' imprisonment on each count, the sentences to be served concurrently. Section 6 (1) (b) and (c) provide:
Any person who—
(b) is found in a house or place in company with reputed thieves or persons having no visible lawful means of support who, on being thereto required by the court, does not give to the satisfaction of the court a good account of his lawful means of support and also of his being in such house or place upon some lawful occasion;
(c) habitually consorts with reputed thieves or known prostitutes or persons who have been convicted of having no visible lawful means of support unless such person, on being thereto required by the court, gives to the satisfaction of the court a good account of his lawful means of support and also of his so consorting;
shall be guilty of an offence.
Penalty: For a first offence—imprisonment for one year; For a second or subsequent offence against this section (whether under the same paragraph or not)—imprisonment for two years.
Paragraphs (b) and (c) of s. 6 (1) were subsequently amended by s. 3 of Act No. 9047 of 1977, the relevant effect of which was to delete from par. (c) the reference to persons who have been convicted of having no visible lawful means of support and that part of the proviso that related to a good account of the defendant's lawful means of support. But it was the section in the form in which it stood before this amendment that governed the present case.
An appeal by the applicant against the convictions was dismissed by Judge Hewitt in the County Court of Victoria on 17th June 1976. His Honour refused the applicant's request to state a case for the determination of the Supreme Court under s. 85 of the Magistrates' Courts Act 1971 Vict.. At the instance of the applicant the Supreme Court (McGarvie J.) made an order that the County Court state a case [24] The first case stated by Judge Hewitt was referred by Kaye J. to the Full Court on the ground that the question of construction raised by the case was important. However, the Full Court, holding the case to be defective, ordered that it be restated. The second version of the case stated by the learned judge also proved to be defective and was required to be restated. After hearing argument on the case in its third and final form the Full Court dismissed the appeals and confirmed the sentences [1] .
1. [1977] V.R. 574.
2. [1978] V.R. 377.
The applicant now seeks special leave to appeal from the Full Court's order on the ground that the interpretation of the subsection raises a point of special importance. The submission made by Mr. Evans on behalf of the applicant as to the meaning and effect of s. 6 (1) (c), as will be seen, raises an important question. He argues that the words "a good account of his so consorting" are satisfied if the defendant establishes that his consorting was for an innocent purpose, an argument which was accepted by McGarvie J. but was rejected unanimously by the Full Court in the judgment from which special leave to appeal is now sought.
The application is complicated by the circumstance that Judge Hewitt failed to make the findings of fact which the applicant sought. His Honour found that the applicant consorted at identified places, mainly hotels, on thirty-three occasions between 4th March 1975 and 27th February 1976 with certain persons all of whom were at the time in question, and to the knowledge of the applicant, reputed thieves. It was found that the consorting was habitual, that on each occasion the applicant had been questioned and warned by police officers that he should not consort and that none the less he had continued to do so. It was also found that the account given by the applicant of the lawful means of support was a good account. With respect to the applicant's account of his consorting the case recited—
4.
(i) The account given by the applicant of his consorting was not a good account.
5. I dismissed both appeals and confirmed the convictions below, finding that the respondents had proved the elements of the charges, beyond reasonable doubt, and that the applicant had not, on the balance of probabilities, given to the satisfaction of the court a good account of his consorting, although he had given a good account of his lawful means of support.
8. Pursuant to the Order of the Honourable Mr. Justice Kaye made the 28th June 1977, I say—
(1) The applicant stated in evidence that in the main, the people he was accused of consorting with he had known for a long period of time; one was his brother, and some others were friends. He did not differentiate between the various occasions of consorting as set out in paragraph 4 hereof. Save as aforesaid, I have no recollection of the applicant's evidence and no transcript was taken of the proceedings.
(2) I did not accept as true his account of his consorting with reputed thieves given by the applicant. I disbelieved his evidence save as to his means of support and save that on an occasion on which the applicant was drinking with his brother (the 6th November 1975 at the Renown Hotel), he also was consorting with another man, and I was not satisfied of his account of his consorting with the other man. I did not come to any conclusion with respect to his brother, as I deemed it unnecessary.
The applicant seeks to overcome the finding in par. 8 (2) of the case by submitting that par. 8 (1) is an incomplete summary of the applicant's evidence in that it says nothing about the purpose for which the applicant was consorting on the occasions in question. It is then argued that in par. 8 (2) the judge says no more than that he disbelieved that part of the applicant's evidence which is summarized in the preceding paragraph. I do not read the stated case in this way. By the opening sentence of par. 8 (2) I understand his Honour to be saying that he did not accept the totality of the applicant's account as to his consorting with reputed thieves. This is made plain by the next sentence in which the judge states unequivocally, "I disbelieved his evidence", and then makes two exceptions to that statement. One exception relates to his testimony concerning lawful means of support, a matter not mentioned in par. 8 (1); the other relates to his consorting with his brother and another man on 6th November 1975, as to which his Honour states that he was not satisfied with the applicant's account of his consorting with the other man, a statement which must be taken to refer to the purpose of that consorting. The interpretation proposed by the applicant of par. 8 has little to commend it. It is inherently improbable that the judge was saying, as the applicant contends, "I do not accept his account of his consorting with reputed thieves, but I say nothing about the acceptability of his evidence relating to his purpose in consorting with those reputed thieves."
Reliance is placed on affidavits deposing to the evidence which had been given by the applicant in the County Court. According to these affidavits the evidence given demonstrated that on the occasions in question the applicant was drinking with persons who were his friends and in one instance his brother, the purpose of the meetings being purely social with the consequence that the consorting was innocent, not having any criminal or illegal flavour to it. The point is made that the deponents were not cross-examined and no contrary evidence was led by the Crown. However, there is no ground on which this Court can amend the stated case by substituting or adding a finding which is contrary to a finding already made by the judge and, on the view which I take, expressed in the stated case. Nor is there any basis for requiring the judge to re-hear the evidence and re-state the case once again. I might have taken a different view had it appeared that the judge had omitted to deal with a relevant matter and had the parties been in agreement as to the matter to be included in the case but here the judge has made a finding which covers the point at issue, albeit unfavourably to the applicant, and the Crown vigorously contests the substitution of a contrary finding. What happened in essence was that the judge declined to accept the applicant's evidence on a point on which the applicant bore the onus of satisfying the Court. It is simply not open to an appellant court on a case stated to review a refusal to find a fact when that refusal is based on the rejection of the testimony of a witness (Hofstetter v. Thomas [2] ). Indeed, a case stated should not annex or set aside the evidence given in the court below unless it asks, in conformity with the statute authorizing the stating of the case, the question whether there is evidence to justify a finding made by the court below or questions relating to the admissibility of that evidence. This is not a case of that kind.
1. [1968] V.R. 199.
Accordingly, it is my opinion that the applicant must fail on the findings of fact which have been made, even if he were successful in maintaining his interpretation of the statute. For this reason I would dismiss the application for special leave.
Nevertheless, as the question of construction has been fully debated before the Court, it should be dealt with. The offence of consorting is an Australasian contribution to the criminal law. It first saw the light of day in s. 4 of the Police Offences Amendment Act, 1901 N.Z.. Provisions making habitual consorting an offence are to be found in the statute law of the other Australian States, but, with the exception of Tasmania to which I shall refer shortly, in no State is there a provision of the kind that appears in s. 6 (1) (c) making it a defence for the defendant to give to the satisfaction of the court a good account of the two matters referred to in the paragraph. Section 6 of the Police Offences Act 1935 Tas. makes it a defence for the defendant to prove to the satisfaction of the court lawful means of support and "good and sufficient reasons" for consorting.
The history of the legislative provisions does not, I think, furnish any particular reason for construing s. 6 (1) (c) of the Vagrancy Act otherwise than according to its terms. In its context "consorts" means "associates" or "keeps company" and it denotes some seeking or acceptance of the association on the part of the defendant (Brown v. Bryan [3] ). Consequently the offence is made out if it appears that the defendant habitually associates with persons falling within the three designated classes, "reputed thieves", "known prostitutes" or "persons who have been convicted of having no visible lawful means of support". It is not for the Crown to prove that the defendant has consorted for an unlawful or criminal purpose. The words creating the offence make no mention of purpose: cf. s. 6 (1) (b) where the proviso refers to "upon some lawful occasion". Nor does the word "consorts" necessarily imply that the association is one which has or needs to have a particular purpose. What is proscribed is habitual association with persons of the three classes, they being undesirable or discreditable persons. Mere association with those persons, which is not habitual, for a criminal or unlawful purpose is not proscribed. The presence of the word "habitually" tells strongly against the applicant's argument. Why did the legislature insist on habitual consorting as an element in the offence if consorting for a criminal or illegal purpose is an essential element in the offence? Indeed, the contrast between pars. (b) and (c) of s. 6 (1) is adverse to the applicant's interpretation. Section 6 (1) (b) makes it an offence for a person to be found in a house or place on a single occasion with reputed thieves or persons having no visible lawful means of support unless he gives to the satisfaction of the court a good account of his lawful means of support and of his being in the place or house "upon some lawful occasion". Thus under par. (b), where the offence consists in keeping company on a single occasion, it is enough to show, inter alia, that the occasion was a lawful occasion. But in the more serious case of habitual association something else is required: the defendant must give good account of that habitual association. It is apparent, therefore, that the gist of the offence under par. (c) is habitual association with persons who fall into the designated classes, whether the association is for unlawful purposes or not.
1. [1963] Tas. S.R. 1, at p. 2.
The expression "a good account of his so consorting" which appears in the proviso is far from precise and for an obvious reason. It is not possible to foresee all the circumstances which may conceivably justify habitual consorting. Yet the applicant seeks to use the imprecise language of the proviso as a reason for altering the precise literal meaning of that part of the sub-section which creates the offence, thereby importing into the offence words which could readily have been expressed by the legislature if it had the applicant's interpretation in mind.
An alternative version of the argument was that s. 6 (1) (c) was so designed that the Crown could prove the offence by establishing habitual consorting and that evidence of habitual consorting would be sufficient to sustain a conviction unless the defendant gave a good account of that consorting by showing that it was for an innocent purpose. This argument encounters similar objections.
It would have been a simple matter to have expressed "good account" in terms of lawful purpose. In the absence of any such provision "good account" must be taken to signify some justification, acceptable to the court, for the habitual consorting which constitutes the gist of the offence. And if the offence consists in habitual consorting it is not an acceptable justification to say that there was habitual consorting but nothing more. To be acceptable the justification must at least assign a reason for the consorting which goes beyond the desire of the defendant to associate with persons of the designated classes. Thus it may be a good account for the defendant to say that he associated with the person in question because they were his close relatives, for filial or family reasons, or because his occupation required him so to do and the association was not for any unlawful purpose. But to say no more than that the association was innocent or not unlawful is not to give a good account.
The argument relies rather heavily on what is claimed to be the harsh or severe application of the provision if the interpretation favoured by the Full Court is to be accepted. It would operate to ostracize a person in the designated classes, cutting him off from any form of friendship, so the argument runs. However, it seems reasonably clear that to constitute the offence, habitually consorting with more than one person, with a plurality of persons, is required. Association with a reputed thief would not be enough. The legislative policy which underlies the provision negatives the statutory rule of construction requiring that the reference in the plural should be read in the singular. It is a policy which was designed to inhibit a person from habitually associating with persons of the three designated classes, because the association might expose that individual to temptation or lead to his involvement in criminal activity. It is not to the point that the section is a provision of long standing and that it reflects a policy which came into existence many years ago. The fact, if it be a fact, that the policy is now a matter of some controversy, is no justification for our construing the provision otherwise than in accordance with its terms. If a change in the statute is thought to be desirable on account of changed conditions or changed attitudes, it is for Parliament to decide whether that change should be made.
The case does not call for a detailed examination of the decisions on the various statutory provisions to which I have already referred. Suffice it to say that, with the exception of McGarvie J.'s decision, the cases all proceed on the view that consorting means associating or keeping company with, and no more than that—see Gabriel v. Lenthall [4] ; Auld v. Purdy [5] ; Clarke v. Nelson; Ex parte Nelson [6] ; Dias v. O'Sullivan [7] ; Reardon v. O'Sullivan [8] ; Beer v. Toms; Ex parte Beer [9] ; Davis v. Samson [10] ; Byrne v. Shearer [11] ; Bryan v. White [12] ; Young v. Bryan [13] ; Brown v. Bryan [13a] . I agree with the Full Court that Byrne v. Shearer provides no support for the applicant. Although O'Bryan, Dean and Smith JJ. [14] spoke of the court being satisfied that the consorting was innocent, it does not appear that the question which presently arises was debated in that case or that their Honours' observations were directed to this question.
1. [1930] S.A.S.R. 318, at p. 327.
2. (1933) 50 W.N. (N.S.W.) 218, at p. 219.
3. [1936] Q.W.N. No. 17.
4. [1949] S.A.S.R. 195, at pp. 199-202.
5. [1950] S.A.S.R. 77, at pp. 79, 81-83, 85-87.
6. [1952] St. R. Qd. 116, at p. 126.
7. [1953] N.Z.L.R. 909, at p. 911.
8. [1959] V.R. 606.
9. [1962] Tas. S.R. 113.
10. [1962] Tas. S.R. 323.
11. [1963] Tas. S.R. 1, at p. 2.
12. [1959] V.R., at pp. 608, 611, 612-613.
The difference between "good account" and "good and sufficient reasons" for consorting, the latter being the expression found in s. 6 of the Police Offences Act 1935 Tas., is not so great as to warrant the drawing of a distinction between the two provisions. It was submitted for the applicant that the Tasmanian decisions to which I have referred were either distinguishable or, alternatively, that they were wrong and should be overruled. In my view the decisions are correct and, as I have said, no distinction is to be drawn for present purposes between the Tasmanian provision and s. 6 (1) (c) of the Victorian Act.
I would dismiss the application for special leave.
Murphy J.
Mr. Johanson was convicted, in April 1976, by a magistrate at Fitzroy of two offences under s. 6 (1) of the Vagrancy Act 1966, which then provided:
Any person who—
(c) habitually consorts with reputed thieves or known prostitutes or persons who have been convicted of having no visible lawful means of support unless such person, on being thereto required by the court, gives to the satisfaction of the court a good account of his lawful means of support and also of his so consorting;
shall be guilty of an offence.
Penalty: For a first offence—imprisonment for one year; For a second or subsequent offence against this section (whether under the same paragraph or not)—imprisonment for two years.
He was sentenced to twelve months' imprisonment on each charge, to be served concurrently; his appeal to the County Court was dismissed by Judge Hewitt on 17th June 1976; his request for a stated case under s. 85 of the Magistrates' Courts Act 1971 was refused but he obtained an order from the Supreme Court of Victoria (McGarvie J.) that the case be stated (see Johanson v. Dixon [No. 1] [15] ). The case was then stated in February 1977. In the Supreme Court, Kaye J. referred it to the Full Court which said that the case had a "long and unfortunate history" [16] .
1. [1977] V.R. 574.
2. [1978] V.R., at p. 378.
Judge Hewitt stated that no transcript had been taken at the hearing of the appeals and that, apart from the list of witnesses and his judgment, he had no independent recollection of the case. His judgment was:
Any person who habitually consorts with reputed thieves unless such person, on being required by the court, gives to the satisfaction of the court a good account of his lawful means of support and also of his so consorting shall be guilty of an offence.
There is sufficient in the evidence to support the term "habitually" and I am satisfied that the appellant habitually consorted with reputed thieves who were known to him as reputed thieves. And further that, on the cases for the respondents, the consorting was not innocent. Therefore the onus was thrown on the appellant and he was required to give to the satisfaction of the court, albeit on the standard of the balance of probabilities, I suppose, a good account of his lawful means of support and also of his so consorting. He has given a good account of his lawful means of support but has not given to the satisfaction of the court a good account of his consorting. He does not really alter the evidence given for the respondents. When booked, for example in the Renown Hotel, he merely defies the police and brazenly gets booked again. I would think that, if he wished to avoid bookings in a public place such as a hotel bar, he would have to change his hotel or his drinking habits. I am aware that one school of thought within the legal profession, and I suppose among the criminal classes, thinks that there should be abolition of the section under consideration, but I suppose there is another school of thought and this would include the police consorting squad, who are against the abolition of the section. I, sitting here as a judge, am unaffected by all this and merely apply the law as it is. O'Bryan J. has said the mischief apparently aimed at by the section is the danger of misconduct by those who habitually consort with reputed thieves while Smith J. says the view of the legislature would seem to include persons habitually consorting with criminals being likely to support themselves by preying on the community in some way or to be under strong temptation to do so. See Byrne v. Shearer [17] . I would think a person with the income of the appellant at the relevant times, and having his family responsibilities, and apparently spending part of his income on drink, e.g. by drinking in schools, would be under strong temptation. The appellant will be convicted. What is alleged against him?
1. [1959] V.R. 606.
The Full Court considered that the case was defective and ordered that it be restated. On 28th June 1977, the restated case [No. 2] [18] came before Kaye J. who considered it to be defective also and ordered that it again be restated. It was restated [No. 3] on 8th August 1977 and came before the Full Court on 7th, 8th and 9th March 1978. In that version Judge Hewitt further stated, pursuant to Kaye J.'s order, the facts that:
At the hearing of the appeals, evidence was given on behalf of the respondents by eighteen police officers, and on behalf of the applicant by the applicant himself and one other witness. I made the following findings:
(a) At the following places and on the following dates, the applicant consorted with certain persons, all of whom were at the time of such consorting, and to the knowledge of the applicant, reputed thieves: (Here were set out under the First Charge 17 dates and places and under the Second Charge 16 dates and places.)
(b) The abovementioned consorting was habitual.
(c) On each of the abovementioned occasions the applicant had been questioned and warned by police officers concerning his consorting, and asked concerning his reason for so doing. Despite such questioning and warning, he continued to consort with reputed thieves. In so doing he defied such warnings.
(d) During portion of the period between the 25th February 1975 and the 16th December 1975 the applicant was not working, and was receiving workers' compensation payments in a figure in excess of $100 per week. This was his only income during such period.
(e) During the latter part of 1975 and until at least the 27th February 1976 the applicant was receiving sickness benefits payments of $98 per week, during which period he was supporting a wife and family. This was his only income during that period.
(f) From early in May 1976 until the hearing of the appeals in June 1976 the applicant was employed on a casual basis by Freightbases Pty. Ltd. and earned gross wages in excess of $1,000.00.
(g) The account given by the applicant of his lawful means of support was a good account.
(h) In the above circumstances, having regard to the applicant's family responsibilities, and his expenditure of part of his income on drink, his income at all relevant times was such as to expose him to strong temptation to engage in criminal activity.
(i) The account given by the applicant of his consorting was not a good account.
I dismissed both appeals and confirmed the convictions below, finding that the respondents had proved the elements of the charges, beyond reasonable doubt, and that the applicant had not, on the balance of probabilities, given to the satisfaction of the Court a good account of his consorting, although he had given a good account of his lawful means of support.
I delivered judgment in the following terms: [The judgment was then set out.]
Following delivery of judgment, I heard evidence on the appeals against sentence in the person of one Ronald Bernard Chadwick, a union organiser. I dismissed both appeals and affirmed the orders made below.
Pursuant to the Order of the Honourable Mr. Justice Kaye made the 28th June 1977, I say—
(1) The applicant stated in evidence that in the main, the people he was accused of consorting with he had known for a long period of time; one was his brother and some others were friends. He did not differentiate between the various occasions of consorting as set out in paragraph 4 hereof. Save as aforesaid, I have no recollection of the applicant's evidence and no transcript was taken of the proceedings.
(2) I did not accept as true his account of his consorting with reputed thieves given by the applicant. I disbelieved his evidence save as to his means of support and save that on an occasion on which the applicant was drinking with his brother (the 6th November 1975 at the Renown Hotel), he also was consorting with another man, and I was not satisfied of his account of his consorting with the other man. I did not come to any conclusion with respect to his brother, as I deemed it unnecessary.
The Full Court dismissed the appeal [19] .
1. [1959] V.R. 606.
2. [1978] V.R. 243.
3. [1978] V.R. 377.
The absence of a proper record caused difficulties in the hearing of the appeal in the Supreme Court. Both there and in this Court, the applicant sought to supplement the case by evidence of the account which he gave to the trial judge. That course is not permissible on the determination of the appeal on a case stated, although it may be permissible on an application in which it is sought to show that the case has not been properly stated.
Every court from which an appeal lies should keep a proper record. Where no record, or a seriously defective record, is kept by an inferior court, the proceedings are a nullity (see Ex parte Reid; Re Lynch; Ex parte Burgess; Re Lynch [20] ; Ex parte Malouf; Re Gee [21] ). See also R. v. Olivo [22] ; Donges v. Ratcliffe [23] ; Ex parte Powter; Re Powter [24] and De Iacovo v. Lacanale [25] . To conduct a trial in such a way that an accused person is deprived of the protection given by essential steps in criminal procedure makes a de facto conviction in law a nullity (see Crane v. Director of Public Prosecutions [26] , per Lord Sumner).
1. (1943) 43 S.R. (N.S.W.) 207.
2. (1943) 43 S.R. (N.S.W.) 195.
3. [1942] 2 All E.R. 494.
4. [1975] 1 N.S.W.L.R. 501.
5. (1945) 46 S.R. (N.S.W.) 1.
6. [1957] V.R. 553.
7. [1921] 1 A.C. 299, at p. 331.
One of the essential steps for the stated case procedure is the keeping of a proper record at the trial. A presiding judge must ensure that a proper record is kept either by himself or by a court reporter. It is generally not practicable for a judge to preside over the court, observe the demeanour of witnesses and, at the same time, keep a record of evidence. In practice, therefore, it is essential that facilities for the keeping of a proper record be available to a judge. However, counsel informed this Court that facilities for the taking of a transcript or record are not available in a substantial majority of cases in the magistrates' courts and the County Courts in Victoria. McGarvie J. said, when making absolute the order to state the case: "Until such time as the facts are stated specially by the learned County Court judge, there will be an element of doubt as to what his findings of fact actually were." (Johanson v. Dixon [No. 1] [27] ). The absence of a proper record of the hearing became fully apparent from Judge Hewitt's first statement of the case.
1. [1977] V.R., at p. 589.
It seems to me that the hearing before Judge Hewitt was a nullity and any further proceedings on it subject to prohibition at common law. It also seems that the adoption of the restatement procedure is open to very grave objection. The power to order restatement should not be used in such a way that it requires what amounts to a new adjudication (see O'Connor v. Hammond, per Stout C.J. [28] ). The final version differs so markedly from the first version, in which Judge Hewitt stated that he had no independent recollection of the case, that it amounts to a new adjudication.
1. (1902) 21 N.Z.L.R. 573, at p. 577.
The Full Court of the Supreme Court of Victoria held that an important point arose for determination. The interpretation of this, and similar provisions in other States, has resulted in some difference of judicial opinion. Despite the difficulties in this case, special leave should be granted in order to consider the interpretation of the sub-section.
The applicant has lived almost all his life in the suburb of Fitzroy in the city of Melbourne. He claims that in the hearing before Judge Hewitt he gave evidence (which was not contested) that the people with whom he was charged with consorting were mostly people who live in Fitzroy; that they were his friends; that his purpose in associating with them on each occasion was innocent; and that nothing "sinister, illicit or illegal had occurred or had been planned or transacted" on the occasions particularized.
The respondents contended that even if the applicant proved those facts to the satisfaction of the judge, they did not constitute a "good account", and that an account which was "innocent" in the sense that it was not attended by any unlawful or criminal activity or purpose and was purely "social" was not a good account; what was necessary was an account which included a reason other than companionship. The Full Court agreed with that. Judge Hewitt seems initially (although it is not clear) to have dealt with the case on the same view.
In O'Connor v. Hammond [29] , Stout C.J. said:
A "consort" has been defined (see Skeat's Dictionary) as "a fellow, companion, mate, partner." Consorting would be proved by companionship. The term "habitually" is used often as an antithesis to "occasionally". It would have to appear that it was the habit of the person accused to consort with the kind of persons mentioned—"thieves" or "prostitutes", etc. "Consort" has in a sense the meaning of frequent companionship, but I must assume that the Legislature, in placing the word "habitually" before "consorts", meant to require proof of a companionship other than one that was merely occasional. The companionship must have been so constant as to have created a habit.
"Habitually consorts" in this context does not include association for relationships such as doctor-patient, landlord-tenant, teacher-student, minister of religion-church member, solicitor-client, employer-employee, employee-employee, family relationships, or association for necessary transactions such as the association of storekeeper and customer. Association for such purpose is not consorting. As F. B. Adams J. said in Davis v. Samson [30] :
I do not think it need be feared that social workers, or probation officers, or members of the legal profession engaged in criminal practice, are likely to find themselves in danger of being convicted under s. 49 (d). They do not "consort" with reputed thieves within the true meaning of that word.
1. (1902) 21 N.Z.L.R., at pp. 575-576.
2. [1953] N.Z.L.R. 909, at p. 911.
Leaving aside circumstances where persons are together and are not consorting, consorting includes "innocent" consorting (see Davis v. Samson [31] ; Clarke v. Nelson [32] ; Dias v. O'Sullivan [33] ; Beer v. Toms; Ex parte Beer [34] ; Byrne Shearer [35] ). The question of whether consorting includes "innocent" consorting should not be confused with the question of whether a "good account" includes an "innocent" account. Yet, throughout this case, the two questions were confused (perhaps because legislation in other jurisdictions does not contain a "good account" provision). The prosecutor has only to prove that when the information was laid, the defendant was a person who habitually (and knowingly) consorts (see Dias v. O'Sullivan [36] and Ex parte Finney; Re Miller [37] ) with members of the prescribed class or classes, and if the defendant does not, on being required, give a "good account" of the habitual consorting and of his lawful means of support, he is guilty.
1. [1953] N.Z.L.R. 909.
2. [1936] Q.W.N. No. 17.
3. [1949] S.A.S.R. 195.
4. [1952] St. R. Qd. 116.
5. [1959] V.R. 606.
6. [1949] S.A.S.R., at p. 204.
7. (1936) 53 W.N. (N.S.W.) 190.
The "good account" provision in the Victorian legislation is a deliberate departure from the New Zealand and New South Wales legislation which do not contain this provision and also from the Police Offences Act 1935 Tas., s. 6, which requires "good and sufficient reasons" for consorting (see Victoria Parliamentary Debates, vol. 187, pp. 4173-4183). What does amount to "a good account" is left obscure.
Where a statute is of a penal nature, the traditional rule is that it should be construed strictly in favour of the defendant. On any view, this legislation contravenes generally accepted standards of human rights (see People v. Belcastro [38] and Campbell and Whitmore, Freedom in Australia (1973), p. 137) and this is a special reason for construing it strictly in favour of defendants. Once it is accepted that consorting includes innocent as well as guilty consorting, then it becomes easier to conclude that a "good account" is one which shows that the consorting was innocent. In Byrne v. Shearer, O'Bryan and Smith JJ. referred to a "good account" as an innocent one. This was followed by McGarvie J. when making the order to state this case (Johanson v. Dixon [No. 1] [39] ). A defendant discharges the burden of proof placed on him by satisfying the court that it is more likely than not that the consorting is innocent. A good account need not show that there was some lawful purpose other than mere companionship. This conclusion is easily drawn from the language of the sub-section which contemplates that the person may give a good account of his habitual consorting. It is inconsistent with that language to require that the account deny habitual consorting: the account is to be one of his so consorting, that is, of his association for companionship. A good account is one that shows that the consorting was innocent, that is, it was for companionship only, or if there were some other purpose, that this was a lawful purpose.
1. (1934) 190 N.E. 301, at p. 303.
2. [1977] V.R. 574.
The contrary interpretation that a good account requires not merely showing innocence or lawful purpose but some other justification for being together with the persons, really amounts to requiring the defendant to show that he was not consorting, that is, that he was not associating for companionship but was with the person for some other reason. This turns the provision from one which requires "a good account" into one which requires a denial of the consorting. That interpretation is a negation of the section, and is so harsh that it should not be imputed to a legislature in the absence of unmistakable language. If an account that the consorting was innocent is not a good account, it is difficult to imagine what is a good account.
The harshness of the provision is somewhat mitigated if the word, "thieves", is construed as having a plural meaning only. This still leaves an ambiguity. The construction most favourable to the defendant, which I would adopt, is that a person who habitually consorts with reputed thieves or known prostitutes or persons who have been convicted of having no visible lawful means of support means one who habitually consorts with two or more reputed thieves or two or more prostitutes, et cetera. A less favourable construction (suggested by Stout C.J. in O'Connor v. Hammond [40] ) is that a person habitually consorts with thieves if he consorts with thief A at one time, thief B at another time, thief C at another time and so on. This less favourable construction does not fit naturally with the expression, "consorts with reputed thieves". The legislation, in my opinion, is directed not to a person habitually being in the company of a thief (although a different thief on at least some occasions) but to his habitually being in the company of thieves.
1. (1902) 21 N.Z.L.R., at p. 576.
It is disturbing that a person can be sentenced to imprisonment for twelve months for associating with others even if the association is innocent of "sinister, illicit or illegal" purpose, and after a hearing in which no proper record was kept. If the trial had been properly recorded and the case, stated in a way which did not amount to a new adjudication, revealed that the judge found that at the time the information was laid the applicant was a person who "habitually consorts with reputed thieves", required him to give a "good account" and disbelieved his account, that would be an end of the matter: this application would be hopeless. I am not satisfied that this is how this case should be regarded. On the contrary, no proper record was kept, the final version of the case stated amounted to a new adjudication and from what does appear, the original adjudication does not seem to have been made upon what I regard as the correct principles.
In these circumstances, although the convictions and sentences should logically be regarded as nullities, they may be the subject of appeal (see Crane v. Director of Public Prosecutions [41] ; R. v. Olivo [42] ). Special leave should be granted, the appeals allowed and the convictions and sentences set aside.
1. [1921] 2 A.C. 299.
2. [1942] 2 All E.R. 494.
Aickin J.
This is an application for special leave to appeal from the Full Court of the Supreme Court of Victoria. As the judgment of that Court shows the case has had a long and unfortunate history because of the protracted endeavours to have a case stated by the County Court in a form proper for consideration by the Full Court. Its somewhat chequered history is set out in the judgment of the Full Court in Johanson v. Dixon [No. 2] [43] . Those initial procedural problems are no longer material.
1. [1978] V.R. 243.
The applicant was convicted on 21st April 1976 at the Fitzroy Magistrates' Court on two informations under s. 6 (1) (c) of the Vagrancy Act 1966 and sentenced to twelve months' imprisonment on each information, such sentences to be served concurrently. Section 6 (1) (b) and (c) is as follows:
6.
(1) Any person who—
(b) is found in a house or place in company with reputed thieves or persons having no visible lawful means of support who, on being thereto required by the court, does not give to the satisfaction of the court a good account of his lawful means of support and also of his being in such house or place upon some lawful occasion;
(c) habitually consorts with reputed thieves or known prostitutes or persons who have been convicted of having no visible lawful means of support unless such person, on being thereto required by the court, gives to the satisfaction of the court a good account of his lawful means of support and also of his so consorting;
shall be guilty of an offence.
From that conviction he appealed to the County Court which affirmed the conviction. Ultimately a case stated came before the Full Court.
The stated case showed that the County Court judge had found as facts that the applicant had consorted with persons who were, to the knowledge of the applicant, reputed thieves, on sixteen or more separate occasions in relation to each information. The County Court judge found that the applicant had given a good account of his lawful means of support but said that his income was such as to expose him to strong temptation to engage in criminal activity. He also found that the applicant had not given a good account of his consorting. The case stated sets out that the applicant had stated in evidence that the people with whom he was accused of consorting were in the main friends whom he had known for a long time and that one was his brother. The stated case further stated that the judge had no other recollection of the applicant's evidence and that he did not accept as true the applicant's account of his consorting with reputed thieves.
The ground of the present application for special leave to appeal is that the interpretation of s. 6 (1) (c) raises a point of special importance and general interest. It was argued that on the proper construction of the section it was a sufficient answer for an accused person to establish that his consorting was for an "innocent purpose".
It was also argued that this Court should receive further material on affidavit as to the evidence before the County Court judge and should modify the findings in the stated case. In his reasons for judgment my brother Mason deals with these arguments. There is no basis on which this Court can amend the stated case by making findings of its own, and I agree with my brother Mason's reasons for taking the view that this is not a case in which this Court should require the County Court judge to re-hear the evidence and re-state the case yet again. I also agree that it is not open to an appellate court on a proceeding by way of case stated to review a finding of fact, or a refusal to find a particular fact. Nor can it reverse a finding that particular evidence should be disbelieved.
The legislative history of this provision in New Zealand and in Tasmania and other States is discussed in the reasons of my brother Mason and I agree with his account of that history, and his conclusion that it provides no basis for construing s. 6 (1) (c) of the Vagrancy Act otherwise than in accordance with the ordinary meaning of the words used.
The ordinary meaning of the words "to consort" is to "accompany; to escort or attend, to be a consort to (someone) or to associate oneself with (someone)", and thus to associate with or to keep company with a particular person is to "consort" with such person. In this respect I agree with the views expressed in Brown v. Bryan [44] that it denotes some seeking or acceptance of the association with other specified persons on the part of a defendant.
1. [1963] Tas. S.R., at p. 2.
The offence therefore lies in habitually associating with persons as described in the section, i.e. reputed thieves, known prostitutes or persons who have been convicted of having no visible lawful means of support. The words prescribing the offence require only associating with such persons and do not require that the association should be for any specified purpose. However, the provision does require that the association should be "habitual" but otherwise mere association is sufficient.
There is a marked contrast between the provisions of pars. (b) and (c) in that the offence described in par. (c) is simply that the defendant "habitually consorts with reputed thieves etc." without being able to give to the court a "good account of his lawful means of support and also of his so consorting", whereas par. (b) deals with a person who is "found in a house or place in company with reputed thieves or persons having no visible lawful means of support who, on being thereto required by the court, does not give to the satisfaction of the court a good account of his lawful means of support and also of his being in such house or place upon some lawful occasion."
Paragraph (b) deals, so far as presently material, with an offence constituted by a single incident, i.e. being "found in a house or place" in the company specified and failing to "give to the satisfaction of the court a good account of his being in such house or place upon some lawful occasion". It is thus clear that some lawful reason for being in the particular house or place constitutes in this respect a good answer to that charge. In marked contrast, however, par. (c) so far as presently material, deals, not with a single occasion, but with habitual conduct, i.e. habitually consorting with reputed thieves unless he gives to the satisfaction of the court a good account "of his so consorting". The force of this contrast is not diminished by the fact that the two paragraphs were not introduced at the same time.
It is, in my opinion, quite clear on the words of these provisions that a "good account" of his so consorting is not provided by saying that he was doing no more than consorting with such persons without there being any unlawful purpose connected with such consorting. The offence is habitual consorting and not habitual consorting for any specified purpose.
To say merely that there was no unlawful purpose associated with the habitual consorting with reputed thieves provides no account, much less any good account of such consorting. It does no more than describe the offence itself as set out in the statute. I find it impossible to read par. (c) as applicable only to cases where it is shown that some particular unlawful purpose was associated with (presumably) all the instances of consorting which make up the habitual consorting the subject of a charge.
There has been a substantial number of decisions in the courts in various States and in New Zealand dealing with substantially the same legislation. The cases are cited in the reasons for judgment of my brother Mason and I do not need to discuss them further, beyond saying that, with one exception, they establish a uniform view that "consorting" means merely associating with or keeping company with other persons and involves no additional ingredient. The exception to that proposition is the decision of McGarvie J. in an earlier stage of the present litigation, reported as Johanson v. Dixon [No. 1] [45] , in which he expressed the view that a person charged with this offence gives a "good account of his consorting" if he establishes to the reasonable satisfaction of the Court that the consorting was "innocent". I respectfully agree with the reasons given in the judgment of the Full Court (Young C.J., Menhennitt and Murray JJ. [46] ) that the reasons and conclusions of McGarvie J. as to the meaning and effect of s. 6 (1) (c) of the Vagrancy Act cannot be supported. In my opinion that decision, so far as it deals with the present point, should be overruled.
1. [1977] V.R. 574.
2. [1978] V.R. 377.
For those reasons I am of opinion that special leave should be refused. |
high_court_of_australia:/showbyHandle/1/10742 | decision | commonwealth | high_court_of_australia | text/html | null | TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd [1963] HCA 57 | https://eresources.hcourt.gov.au/showbyHandle/1/10742 | 2024-09-13T22:51:46.611874+10:00 | High Court of Australia
Kitto, Windeyer and Owen JJ.
TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd
[1963] HCA 57
ORDER
Appeals allowed. Judgment of the Supreme Court set aside except in so far as the counterclairn of the defendant Esanda Ltd. is thereby dismissed with costs. Action remitted to the Supreme Court to re-assess the damages and to enter judgment for the plaintiff against the defendants accordingly. Respondent to pay one-half of the appellants' costs of the appeals.
Cur. adv. vult.
The Court delivered the following written judgment:—
Nov. 26
Kitto, Windeyer and Owen JJ.
These appeals are brought by the defendants, T.C. Industrial Plant Pty Ltd (hereinafter called the T.C. Company) and Esanda Ltd. (hereinafter called Esanda), in an action heard by Stable J. in which he gave judgment for the plaintiff, Robert's Queensland Pty Ltd, against the defendants for £27,889 15s. 6d. and for the plaintiff on a counterclaim pleaded by Esanda.
At all relevant times the business of the T.C. Company included that of selling and supplying "Hazemag" Impeller Breakers which are machines designed to crush stone and gravel for use in concreting work and Esanda, which was a wholly owned subsidiary of the E.S. & A. Bank, carried on a hire-purchase business. Early in 1958 the Commonwealth required a large quantity of screened crushed aggregates in three sizes for use at an aerodrome near Brisbane and called for tenders for the supply and delivery to the aerodrome of about 24,000 cubic yards of this material. A man named Robert, who later became the managing director of the plaintiff company, lodged a tender and on 8 July 1958, it was accepted. The specifications and conditions upon which the tenders were called and which later became part of the contract with the Commonwealth required the material to be delivered at the rate of not less than 250 cubic yards per week for each size of aggregate. In the events that happened this would have meant that, as to one size of aggregate, delivery would be required to be completed not later than 2 December 1958; as to another size not later than 17 March 1959, and, as to the third, not later than 24 March 1959. The specifications and conditions further provided that in default of delivery within the times allowed or any extension thereof granted by the Commonwealth the contractor would pay liquidated damages at the rate of £30 for each week beyond the time allowed by the contract and for each type of aggregate and, in addition, would forfeit all moneys deposited with the Commonwealth by way of security for the due performance of the contract. Provision was also made by which the Commonwealth could cancel the contract in the event of the contractor's failure to perform any of its terms and it contained a clause forbidding the assignment of the contract.
It was Robert's intention to form a proprietary company to carry out the contract if his tender was accepted and this was made known by him to the Commonwealth officials who were concerned with its execution and performance. The plaintiff company was accordingly incorporated towards the end of May 1958. The contract, which was dated 11 August 1958, was made with and signed by Robert but in fact, to the knowledge and with the assent of the Commonwealth officers concerned, the plaintiff carried out all the work that was done and the deliveries that were made and the plaintiff paid to the Commonwealth the sum of £467 which was required to be paid by way of security for the due performance of the work.
Before the contract was signed and in anticipation of its execution Robert and those associated with him took steps to find a crushing machine suitable for the work and their search led them to the T.C. Company. They, themselves, had had no experience in gravel and stone crushing work but they explained in detail to the responsible officers of the T.C. Company the nature of the work to be done and the terms of the contract which was about to be made with the Commonwealth. In the course of these discussions the representatives of the T.C. Company assured them that a crushing machine known as the Hazemag A.P. 4 Impeller Breaker which the T.C. Company could supply was suitable for the purpose of carrying out the work for which the contract called. An order for the crusher was there upon given by the plaintiff and an initial payment of £1,500 was made by it, the T.C. Company being told that Esanda would complete the purchase from the T.C. Company and let the machine on hire to the plaintiff under a hire-purchase agreement. In consideration of the plaintiff making the initial payment and arranging for Esanda to provide the balance of the price the T.C. Company gave a number of warranties relating to the crusher which need not be detailed. The learned trial judge found also that the plaintiff had made known to the T.C. Company the particular purpose for which the crusher was required so as to show that it had relied on the skill and judgment of the T.C. Company and that it was an implied condition of the agreement between that company and the plaintiff that the crusher was fit for the purpose of crushing the stone and gravel required for the fulfilment of the contract with the Commonwealth. Arrangements were then made by the plaintiff with Esanda by which the latter agreed to buy the crusher from the T.C. Company and pay the balance of the price and let it to the plaintiff on hire purchase. Before Esanda agreed to do this discussions took place between Robert and other representatives of the plaintiff and one Carlisle, who was the manager of the branch of the E.S. & A. Bank at which Robert and the plaintiff banked and was also an officer of Esanda. All that Carlisle knew about the crusher and its fitness for the purpose of carrying out the contract with the Commonwealth came to him from the plaintiff's representatives and they, as his Honour found, were to Carlisle's knowledge merely repeating the assurances given to them by the T.C. Company. Following these discussions and early in September 1958 the crusher was purchased by Esanda from the T.C. Company for £9,668 less the deposit of £1,500 which the plaintiff had already paid and Esanda, in turn, hired it to the plaintiff under a hire-purchase agreement under which an initial payment of £3,223 was made by the plaintiff and it agreed to pay monthly instalments of £306 38s. About 12 September 1958, the crusher was delivered to the plaintiff at the site where the crushing operations were to be carried out. It was correctly assembled there and work began. The machine, however, proved to be unfitted for the purpose for which it had been supplied with the result that, despite the plaintiff's best endeavours, deliveries of aggregates to the Commonwealth were far below those for which the contract provided. In a letter dated 28 October 1958, from the Commonwealth Director of Works to the plaintiff attention was drawn to this fact and the plaintiff was required to take action to improve the rates of delivery so that the contract might be performed within the times specified. The plaintiff made every endeavour to rectify the faults in the crusher but the troubles persisted and on 17 December 1958, the Director of Public Works wrote a further letter to the plaintiff stating that default in making deliveries could not be tolerated any further and required the plaintiff to state within seven days its "intentions for fulfilling all the terms of the contract". The plaintiff replied on 29 December that an officer of the T.C. Company had promised to inspect the crusher and had guaranteed to make it operate efficiently. On 31 December the solicitors for the plaintiff wrote to the T.C. Company making further complaints of the deficiencies of the crusher and pointing out that, as a result, the plaintiff was in danger of having its contract with the Commonwealth cancelled. The letter called upon the T.C. Company to "replace" the equipment in full working order but no reply was received. On 8 January 1959, the plaintiff wrote to the Director of Public Works conceding that it was in default in making deliveries and giving a lengthy account of its unsatisfactory dealings with the T.C. Company. It went on to say that inquiry had shown that other equipment for stone and gravel crushing was "available for purchase only" but that the plaintiff had not the finance to purchase such equipment and that in these circumstances it had no alternative but to advise that it was unable to perform the terms of the contract. The letter accordingly asked that it be released from the contract in order to avoid as far as possible incurring further losses. There followed a request that the Commonwealth would not seek "penalties" from the company in addition to the losses which it had already suffered and asked that the moneys deposited by way of security be repaid. On 30 January 1959, the plaintiff's solicitors wrote to the T.C. Company that it had been forced to "retire" from the performance of its contract with the Commonwealth because of the defects in the crusher and asked that the T.C. Company "repurchase this plant from our client at the full cost which was paid for it" and accept full responsibility for the damages which the plaintiff had sustained. No reply to this letter was received. On 27 February the Director-General of Works gave written notice of the cancellation of the contract addressed to Robert c/o the plaintiff. The notice recited that "Whereas by written communication dated 8th January, 1959, you have requested to be relieved from having to carry out the remainder of the work" and went on to give notice of cancellation and to declare forfeited "all sums of money remaining in the hands of the Commonwealth in respect of the said contract together with all sums deposited by Robert's (Qld.) Pty Ltd and retained as security for the due and proper performance and completion of the said contract". Further correspondence passed between the Director of Works and the plaintiff and ultimately the amount of the deposit was retained by the Commonwealth but no claim was made by it for the payment of liquidated damages and all material in fact delivered by the plaintiff at the aerodrome was paid for at the contract rates. On 4 March 1959, the plaintiff gave written notice to Esanda that it elected to treat the hire-purchase agreement of 5 September 1958, as repudiated by the latter on the ground that Esanda had committed breaches of "conditions required to be fulfilled by you pursuant to the said agreement and the said Acts". The Acts in question were The Hire-purchase Agreement Acts 1933-1946 Q. The crusher was not in fact used by the plaintiff after its contract with the Commonwealth was cancelled and the machine was, as his Honour found, put by it in a place of safe keeping where it was available to Esanda.
What has been said is no more than a brief outline of the events which led to the institution of the action in April 1959. In it the plaintiff claimed damages for breaches of contract against both defendants. The claim against the T.C. Company was based (inter alia) upon a breach of the implied condition that the crusher was reasonably fit for the purpose of carrying out the work of crushing required for the performance of the plaintiff's contract with the Commonwealth. The learned trial judge found that there had been a breach of this condition and this finding has not been attacked on appeal. He proceeded then to assess the plaintiff's damages at £27,889 15s. 6d. of which £15,889 15s. 6d. represented, in the main, expenditure and liabilities incurred by the plaintiff in the course of and for the purposes of carrying out its contract with the Commonwealth less the amounts paid to it by the Commonwealth under that contract. The balance of £12,000 represented his Honour's estimate of the profits which the plaintiff would have made had it been able to carry out its contract with the Commonwealth and a further contract for the delivery of additional quantities of aggregate which would, his Honour considered, have probably been made with it by the Commonwealth if it had been able to fulfil the contract in fact made.
It is convenient at this point to state the ground on which the plaintiff's claim against Esanda was upheld by the learned trial judge. By its statement of claim the plaintiff alleged (inter alia) that, by reason of the provisions of s. 7A of The Hire-purchase Agreement Acts 1933-1946 Q, it was an implied condition of the contract between the plaintiff and Esanda that the crusher was reasonably fit for the particular purpose for which it was required and that there had been a breach of that condition. His Honour was of opinion that in the circumstances of the case no warranties or conditions as to the fitness of the crusher for the purpose for which it was let to the plaintiff on hire purchase were to be implied by the common law because "all that Esanda did was to sign a hire-purchase agreement for a machine of which all its knowledge was what it had gleaned from the plaintiff". He was of opinion, however, that s. 7A(1) of The Hire-purchase Agreement Acts 1933-1946, which was in force at the relevant time, applied. By that subsection it was provided that
If any chattel has been let or sold under a hire-purchase agreement to a hirer who, at any time within a period of six months prior to the making of such hire-purchase agreement, made known — (a) To the owner; or (b) To any other person who within the said period shall have offered or agreed to let or sell to the hirer or obtained or received from the hirer an application or order for the letting or sale to the hirer of such chattel the particular purpose for which the chattel is required, so as to show that the hirer relied on the skill or judgment of the owner or of such other person, as the case may be, and the chattel is of a description which it is in the course of the business of the owner or of such other person, as the case may be, to supply there is an implied condition that the chattel shall be reasonably fit for such purpose and such implied condition shall be binding in law as well upon such other person as upon the owner.
His Honour was of opinion that the T.C. Company was "any other person" within the meaning of par. (b) of the sub-section and that all the other requirements of the sub-section had been fulfilled. The plaintiff had, within a period of six months before the making of the hire-purchase agreement with Esanda, made known to the T.C. Company the particular purpose for which the crusher was required so as to show that it relied upon the skill and judgment of the T.C. Company. That company had obtained or received from the plaintiff an application or order for the letting or sale to the plaintiff of the crusher and the machine was of a description which it was the business of the T.C. Company to supply. The result was therefore that there was to be implied in the hire-purchase agreement between Esanda and the plaintiff a condition that the crusher was fit for the purpose for which it was hired. There had been a breach of that implied condition and accordingly the learned trial judge found in favour of the plaintiff as against Esanda for the same amount of damages as he awarded against the T.C. Company.
It was contended before his Honour and on the appeal that, as against Esanda, the plaintiff was estopped from asserting that the crusher was unfit for the purpose for which it was supplied because, so it was said, the plaintiff had represented to Esanda that it was fit for that purpose and, acting on that representation, Esanda had agreed to let it on hire purchase to the plaintiff. The submission was rejected by the learned trial judge for the reason, amongst others, that in the discussions between the plaintiff's representatives and Carlisle which led up to the making of the hire-purchase agreement the former had, to the latter's knowledge, merely repeated the assurances which the T.C. Company had given as to the capabilities of the crusher. In other words, the representation made to Esanda by the plaintiff was not that the machine was fit for the purpose for which it was required but that the T.C. Company had stated that it was fit for that purpose. On the evidence this was a finding which was clearly open and no good reason has been shown why it should not stand. This submission therefore fails and it is necessary then to consider the matters which were argued on the issue of damages.
The same submissions were made on behalf of each of the defendants. Some of them related to matters of detail but three of them were on broader lines. It was said that the contract for the supply of aggregates was made between the Commonwealth and Robert and not between the Commonwealth and the plaintiff and that accordingly the latter could not maintain a claim for loss of profits resulting from a failure to perform that contract. The learned trial judge was of opinion that, although Robert had signed the original contract, the evidence showed that it had either been assigned by him to the plaintiff with the knowledge and assent of the Commonwealth or that a novation of it had occurred thus creating a contractual relationship on the same terms between the plaintiff and the Commonwealth. An examination of the evidence, both oral and documentary, seems to us to establish that the contract had been novated and this point therefore fails. Next it was said that the plaintiff had failed to mitigate its damage in that it should, so it was said, have sought from the Commonwealth an extension of time for performance of the contract and made arrangements to obtain another crushing machine capable of carrying out the necessary work. But it was for the defence to show that the plaintiff had failed to mitigate damages and it is a sufficient answer to this submission to say that when regard is had to the evidence and in particular to the letters of 28 October and 17 December 1958, from the Director of Works to the plaintiff, to which reference has earlier been made, it is most improbable that, had the plaintiff applied for an extension of time, it would have been granted and that the plaintiff's action in asking, in its letter of 8 January 1959, to the Director of Works, to be released from the further performance of the contract was reasonable. Had it not taken this course, it is probable that it would have incurred further loss and become liable to pay substantial sums by way of liquidated damages and, in such circumstances, might well have been charged with an unreasonable failure to mitigate its damages.
It was also submitted that the plaintiff could not recover under both the heads of damage upon which the learned trial judge based his award but was bound to elect whether it would pursue its claim for expenditure uselessly incurred as a result of the defendants' breaches of contract or, in the alternative, its claim to recover for the loss of the profits it would have earned had the crusher been fit for the purpose for which both defendants knew it was required, namely to carry out the plaintiff's contract with the Commonwealth, the terms of which were at all material times known to each of them. This submission was based upon the decision in Cullinane v British Rema Manufacturing Co. Ltd. [1] . That was a case in which the plaintiff had purchased a clay pulverizing machine from the defendant, to be made according to certain specifications, the defendant warranting that it would pulverize clay at the rate of six tons per hour. The machine was built according to the specifications but would only pulverize clay at less than the warranted rate. The plaintiff had incurred expense in erecting a building to house the machine and buying ancillary plant. He continued to work the machine but by reason of the fact that its capacity was less than had been warranted his operations were less profitable than they would have been had it complied with the warranty. He claimed to recover by way of damages the cost of erecting the building, purchasing the ancillary plant and purchasing the machine itself less the estimated residual value of those assets as at the time of the institution of the action. In addition he claimed for loss of the profits he would have made up to the date of trial had the machine been as warranted and, in arriving at the amount of profits lost, he allowed for depreciation and maintenance on the building, the machine and the ancillary plant.
1. [1954] 1 Q.B. 292.
Judgment in the action was delivered three years after the date of delivery of the machine. The claim for loss of profits was limited to that period, notwithstanding that the machine had a life of ten years. This introduced into the case a complication which led to an ultimate disagreement amongst the members of the Court of Appeal. Evershed M.R. and Jenkins L.J. thought that as a result of the limitation the case had to be decided on the footing that if the machine had been as warranted it would have earned profits during the three years but none thereafter. Morris L.J. on the other hand thought that the limitation meant only that although loss of profits after the three years would have been incurred it was not claimed for. This difference of opinion as to the effect of the limitation led to disagreement as to the fate of the appeal. It is important to see how that came about. The plaintiff's claim had been submitted to an official referee under five heads. Heads A., B. and C. were capital expenditure, A. being the cost (less break-up value) of buildings etc. erected specially to house the machine, B. the cost of the machine less its residual value, and C. other capital expenditure preliminary to the working of the machine, less residual values. Then a claim D. was made for interest on A., B. and C. for the three years. Finally a claim E. was made for loss of profit for the three years, arrived at by taking the estimated receipts for the warranted output and subtracting not only running costs, office expenses and interest but also depreciation at ten per cent per annum. The official referee allowed A., B. and C. as representing capital thrown away; he allowed D.; and in addition he allowed E., but without the subtraction of depreciation. On the assumption by which the majority of the Court of Appeal considered the plaintiff was bound, namely that if the machine had been as warranted profits would have been earned for three years but no longer, what the official referee had done amounted to saying that the plaintiff was entitled to recover not only the whole of the profit (without deduction for depreciation) which he would have got by laying out A., B. and C., but also A., B. and C. themselves. Plainly that could not be right. It would mean that in the end the plaintiff would have the equivalent of his full profit without having borne the expense of earning it. The plaintiff's claim as pleaded had not suggested that. What it had suggested was that the plaintiff should recover, in addition to A., B., C. and D. only so much of the three years' profits as should remain after writing off out of them the three years' proportion (i.e. three-tenths) of A., B., C. and D. If Morris L.J.'s opinion had prevailed as to what the limitation to the three years' period really implied, this would, we think, have been considered by the majority of the Court to be unexceptionable in principle, provided that it meant accepting as the proper measure of damages the aggregate of A., B., C. and D. plus, not the profits earned by the laying out of A., B. and C., but only the excess of those profits that would have remained after recouping A., B. and C. This would only have been another way of giving the plaintiff the full amount of the lost profits without any deduction for depreciation, and it would have accorded with the basic principle of Hadley v Baxendale [2] , and Victoria Laundry (Windsor) Ltd. v Newman Industries Ltd. [3] , which the Court was keeping steadily before it. But the majority of the Court, if we understand their judgments aright, would not have agreed with Morris L.J. that a deduction of only three years' depreciation would produce the correct result.
1. (1854) 9 Exch. 341 [156 E.R. 145].
2. [1949] 2 K.B. 528, at p. 539.
There is a sentence in the judgment of Evershed M.R. upon which a comment may be permissible. After having said that a person who has obtained a machine unable to perform what it was warranted to perform may adopt the course of claiming to recover the capital cost he has incurred, deducting anything he can obtain by disposing of the material that he got, his Lordship proceeded [4] "But, alternatively, where the warranty in question relates to performance, he may, in my judgment, make his claim on the basis of the profit which he has lost If he chooses to base his claim on that footing, it seems to me that depreciation has nothing whatever to do with it." Jenkins L.J. spoke similarly [5] . We understand their Lordships to mean that in such a case the plaintiff, having paid for the machine at the beginning, should not have to pay for it a second time (in effect) by having its value, spread over the period of its life, subtracted from what otherwise would be his damages. The reason obviously is that where the plaintiff adopts, as the amount the machine would have been worth to him if it had been as warranted, the amount of the profits he would have made by using it to the point of exhausting its useful life, he is entitled to recover the whole amount of those profits, without making provision for replacement of the cost of the machine; for those profits are what he was really buying when he bought the machine in reliance upon the warranty. But the same result may be produced by claiming for recoupment of his capital outlay and in addition for the excess of the estimated profits over the amount of the capital outlay; and that is all that is done by a plaintiff who claims his capital outlay and in addition profits estimated after deduction of depreciation [6] . The justification for the refusal of the majority of the Court in Cullinane's Case to follow such a course lies, we venture to think, in the fact that since nothing was proved about the probable amount of the profits that would have been made in the final seven years of the machine's life, and therefore nothing about any probable excess of profits during the whole ten years of the machine's life over amounts of depreciation equalling the total capital cost, the plaintiff failed to show that damages assessed on the loss-of-profits basis would be greater than damages assessed by reference to capital expenditure plus interest. What was perfectly clear was that the plaintiff could not have damages assessed on the one basis plus damages assessed on the other basis. To sum the matter up, the seller (in effect) promised the buyer that the machine was such that upon the buyer laying out £X in acquiring and installing the machine he would be able to get £X + Y by working it. For breach of the promise the buyer, having laid out his £X, may recover, if he chooses, what the machine would have been worth to him if it had been as promised (presumptively £X) minus the actual value of the machine. Alternatively he may recover £X + Y; he is not to be restricted to (£X + Y) - (£X in the form of depreciation), for he has already parted with £X once, namely at the beginning. And it is only stating the second alternative in another way to say that he can recover (£X + Y) - (£X in the form of depreciation) and in addition his capital outlay £X.
1. [1954] 1 Q.B., at p. 303.
2. ibid., at p. 306.
3. See [1954] 1 Q.B., at p. 308, per Jenkins L.J.
We have been invited to say that what was held in Cullinane's Case is opposed to the decision of an earlier Court of Appeal in the case of Hydraulic Engineering Co. Ltd. v McHaffie Goslett & Co. [7] . That was not a case of a warranty relating to performance; it was a case of a contract to supply an article within an agreed time, the article being required by the plaintiff (as the defendant knew) for incorporation in a machine, the rest of which the plaintiff was manufacturing himself, to be sold for a price exceeding the total cost to the plaintiff. The Court held that the plaintiff was entitled to recover the cost he incurred in manufacturing the rest of the machine plus the profit he would have made by selling the completed machine. But the word "profit" was there being used in a sense different from that in which it was to be used in Cullinane's Case. In the latter case the word meant a profit from operating the article purchased; in other words the excels of the receipts that would have been obtained by the contemplated use of the article to perform profitable work (if it had been as warranted) over the expenditure which that use would have involved. But in the former case "profit" meant the excess of the price that would have been obtained on a contemplated sale of a machine (which included the article in question and other integers) over the cost to the plaintiff of that machine, sale of the machine having been made impossible by the nonfulfilment of the stipulation sued upon. As an authority that the damages recoverable included both cost and profit the case means only that the plaintiff, having expended £X which he would have got back together with £Y profit if the defendant had performed his obligation, can recover for breach of that obligation the whole sale price he should have been enabled to obtain, viz. £X + Y; and it makes no difference if you prefer to say that he can recover £X under the name of cost plus £Y under the name of profit. It is hardly surprising that Hydraulic Engineering Co.'s Case was not cited in Cullinane's Case. The difference between them may be expressed by saying that in the former case the plaintiff by incurring the items of cost (less residual values) would have obtained, but for the defendant's breach, the whole of the price for which he could have sold the machine, and therefore must have the amount of that price (cost plus profit) as damages; whereas in the latter case the plaintiff, but for the defendant's breach, by incurring the items of cost (less residual values) would have obtained the operating profit and is entitled to damages for the loss thereof, but would not have got back the amount of the cost and is therefore not entitled to damages as if he had lost that through the defendant's breach.
1. (1878) 4 Q.B.D. 670.
The case before us is one of a breach of condition followed by the election by the plaintiff to terminate its contract with Esanda. The only difference that that makes as regards damages is that the defective machine reverted to the defendant Esanda and consequently there is no item of residual value to be allowed for. The learned trial judge awarded damages in two parts. First his Honour awarded £15,889 15s. 6d. to cover all items of cost incurred by the plaintiff (including interest) less the amount of the payments received by the plaintiff from the Commonwealth. This would restore the plaintiff to the position it was in at the start. Secondly his Honour awarded £12,000 for loss of the profits which he thought the plaintiff would probably have gained if the machine had been as warranted. The judgment does not reveal how his Honour arrived at that figure, but from a reference which he made to figures submitted to him by counsel for the plaintiff, and a statement that he was allowing for contingencies normally to be expected whereby the optimum is not always attained, it seems probable that his Honour accepted the items in a Sch. "C" which counsel had placed before him, showing a loss of profit of £15,440 1s. 5d., and then reduced that figure to a round £12,000. If his Honour had made an estimate of the plaintiff's probable working profit after deducting from the future receipts that would have been obtained from the Commonwealth the expense (not including any items already covered by the £15,889 15s. 6d.) of earning those receipts, it would have been right to allow in the damages the excess of that profit over the £15,889 15s. 6d. But it is not clear that such an estimate could be made on the material in Sch. "C"". The only satisfactory way of dealing with the case, it seems to us, is to remit the question of damages to the Supreme Court for further consideration. It may of course be that the learned judge will find it preferable to work out a single calculation, taking the whole of the actual and probable expenditure which the plaintiff would have incurred in performing its contract with the Commonwealth and the probable extension thereof had the crusher been of the warranted fitness, and subtracting the resulting figure from the total receipts the plaintiff would have obtained under the contract and the extension.
It remains to deal with one further matter. In its counterclaim Esanda denied that the plaintiff had any right to treat the hire-purchase agreement as repudiated and sought to recover from it £7,613 19s. representing twenty-one instalments of hire under the hire-purchase agreement, together with interest thereon. At the trial the counterclaim was supported upon the ground that the plaintiff had not returned the machine to Esanda's place of business when the notice of 4 March 1959, was given and that for this reason the plaintiff remained liable for instalments of hire thereafter falling due, together with interest. On the appeal this contention was abandoned. Instead it was submitted that the plaintiff, when it discovered that the condition as to the fitness of the machine to perform the work had not been complied with, kept and worked it for a considerable time. It had, so it was said, thereby elected to treat the breach of the condition as a breach of warranty and, while it was entitled to recover damages for that breach, the hire-purchase agreement remained on foot and the plaintiff was liable to pay instalments of hire and interest thereon. If this be correct, it would seem to follow that the damages recoverable by the plaintiff from the T.C. Company would be correspondingly increased but it is unnecessary to consider this further because the point now raised should not, in our opinion, be entertained. Had the matter been put forward at the trial, issues of fact would have arisen as to which relevant evidence might have been led to show that, in all the circumstances, the plaintiff had not made any such election as was suggested. The evidence suggests that during the period when the plaintiff was endeavouring to have the machine put into proper working order, by the renewal of parts and the like, Esanda was informed of the difficulties being encountered but no attempt was made to elicit evidence as to what passed between it and the plaintiff on these occasions. In these circumstances we think we should apply what was said by Lord Watson in Connecticut Fire Insurance Co. v Kavanagh [8] , and adopted by this Court in Suttor v Gundowda Pty Ltd [9] :
When a question of law is raised for the first time in a court of last report, upon the construction of a document, or upon facts either admitted or proved beyond controversy, it is not only competent but expedient, in the interests of justice, to entertain the plea. The expediency of adopting that course may be doubted, when the plea cannot be disposed of without deciding nice questions of fact, in considering which the court of ultimate review is placed in a much less advantageous position than the courts below. But their Lordships have no hesitation in holding that the course ought not, in any case, to be followed unless the court is satisfied that the evidence upon which they are asked to decide establishes beyond doubt that the facts, if fully investigated, would have supported the new plea.
1. [1892] A.C. 473, at p. 480.
2. (1950) 81 C.L.R. 418, at p. 438.
In the result we find ourselves, except on one point, in agreement with Stable J., by whose exhaustive and careful judgment we have been greatly assisted. We are of opinion that the judgment below should be set aside and that the action should be remitted to the Supreme Court for further hearing as to the quantum of damages. The respondent should pay one-half of the appellants' costs of the appeals. |
high_court_of_australia:/showbyHandle/1/10436 | decision | commonwealth | high_court_of_australia | text/html | null | Behrendorff v Soblusky [1957] HCA 84 | https://eresources.hcourt.gov.au/showbyHandle/1/10436 | 2024-09-13T22:51:53.760672+10:00 | High Court of Australia
Dixon C.J. McTiernan and Taylor JJ.
Behrendorff v Soblusky
[1957] HCA 84
ORDER
Application refused with costs.
Dixon C.J.delivered the judgment of the Court as follows:—
Dec. 3
Dixon C.J.
This is an application for special leave to appeal from the judgment of the Full Court of Queensland affirming the judgment given for the plaintiff at the trial. The question upon which the decision of the Full Court depended and which is raised upon this application for special leave is of a very peculiar description. To make it clear, it is desirable to say a little about the facts of the case.
It appears that Soblusky, who was the plaintiff in the action, had possession of a Pontiac panel van under a hire purchase agreement. No doubt colloquially he would be said to be the owner. It further appears that Behrendorff, who is the defendant in the action, held under a hire purchase agreement a Ford V8 sedan. The two men resolved to exchange the vehicles and Soblusky took possession of the Ford V8 sedan and proceeded to drive it. He was a somewhat elderly man and had suffered some injuries which made him unwilling to drive the car any long distance. He did not become the registered owner of the car, he did nothing to change the title of the car, he simply took it over and had possession of it.
On 1st September 1956 he and a party determined to drive from Maryborough to Gayndah to attend a meeting of a Buffalo Lodge. The party consisted of a Mr. Lewis, a Mr. Egan and a Mr. Anderson as well as the plaintiff Soblusky.
Soblusky appears to have asked Lewis to undertake the driving and to have placed him in charge of the car in the sense that he put him in the driver's seat and resigned the whole business to him. Soblusky dropped off to sleep.
Whether Mr. Lewis went to sleep or not does not appear, but the car ran off the road doing considerable injury to at least three of the passengers. Soblusky was one of these and he brought an action against Lewis and Behrendorff in which the insurance commissioner as the insurer of Behrendorff was joined. In that action he recovered damages but not a sufficient amount to enable him to appeal to this Court without special leave.
The insurance commissioner in Behrendorff's name and in his own behalf seeks special leave to appeal from the judgment which has been affirmed.
The action which Soblusky brought was based on sub-s. (2) of s. 3 of The Motor Vehicles Insurance Act of 1936 Q. as amended. That section says, so far as is material, that for the purposes of every claim for accidental bodily injury, fatal or non-fatal, to any person caused by, through or in connexion with a motor vehicle insured thereunder every person other than the owner who at any time is in charge of such motor vehicle, whether or not with the owner's authority, shall be deemed to be the authorised agent of the owner and to be acting in relation thereto within the scope of his authority as such agent.
Soblusky's case is that as Lewis was driving the car and as Behrendorff was the owner of the car, Lewis was Behrendorff's agent and was to be deemed to be his authorised agent and to be acting in relation thereto within the scope of his authority as such agent.
That Behrendorff was the owner of the car appears clearly enough from the definition of owner. The definition is a very long one, but so far as it is material to Behrendorff's case, it says that the word means a person registered in the records of the Commissioner of Main Roads under The Main Roads Act as the owner of the motor vehicle unless such person shall have given to the commissioner a notice in writing in accordance with the Main Roads Regulations advising the transfer of the motor vehicle or authorising the cancellation of the certificate of registration or renewal of registration appearing in his name in respect thereof. Behrendorff fills that character and therefore falls within the definition of "owner". None of the notices referred to was given and he stands registered as the owner and insured as the owner.
Availing himself therefore of the imputed or statutory agency, Soblusky sued Behrendorff saying "Lewis is the statutory agent of the defendant and therefore I can recover."
On the terms of the statute every condition is fulfilled to enable him to satisfy that description. It is to be observed that sub-s. (2) does not speak in terms of liability, it speaks in terms of agency. Lewis was however negligent and as the statutory agent acting in the scope of his statutory authority from Behrendorff, he must have made Behrendorff vicariously liable and consequently the insurance office would stand in his place and be required to meet its insurance.
The answer which was attempted before the Full Court of the Supreme Court is that while that all may be true, nevertheless Lewis was the agent also of the injured man, the plaintiff Soblusky, and in driving the car was driving as his agent. To establish that the line of authority which is commonly thought to begin with Samson v. Aitchison [1] and which goes on to the interesting case of Ormrod v. Crosville Motor Services Ltd. [2] is relied upon.
1. (1912) A.C. 844.
2. (1953) 1 W.L.R. 409; 1120.
Having established that on authority that is at least a possible view of the relationship between Lewis and Soblusky, it is then said on behalf of the applicant that you have two agencies. You have the statutory agency imputed to Behrendorff so that Lewis represents him by statute. You have another legal agency imputed under judicial authority so that Lewis represents Soblusky the injured man as his agent to drive the car.
Then a step is taken which the Full Court thought had no warrant. It is said that with these two lines of agency the consequent liability which one would think would flow from the application of sub-s. (2) of s. 3 should be intercepted and Soblusky's action should fail because the injury was caused by an act of negligence of a man who was also his agent. It is to be noted as a very obvious thing that Lewis may have been responsible to Soblusky for damages but Soblusky was under no relevant liability as a result of Lewis's negligence. Soblusky was the injured man and we are concerned now only with liability for his injuries. We are not dealing with any vicarious liability of Soblusky. He is simply the person who was injured and who is making the claim under the statute. The simple answer appears to me to be that given by the Full Court that there is no basis for indemnity or contribution in this supposed double relationship, namely, the statutory agency of Lewis imputed to Behrendorff as principal and the agency of Lewis in driving the car for Soblusky under his authority actual or imputed.
The statute simply says that the owner, namely Behrendorff, shall be in the position of operating the car by his authorised agent Lewis acting in relation thereto within the scope of his authority as such agent. It seems therefore to follow that there is no means of interrupting or intercepting the operation of a tortious liability to the plaintiff Soblusky which follows from Lewis's negligence as Behrendorff's statutory agent.
A further argument however was presented to us which appears not to have been presented to the Full Court of Queensland. It was that really Lewis was not the person in charge of the motor vehicle within the meaning of sub-s. (2) of s. 3, that Soblusky himself remained in charge.
Notwithstanding what Mr. Lucas has said in his able argument, I remain of the view that that is, to a great extent, a question of fact.
I am not disposed as at present advised to deny that the words "in charge" may be compatible with some other person actually occupying the driver's seat. If the person who is generally in charge of a car put an unlicensed driver there in order to teach him or put a child there it may be so. One feels that the words "in charge" are probably used to include cases where no one is occupying the driver's seat, as for example, if the person in charge happens momentarily not to be actually in the car. But however that may be, in the present case Lewis was put in the driver's seat to drive because Soblusky said he was not fit to undertake the full responsibility of the journey. Soblusky went off to sleep and Lewis seems to have been left in full command. At all events that view of the case is fairly open and we could not grant special leave in order that such a question should be canvassed, particularly as it was a point not taken before the Full Court itself.
For those reasons I am of opinion that special leave should be refused. The application will accordingly be refused. It will be refused with costs. |
high_court_of_australia:/showbyHandle/1/12397 | decision | commonwealth | high_court_of_australia | text/html | null | R v White [1968] HCA 19 | https://eresources.hcourt.gov.au/showbyHandle/1/12397 | 2024-09-13T22:51:55.912977+10:00 | High Court of Australia
Barwick C.J. McTiernan, Kitto, Taylor and Menzies JJ.
R v White
[1968] HCA 19
ORDER
Special leave to appeal granted, appeal allowed. Order of the Supreme Court of South Australia set aside and in lieu thereof order that the appeal to that Court be dismissed.
Cur. adv. vult.
The following written judgments were delivered:—
1968, April 26
Barwick C.J.
The question on this appeal is whether it was competent for the judge who sentenced the applicant at the same time to declare him an habitual criminal. The answer is to be found in the proper construction of s. 319 (1) (c) of the Criminal Law Consolidation Act, 1935-1957 of the State of South Australia. That section and the circumstances of the case are set out by my brother Menzies in his reasons for judgment which I have had the advantage of reading. There is therefore no need for me to do so. Further, I agree entirely with the conclusion reached by his Honour and with the reasoning by which he supports it. Having regard, however, to certain views expressed in the judgment of the majority of the Full Court of the Supreme Court of South Australia in this case [6] and by Gibbs J. in Reg. v. Keitley [4] , I wish to add a few remarks of my own.
1. [1967] S.A.S.R. 184.
2. [1965] Qd. R. 190.
The terms of s. 319 were originally derived from s. 3 of the Habitual Criminals Act, 1905 of the State of New South Wales, a provision which was also adopted in substance by the States of Victoria, Queensland and Western Australia and by New Zealand. When first enacted in South Australia in 1907 as s. 3 of the Habitual Criminals Amendment Act of that year, it had been preceded by an Act called the Habitual Criminals Act, 1870 S.A., the substance of which is now to be found in s. 316 of the Criminal Law Consolidation Act. Though the Act of 1907 was entitled as an Amendment Act, it embodied a new and distinct scheme not in reality a modification or extension of the scheme of the 1870 Act. Perhaps the best indication of this is the presence of both schemes, still unrelated to each other, in the present Act. The period of police supervision for seven years after the service of a term of imprisonment for which s. 316 provides depends upon a prior conviction for an offence within a specified range of offences. It is imposed by the Act itself upon the subsequent conviction for an offence in the same range unless the court sentencing the accused for the subsequent offence otherwise declares. On the other hand, s. 319 like its predecessors, including the New South Wales statute, creates in the court a discretion to declare a convicted person an habitual criminal if that in fact is what in the opinion of the court he is. The section does not itself impose anything upon the prisoner but selects what it describes as previous conviction on at least a specified number of occasions of an offence of the specified class as indicative of the possibility that crime has become habitual with the prisoner. It seems to me that the scheme of this section is different from and independent of that of s. 316 and its predecessors and that no conclusion can be drawn from any difference in the language of the two provisions. Further, the selection of previous conviction on at least a specified number of occasions as the condition giving rise to the judicial discretion does not appear to me to be founded on any specific concept of incorrigibility or lack of response by the prisoner to what is said to be the warning of a prior conviction or of a prior sentence. The selection is made I think because the frequency of the commission of an offence within the stated range of offences may mark habituation and call for special measures for the protection of the public and the reformation of the prisoner.
In my opinion, Reg. v. Keitley [1] ought not to be followed. The exposure of the prisoner to the judicial discretion which s. 319 (1) gives to the trial judge when he has been thrice convicted of one of the serious offences listed in s. 319 (3) cannot, in my opinion, be properly described as harsh and capricious. Though a man be convicted on the one day and upon the one indictment of a number of offences, the separate offences will in all probability have been committed on different days and probably on days separated by substantial intervals of time. Therefore, both upon my own reading of the section and upon long standing authority to which my brother Menzies makes reference and which commends itself to me, I consider that when Chamberlain J. made the declaration which he did he acted within the authority conferred by s. 319 of the Act. According to the proper construction of that section, the respondent had been previously convicted on at least three occasions of an offence mentioned in class V. of sub-s. (3). Indeed, in my opinion, if the declaration be regarded as part of the sentence on the third count, the conviction on the first and second counts constituted further occasions. The matter therefore became one for the exercise of the discretion which the learned judge had under the section. That judicial discretion is an ample safeguard against a declaration being made in a case where, notwithstanding a person has three convictions or more, he is not really an habitual criminal.
1. [1965] Qd. R. 190.
McTiernan J.
I would allow the appeal. I concur in the reasons of my brother Menzies and I do not consider that it is necessary to add anything to them.
Kitto J.
I too agree in the judgment of Menzies J.
Taylor J.
I agree with the reasons and conclusions of Menzies J. I add, merely by way of emphasis, that I can see no warrant for treating the expression in s. 319 (1) of the Criminal Law Consolidation Act S.A.—"on at least three occasions"—as expressing a necessity for any particular temporal disconformity in relation to the previous convictions. There is nothing in the expression to entitle one to say that by "occasions" the legislature meant "days" or, for that matter, any other specific period of time. It is however objected that unless the meaning attributed to the whole expression by the respondent is given to it the word "occasions" loses all force and is relegated as surplusage. That is to say that to reject the respondent's submission is to read the section as if it simply provided that a declaration may be made under it if it appears that the accused, having been convicted of an offence mentioned in sub-s. (3), has been previously convicted at least three times of an offence mentioned in the latter subsection. But to attempt to state the substance of the section in this fashion discloses, I think, the reason for the presence in the section of the word "occasions". It may well have been thought rather less precise to speak of a person having been previously convicted at least three times of an offence mentioned in sub-s. (3) rather than of a person who has been previously convicted on at least three occasions of such an offence.
It is the respondent's contention that since the relevant provisions of convictions, though more than three in number, occurred on two, and not three or more occasions, a declaration under s. 319 (1) could not be made. But there is ample authority for the proposition that a conviction occurs when a verdict of "Guilty" is returned to an indictment (Reg. v. Blaby [1] , Reg. v. Miles [2] , R. v. Sheridan [3] , R. v. Grant [4] and Reg. v. Campbell; Ex parte Hoy [5] ) and where an indictment or information contains several counts alleging separate offences the jury should be directed to return a verdict on each count: R. v. Bailey [1] . I cannot, therefore, see why the return of the verdict should not be the occasion of the conviction and that, therefore, why it does not appear that the respondent was previously convicted on at least three occasions. The view of the Court of Criminal Appeal "that two or more convictions on the same day constitute only one occasion for the purposes of s. 319" should not, in my opinion, be adopted. If, however, we were to adopt it the result would be that, if in a like case, it appeared that an offender had been convicted on each of three successive days of separate offences of the requisite character a declaration might, on the subsequent conviction, be made but otherwise if the three previous convictions had been the subject of separate counts in the one indictment. I do not think that any such capricious result was intended and I prefer to follow the long-standing authorities on the point in this country and in New Zealand.
1. [1894] 2 Q.B. 170.
2. (1890) 24 Q.B.D. 423.
3. [1937] 1 K.B. 223.
4. [1936] 2 All E.R. 1156.
5. [1953] 1 Q.B. 585.
6. [1924] 2 K.B. 300.
I would allow the appeal and restore the declaration of the learned trial judge.
Menzies J.
Section 319 (1) (b) of the Criminal Law Consolidation Act, 1935-1957 S.A. is as follows:
79.
(1) When any person is convicted on information of an offence of one of the classes of offences mentioned in subsection (3), the following provisions of this section shall take effect:—
(b) Where such person is so convicted of an offence included in any of the classes V., VI., VII., or VIII., mentioned in subsection (3), and has been previously convicted on at least three occasions of an offence mentioned or included in any of the said classes V., VI., VII., or VIII., such judge may, in his discretion, declare as aforesaid that such person is an habitual criminal.
The words "as aforesaid" in this provision mean, as part of the sentence, see s. 319 (1) (a). In sub-s. (3) of s. 319 "larceny" is included in class V.
On 9th May 1962 the respondent was convicted by a jury upon three counts of larceny; on 14th May 1962 he was arraigned upon an information alleging previous convictions as follows:
1. House breaking and larceny (two counts) at the Adelaide Juvenile Court on 15th March 1957.
2. Shopbreaking and larceny (three counts) at the Adelaide Juvenile Court on 15th March 1957.
3. Officebreaking and larceny, at the Adelaide Supreme Court on 6th April 1959.
4. Possession of housebreaking implement at night at the Adelaide Supreme Court on 6th April 1959.
5. Officebreaking and larceny, at the Adelaide Supreme Court on 6th April 1959.
The respondent pleaded guilty and after some intermediate proceedings Chamberlain J. sentenced him for the offences for which he had been convicted on 9th May 1962 and as part of the sentence declared him to be an habitual criminal. An appeal to the Full Court against this declaration was dismissed on 23rd July 1962 and this Court refused special leave to appeal from that decision. Further applications for leave and special leave to appeal made by the respondent were refused in February 1966. On 13th October 1966 the respondent submitted a petition for mercy to the Governor of South Australia and thereupon the whole case was referred to the Full Court to be heard and determined as in the case of an appeal by the respondent—Criminal Law Consolidation Act, s. 369. Upon this reference the Court, confining its attention to the question whether the respondent had "been previously convicted on at least three occasions" of larceny, by a majority (Bray C.J. and Mitchell J., Hogarth J. dissenting) determined that he had only been so convicted on two occasions and quashed the declaration made by Chamberlain J. From that decision [1] the Crown sought and obtained special leave to appeal to this Court. The question now is, therefore, whether the respondent had been previously convicted on at least three occasions of larceny.
1. [1967] S.A.S.R. 184.
The respondent had been previously convicted on eight counts of larceny but five of these convictions were upon counts heard in the Adelaide Juvenile Court on 15th March 1957 and the remaining three convictions were upon counts heard in the Supreme Court at Adelaide on 6th April 1959. The Full Court decided that the respondent had been previously convicted on two occasions only, that is once on 15th March 1957 and once on 6th April 1959.
As will appear later, there is conflicting authority upon statutory provisions elsewhere corresponding with that now under consideration; it is convenient, however, in the first place to examine the language of s. 319 (1) (b) in its context in the Act. The provision is concerned with a conviction of an offence of the specified classification both as the occasion for making a declaration and as the condition upon which a declaration can be made upon that occasion. The condition is conviction of an offence on at least three occasions; it is not, in terms at least, three convictions of an offence. Nevertheless it may well be that each conviction of an offence is itself an occasion. Looking at the section itself there appears to be no justification for reading the word "occasions" as meaning days, and there would seem to be no reason for not treating a criminal convicted in separate courts on the one day as having been convicted on two occasions, e.g., in a Local Court in the morning and in the Supreme Court in the afternoon. Nor would there seem to be much more reason for regarding a criminal convicted in the morning of robbery and in the afternoon of extortion as not having been convicted on two occasions, even if both convictions were in the one court. The difficulty that had been found in the section becomes apparent only when a prisoner is tried upon separate counts in the one court at the one time, for then in common parlance the ensuing convictions might be described as being upon the one occasion. Should this be so, however, it is merely one of the many cases where common parlance and the true meaning of a statutory provision may differ. The difficulty which I have acknowledged as arising in the third instance which I have taken is perhaps more apparent than real, for a careful reading of the judgment of the learned Chief Justice, with which Mitchell J. agreed, satisfies me that his Honour would treat the three instances I have taken in the same way and would not regard a number of convictions on the one day as amounting to more than convictions upon one occasion. In the same way I would treat all three instances in the one way but would, with respect to the Chief Justice's view, regard every conviction as being upon a separate occasion. There is in my opinion an occasion every time a person is charged in court with an offence and is convicted upon that charge. So I read s. 319 (1) (b).
It is, however, necessary to refer to the authorities.
In New South Wales in R. v. Hamilton [1] , decided in 1913, it was said:
The Habitual Criminals Act requires that before the judge can use his discretionary power of declaring an offender an habitual criminal there must have been in this class of offence three convictions on indictment.
Now, certain questions occurred to the Court in dealing with declarations under the Habitual Criminals Act because of the peculiar wording of the section dealing with these matters; and it was thought proper that the whole subject should be considered, having in mind the intention and object of enacting this kind of legislation. The provision of s. 3, which is the one in question, uses the expression—a person convicted of an offence of a certain class who has been previously so convicted on at least, for one class of offence, two occasions; and for another class of offence, under which the present one comes, conviction on at least three occasions. The Court took the opportunity of consulting with the three other members of the Bench who have sat in this Court of Criminal Appeal, and the history of legislation on the subject, which began in England in the year 1869, was very carefully considered. Our own enactment, which was passed in the year 1905, does not use the same expressions, or require precisely the same kind of consideration as that laid down in the English Act, and though a study of those Acts and the decisions upon them are of great use in considering the matter, they were not of special value in determining the meaning of our own legislature. But the general consensus of opinion, on consultation, was that when our own legislature used the expression, "a person having been convicted on so many previous occasions", they did mean the same thing as is expressed in the English Act, which speaks of a person having been so many times convicted previously. [1]
1. (1913) 13 S.R. (N.S.W.), at pp. 653, 654.
1. (1913) 13 S.R. (N.S.W.) 651.
2. (1913) 13 S.R. (N.S.W.), at pp. 653, 654.
In New Zealand in 1910 it was decided by a Full Court comprising five judges in R. v. Steele [2] that each conviction of a prisoner is a separate occasion within the meaning of s. 29 of the Crimes Act, 1908 N.Z., whether the several convictions are recorded on the same day or on different days. Stout C.J., after indicating that the prisoner had been convicted on four separate indictments before the Supreme Court on 27th May, asked: "Has he been previously convicted on at least four occasions of any offence?". His Honour then said:
It is true the Act does not mention four offences. It seems to me to imply that, because it says "convicted on at least four occasions of any offence"; it does not mean convicted on four occasions of several offences, but it is assumed that there is only one offence on each occasion.
The statute has made it necessary that there shall be four—four occasions of any offence. There were separate indictments, and each indictment was really a separate occasion when he pleaded guilty to it. It does not matter if it all took place in the one day. [3]
1. (1910) 29 N.Z.L.R., at p. 1043.
This decision was applied in New Zealand in 1911, 1917 and in 1946. In R. v. Nesbitt [4] the Court of Appeal comprising five judges affirmed R. v. Steele [1] and distinguished R. v. Tier [2] on the ground that in that case there had been but one plea to several counts.
1. (1910) 29 N.Z.L.R. 1039.
2. (1910) 29 N.Z.L.R., at p. 1043.
3. [1946] N.Z.L.R. 505.
4. (1910) 29 N.Z.L.R., 1039.
5. (1912) 32 N.Z.L.R. 428.
In South Australia in Reg. v. Ciemcioch [3] , the Full Court, in the course of its judgment, said in relation to s. 319 (1) (b):
A further contention, that convictions on separate counts in the one information did not constitute convictions on separate "occasions", was mentioned, but, in our view, quite properly, was not pressed. [4]
1. [1963] S.A.S.R. 64.
2. [1963] S.A.S.R., at p. 66.
It appears, therefore, that many judges over a long period of time have regarded a conviction upon a separate count as a conviction upon a separate occasion and notwithstanding the counts were heard in the one court at the one time.
In England, however, in 1953 a different view was taken but without any reference to the authorities already cited. In Reg. v. Rogers [5] the Divisional Court held that the word "occasions" in s. 21 (2) of the Criminal Justice Act, 1948 U.K.—corresponding with, though not in exactly the same terms as, the subsection now under consideration—meant separate appearances before a court and that two convictions of the same man at the same sessions or assizes are not convictions on two separate occasions. Lord Goddard C.J., in delivering the judgment of the Court, said:
The court is therefore of opinion that we must construe these words "on at least three previous occasions", as meaning that each occasion is a separate occasion if sentences have been passed at a separate court; that is to say, that two sentences passed on the same man at the same sessions or the same assizes will not rank as passed on two separate occasions; they must be at separate assizes or quarter sessions.
If one construes the word "occasion" as really meaning appearance in court, appearance at the assizes, appearance at the quarter sessions or the petty sessions, that gives a meaning which is in my view consonant with the spirit and intention of the Act. [6]
1. [1953] 1 Q.B., at pp. 316, 317.
1. [1953] 1 Q.B. 311.
2. [1953] 1 Q.B., at pp. 316, 317.
In the Full Court, Hogarth J. felt himself able to distinguish this decision because it involved consideration of ss. 21 (1) and 22 as well as s. 21 (2) of the English Act, but a careful study of Lord Goddard's judgment does not enable me to adopt this view. It does seem, however, that the decision of the Divisional Court turned very much upon the application of the old rule that a judgment relates back to the first day of the term so that the whole term should be treated as one occasion for the purposes of the English section. It is apparent, moreover, that an appearance at the assizes and an appearance in petty sessions on the same day would have been regarded as appearances on different occasions. In my opinion neither this decision, nor those which have followed it, such as Reg. v. Rider [1] ; Reg. v. Perfect [2] and Reg. v. Keitley [3] , outweigh the decisions in South Australia, New South Wales and New Zealand to which reference has been made earlier.
1. [1954] 1 W.L.R. 463.
2. [1957] 2 Q.B. 107.
3. [1965] Qd. R. 190.
As the authorities stand, I think our proper course is to give effect to our own understanding of the section. Doing that, I consider that when Chamberlain J. made the declaration which he did he acted within the authority conferred by s. 319 of the Act for, according to the proper construction of that section, the respondent had been previously convicted on at least three occasions of an offence mentioned in class V. of sub-s. (3). The matter therefore became one for the exercise of the discretion which the learned judge had under the section. That judicial discretion is an ample safeguard against a declaration being made in a case where, notwithstanding a person has three convictions or more, he is not really an habitual criminal.
For these reasons the appeal should be allowed and the declaration which was quashed by the Full Court should be restored. |
high_court_of_australia:/showbyHandle/1/8966 | decision | commonwealth | high_court_of_australia | text/html | null | Bennett v Minister of Community Welfare [1992] HCA 27 | https://eresources.hcourt.gov.au/showbyHandle/1/8966 | 2024-09-13T22:51:58.353501+10:00 | High Court of Australia
Mason C.J. Deane, Toohey, Gaudron and McHugh JJ.
Bennett v Minister of Community Welfare
[1992] HCA 27
ORDER
Appeal allowed with costs. Set aside the order of the Full Court of the Supreme Court of Western Australia and in lieu thereof order that:
(i) the appeal to that Court be allowed with costs; and
(ii) the order of the Supreme Court of Western Australia (Nicholson J.) be set aside and in lieu thereof judgment entered for the appellant against the respondent with costs.
Remit the matter to the Full Court of the Supreme Court of Western Australia on the issue of damages.
Cur. adv. vult.
The following written judgments were delivered:—
1992, June 25
Mason C.J., Deane and Toohey JJ.
The facts of this matter have been set out in the reasons for judgment prepared by Gaudron J.
It is not now in question that there was a duty of care owed by the Director of Community Welfare ("the Director") to the appellant and that there was a breach of that duty (for which, it is agreed, the Minister was vicariously liable). In the courts below, the duty of care appears to have been equated to, even derived from, a fiduciary duty owed by the Director to the appellant arising out of his statutory office as guardian. That fiduciary duty was a positive duty to obtain independent legal advice with respect to the possible existence of a cause of action on the part of the appellant arising out of the circumstances in which he sustained an amputation of four fingers of his left hand.
In March 1973, the appellant, then aged sixteen, had been committed to the care of the Department of Community Welfare for two years for treatment, discipline and training, pursuant to s. 34(a) of the Child Welfare Act 1947 WA ("the Act"). The consequences of the committal were that the appellant became a ward and, "[s]ubject to the regulations and the direction of the Minister", the Director became the guardian and had "the care, management and control" of the person and property of the appellant [1] . The Director was authorized to detain a ward in an institution (s. 10(2)(b)). The Director detained the appellant in the institution "Riverbank" and, whilst there in the care of the Department, he was put to work operating a bench saw without adequate instruction and adequate supervision. The saw lacked a proper guard. The injury occurred in those circumstances.
1. s. 10(1) of the Act.
It is common ground that the appellant had an entitlement to recover damages at common law against the Minister in respect of his injury. His cause of action in respect of the injury became statute-barred by the Limitation Act 1935 WA before he became aware in 1982 of his entitlement to bring an action.
In the circumstances which we have outlined, the Director, after the appellant's injury, became subject to a duty of care owed to the appellant to avoid his suffering loss and damage arising from the possibility that he might not exercise an entitlement to bring an action for damages in respect of his injury and that the action might become statute-barred. The common law duty of care arose independently of the fiduciary duty which in no way displaced, qualified or derogated from the common law duty. The Director breached that common law duty by failing to obtain independent legal advice.
The question is whether the breach of duty caused the loss or contributed to the loss of the right to bring the action for damages against the Minister, by reason of the action becoming statute-barred. The answer to that question is complicated by the circumstance that, after the appellant was discharged from the care of the Department and ceased to be a ward in March 1975, he sought and obtained legal advice in 1976 with respect to the possibility of making a claim in respect of his injury. The advice then obtained was to the effect that "he had no claim other than at workers' compensation". The reference to "workers' compensation" was erroneous. The reference should have been to the proceeds of a policy of accident insurance taken out by the Department and to which the appellant was told he was entitled. The policy of insurance provided for the payment of compensation based on rates applicable under the Workers' Compensation Act 1912 WA as at 26 October 1970.
It will be necessary later in these reasons to look more closely at the circumstances in which this advice was given. For the moment, it is sufficient to say that the Minister points to the receipt by the appellant of this advice as the real cause of the appellant's decision not to bring an action against the Minister before the limitation period had expired.
In the realm of negligence, causation is essentially a question of fact, to be resolved as a matter of common sense [2] . In resolving that question, the "but for" test, applied as a negative criterion of causation, has an important role to play but it is not a comprehensive and exclusive test of causation; value judgments and policy considerations necessarily intrude [3] . The inadequacy of the "but for" test has emerged in cases in which a superseding cause, amounting to a novus actus interveniens, has been held to break the chain of causation which would have otherwise resulted from an earlier wrongful act or omission. In those cases, though the earlier wrongful act or omission may have amounted to an essential condition of the occurrence of the ultimate harm, it was not the true cause or a true cause of that harm.
1. Fitzgerald v Penn (1954), 91 C.L.R. 268, at pp. 277-278, per Dixon C.J., Fullagar and Kitto JJ.; March v Stramare (E. & M.H.) Pty Ltd (1991), 171 C.L.R. 506, at p. 515, per Mason C.J.; pp. 522-523, per Deane J.
2. March v Stramare (E. & M.H.) Pty Ltd
In the present case, the Director's breach of duty satisfies the "but for" test, subject to two assumptions. If we assume that the Director had obtained correct independent legal advice as to the appellant's rights and that the appellant (or an appropriate person acting on his behalf) had acted on that advice by commencing an action within time, the relevant loss would not have occurred. In that sense, subject to these two qualifications, the Director's breach of duty was causally related to the loss.
The first of the two assumptions has no significance for the purposes of this case. The Director's duty was to obtain legal advice from a competent legal practitioner based on adequate and accurate instructions. The Minister does not, and could not, contend that advice sought from such a source and based on such instructions would not have acknowledged or asserted the existence of a cause of action at the suit of the appellant. The contrary advice subsequently provided to the appellant in 1976 does not detract from the accuracy of that statement because that advice was, as we shall make plain, the product of inadequate and incorrect instructions which were, to a substantial extent, obtained from the Department itself.
The second assumption stands in a different position. Although the appellant bore the general onus of establishing that the Director's breach of duty caused or contributed to his loss, it was common ground that the appellant would have made a claim and commenced an action for damages against the Minister, once he was legally able to do so, had he been made aware of his rights. The Minister has not contended in this Court or in the courts below that the appellant's case on the causation issue was deficient on this score.
It follows then that, subject to consideration of the legal significance of the obtaining of the advice in 1976, the appellant's cause of action would not have become statute-barred but for the Director's breach of duty. Had the Director performed his duty and procured the advice, that advice would have changed the course of events, namely, the inaction on the part of the appellant which led to the loss, and prompted instead a decision by him which would have both preserved and enforced his cause of action, thereby deflecting the loss which occurred. In this respect, the Director's breach of duty, his omission to do what he should have done, was a causal factor which continued to operate until the limitation period expired, unless the obtaining by the appellant of legal advice in 1976 had the effect of superseding the continuing operation of the Director's omission to procure independent legal advice.
In considering whether the obtaining of the 1976 advice had that effect, the first and the most significant point to be made is that, if the Director had performed his duty and obtained independent legal advice, there would have been no occasion for the appellant to seek advice in 1976. In other words, the appellant sought and obtained advice because, and only because, the Director was in breach of his duty of care. That circumstance in itself makes it difficult, if not impossible, to conclude that, in the situation described, the 1976 advice superseded the Director's breach of duty as the sole cause of the subsequent loss.
But that is not all. It is necessary to examine the 1976 advice, the circumstances in which it was given and the effect which it would have had if the Director had performed his duty. In or about the month of November 1976, after having left the custody of the Department, the appellant sought advice through the Legal Assistance Scheme sponsored by the Law Society of Western Australia. A barrister was retained by the Legal Aid Committee and instructed in the following terms:
To interview Wayne Kenneth Bennett in Fremantle Prison in relation to an offer of damages or compensation made to him arising out of an accident in the workshops at "Riverbank" and advise him in relation thereto and represent him generally in negotiations if you consider this advisable or necessary.
Costs in this matter have been provisionally costed at $200.00 for negotiation.
It seems that the barrister assigned to the matter interviewed the appellant before Christmas 1976 and, after hearing the appellant's account of the circumstances in which he sustained injury, advised him that he had no rights against the Department and that he should accept the insurance proceeds held by the Department on his behalf. The report made by the barrister to the Administrator of the Legal Assistance Scheme states that a proof was taken from the appellant, though there is no evidence as to the contents of that proof. The report goes on to say that inquiries were made "at S.G.I.O. the Department of Community Welfare (Mr. White and Mr. John Foulsham) and Inspector [of] Machinery of the Department [of] Labour".
The report continues:
After a consideration of the facts I was of opinion that Bennett a Ward of the State had been represented fully by the Director [of] Community Welfare and had received proper advice from the Director his Legal guardian.
The advice forwarded to Bennett was that in my view he had no claim other than at workers compensation.
It is an inevitable inference, as Rowland J. suggested in his judgment in the Full Court of the Supreme Court of Western Australia, that this advice was based on information given to the barrister by the Department. Although the report does not identify the advice given by the Director to the appellant, it was presumably advice to the effect that he had no rights against the Director or the Minister. In this respect, it is extremely significant that the Minister at all times, until the hearing of the appeal in the Full Court, maintained that there was no breach of a duty of care in connexion with the injury sustained by the appellant and that there was no duty to advise him of his rights. It follows that the barrister's advice given to the appellant in 1976 was not only wrong but also was based on information given by the Department itself, that information being clearly incorrect and self-serving as the Department neither advised nor sought to obtain advice for the appellant.
In these and other respects, the advice given by the barrister fell short of the advice which would be given in a normal solicitor-client relationship. Reliance was placed on information evidently provided by the Department without reference to any instructions which may have been obtained from the appellant. Indeed, the advice did not acknowledge or refer to the critical matters (lack of instruction in the use of the saw, lack of experience on the part of the appellant and the absence of a proper guard) which served to evidence breach by the Director of a common law duty to take care, let alone evaluate them. Of course, the advice was sought and obtained, not in the regular course of a solicitor-client relationship but in the context of a legal assistance scheme which may necessitate some departure from normal procedures. But, in the ultimate analysis, we are left with the firm impression that the advice fell well short of the independent legal advice which it was the duty of the Director to procure for the appellant.
Indeed, it is so unsatisfactory in terms of its content and the procedures on which it was based that it is impossible to conceive that the appellant would have been dissuaded by this advice from commencing an action against the Minister had the appellant earlier had the benefit of advice from a lawyer, procured by the Director, that he had a good, or even a reasonable, cause of action against the Minister. In this situation, the advice given in 1976 did not supersede the Director's breach of duty as the cause of the relevant loss.
In our view, for these reasons, the primary judge and the majority in the Full Court were mistaken in classifying the obtaining and the receipt of the 1976 advice as a novus actus interveniens. In reaching that conclusion, their Honours appear to have been of the opinion that, on account of the 1976 advice, the loss would have occurred notwithstanding the Director's breach of duty in omitting to obtain independent legal advice. That opinion proceeded, at least in part, on the footing that, by obtaining advice in 1976, the appellant achieved what he would have achieved had the Director discharged his duty to obtain independent legal advice. In the light of what we have already said, we cannot accept that line of reasoning.
It is unnecessary for us to consider what would have been the position in the event that the advice obtained by the appellant in 1976 constituted independent legal advice conforming to normal standards and procedures. Whether such advice would have constituted the supervening cause or a concurrent cause along with the Director's omission to obtain advice is an interesting and, on the facts as we see them, an academic question. In order to answer that question, it might be necessary to consider the view that there is no real distinction between breach of duty and causation [4] , as well as the question whether a failure to take steps which would bring about a material reduction of the risk amounts to a material contribution to the injury. These questions have been considered in Canada in the context of a possible shift in the onus of proof [5] but it seems that the problem still awaits final resolution. There is no occasion to consider it here.
1. See McGhee v National Coal Board , [1973] 1 W.L.R. 1, at p. 8; [1972] 3 All E.R. 1008, at p. 1014, per Lord Simon of Glaisdale; Quigley v The Commonwealth (1981), 55 A.L.J.R. 579, at p. 581; 35 A.L.R. 537, at p. 539, per Stephen J.
2. Nowsco Well Service Ltd. v Canadian Propane Gas & Oil Ltd. (1981), 122 D.L.R. (3d) 228; Letnik v Metropolitan Toronto Municipality , [1988] 2 S.C.R. 399; (1988) 49 D.L.R. (4th) 707; Haag v Marshall (1989), 61 D.L.R. (4th) 371; Snell v Farrell [1990] 2 S.C.R. 311; (1990) 72 D.L.R. (4th) 289; Lankenau Estate v Dutton (1991), 79 D.L.R. (4th) 705.
For the foregoing reasons we would allow the appeal, set aside the judgment of the Full Court of the Supreme Court and, in lieu thereof, allow the appeal to that Court. Judgment should be entered for the appellant and the matter should be remitted to the Full Court on the issue of damages.
Gaudron J.
In March 1973 the appellant, Wayne Kenneth Bennett, was committed to the care of the Department of Community Welfare ("the Department") and, pursuant to s. 4 of the Child Welfare Act 1947 WA, he then became a ward of the State. He was confined to Riverbank, a detention centre. He was aged sixteen and was put to work operating a bench saw in the woodwork shop. On 23 April 1973, some few weeks before his seventeenth birthday, he was feeding a length of timber into the saw when the fingers of his left hand were amputated.
It is accepted that Mr. Bennett was neither adequately instructed nor adequately supervised in the use of the saw. Moreover, the saw was not properly guarded. It is also accepted that, had proceedings been brought within time, he was entitled to recover common law damages for his injury. Mr. Bennett did not become aware of his right in that regard until April 1982. By that time any claim that he might have made was barred by the Limitation Act 1935 WA.
In this action, which was commenced in 1983, Mr. Bennett claims damages for the loss of his right to bring proceedings with respect to the injury he suffered in 1973. The amended statement of claim asserts a breach of duty by the Director of Community Welfare ("the Director") to secure independent legal advice for him with respect to that injury.
It is not now disputed that there was a duty on the part of the Director as claimed in these proceedings, that there was a breach of that duty and that, if liability arises from that breach, it attaches to the Minister vicariously. However, at all stages liability has been denied on the basis that, in 1976, Mr. Bennett obtained legal advice with respect to his 1973 injury, which advice was to the effect that he had no right of action at common law. That advice was wrong and, according to the argument made on behalf of the Minister, it was the cause of Mr. Bennett's losing his right to bring proceedings for damages for personal injury.
It is necessary to give a brief account of the legal advice given in 1976. Mr. Bennett was then aged twenty and his guardianship had come to an end with the expiry of the period of his committal on 7 March 1975 [6] . He was in prison. He apparently made contact with those administering the Legal Assistance Scheme of the Law Society of Western Australia, and a barrister was asked "to interview [him] in Fremantle Prison in relation to an offer of damages or compensation made to him arising out of an accident in the workshops at "Riverbank" and advise him in relation thereto and represent him generally in negotiations if you consider this advisable or necessary."
1. Child Welfare Act 1947 WA, s. 4.
Mr. Bennett had not received an "offer of damages or compensation". Instead, he had received or had been told that he was entitled to receive certain moneys. A sum of money equal to the amount payable under workers' compensation legislation for the physical loss suffered had been paid to the Director pursuant to a personal accident insurance policy which the Department had taken out. That money had been invested for or on account of Mr. Bennett. In December 1976 a barrister advised Mr. Bennett that "he had no claim other than at workers' compensation". It seems that the barrister and Mr. Bennett both regarded the money which had been invested and which was treated by the Legal Assistance Scheme as "an offer of damages or compensation" as money paid in satisfaction of an entitlement to receive workers' compensation.
The matter came on for hearing before Nicholson J. in 1988. Mr Bennett gave evidence to the effect that, relying on the legal advice given to him in 1976, he took no step to claim damages for the injury suffered at Riverbank in 1973. It was held that the 1976 advice constituted a novus actus interveniens and it, rather than the Director's breach of duty, caused Mr. Bennett to lose his right to claim damages for the injury to his hand. A verdict was entered for the Minister. However, in case the decision on causation might be wrong, his Honour proceeded to assess general damages at $20,000 and special damages at $1,932.22. By majority (Pidgeon and Seaman JJ., Rowland J. dissenting), an appeal to the Full Court of the Supreme Court of Western Australia was dismissed.
Mr. Bennett now appeals to this Court seeking orders that a verdict be entered in his favour, that the judgments of Nicholson J. and of the Full Court be set aside, that the matter be remitted to the Full Court on the question of damages and, in particular, to determine the grounds of appeal going to the manner in which damages were provisionally assessed by Nicholson J. Those grounds of appeal were not dealt with by the majority in the Full Court, their Honours having determined the appeal on the issue of causation.
It is now settled that, in the context of tortious liability, questions of causation are questions of fact to be answered as a matter of common sense and experience [7] . And this is so whether the issue is, as is usually the case, whether some act caused [8] or contributed [9] to a loss or injury, or, as in this case, whether some other act (a novus actus interveniens) broke the chain of causation.
1. March v Stramare (E. & M.H.) Pty Ltd (1991), 171 C.L.R. 506, esp. at p. 515, per Mason C.J.; at p. 522, per Deane J. See also p. 524, per Toohey J.
2. See, e.g., Imperial Chemical Industries of Australia & New Zealand Ltd. v Murphy (1973), 47 A.L.J.R. 122.
3. See, e.g., Stapley v Gypsum Mines Ltd. , [1953] A.C. 663; Bonnington Castings Ltd. v Wardlaw , [1956] A.C. 613; Sherman v Nymboida Collieries Pty Ltd (1963), 109 C.L.R. 580; and Duyvelshaff v Cathcart & Ritchie Ltd. (1973), 47 A.L.J.R. 410.
Notwithstanding that it is a question of fact, causation is an issue which may sometimes attract the intervention of an appellate court, either in application of the principles established in Warren v Coombes [10] or because the question has been determined in a way that involves an error of law [11] . In my view, the approach adopted in this case, both at first instance and by the majority in the Full Court, involved an error of law in that there was a failure to have proper regard to the circumstances that would have existed had the Director obtained independent legal advice for Mr. Bennett.
1. (1979) 142 C.L.R. 531. See also The Commonwealth v Introvigne (1982), 150 C.L.R. 258, at pp. 260-262, per Gibbs C.J.; p. 274, per Mason J.
2. See the general discussion of the circumstances in which a finding of fact may involve an error of law in Australian Broadcasting Tribunal v Bond (1990), 170 C.L.R. 321, at pp. 355-356, per Mason C.J.
The case against the Minister was based on an omission or failure to act, rather than on the doing of some positive act. There are occasions when a failure to do something may have a direct physical consequence such that the failure and the consequence may together be viewed as a positive act. Thus, a failure to keep a proper look out may lead directly to one motor vehicle being driven into another. In situations of that kind the physical act of driving one car into another, rather than the failure to keep a look out, will ordinarily be treated as the act by reference to which questions of causation are to be answered. And there are occasions when an omission or failure to act, although not attended by any physical act, is properly treated as a positive act. Thus, where silence gives rise to an inference that a particular state of affairs does or does not exist, a failure to inform may be treated as a misstatement of fact [12] . Again, in cases of that kind questions of causation may be approached as though the positive act had, in fact, occurred. But this case, so far as it involves the Director and, vicariously, the Minister, does not fall into either of those categories: it does not involve any positive act and it does not involve an omission which can be treated as a positive act. It must be approached on the basis of omission and nothing else.
1. See L. Shaddock & Associates Pty Ltd v Parramatta City Council [No. 1] (1981), 150 C.L.R. 225; Hawkins v Clayton (1988), 164 C.L.R. 539, at p. 593, per Gaudron J.
Leaving aside cases involving some positive act and those in which an omission can be treated as a positive act, a case based on omission or a failure to act will, in certain respects, fall for analysis in a way that differs from that appropriate for a case based on a positive act. Thus, in the case of a positive act, questions of causation are answered by reference to what, in fact, happened. In the case of an omission, they are answered by reference to what would or would not have happened had the act occurred [13] . In that exercise, the larger philosophical questions are brushed aside and the issue is approached on the basis that "when there is a duty to take a precaution against damage occurring to others through the default of third parties or through accident, breach of the duty may be regarded as materially causing or materially contributing to that damage, should it occur, subject of course to the question whether performance of the duty would have averted the harm" [14] .
1. See, e.g., Duyvelshaff v Cathcart & Ritchie Ltd.; Quigley v The Commonwealth (1981), 55 A.L.J.R. 579; 35 A.L.R. 537. See also Hart and Honoré, Causation in the Law, 2nd ed. (1985), pp. 59-61 where the authors identify the hypothetical nature of an inquiry as to the causal significance of providing or failing to provide a person with, or depriving a person of, an opportunity.
2. Sutherland Shire Council v Heyman (1985), 157 C.L.R. 424, at p. 467, per Mason J. See also Hart and Honoré, op cit., p. 38.
In practice, it is not always necessary to inquire what would have happened in the circumstances under consideration had a positive duty been performed. Thus, in the case of a statutory duty, a "breach of duty coupled with an accident of the kind that might thereby be caused is enough to justify an inference, in the absence of any sufficient reason to the contrary, that in fact the accident did occur owing to the act or omission amounting to the breach of statutory duty" [15] .
1. Betts v Whittingslowe (1945), 71 C.L.R. 637, at p. 649, per Dixon J.
And although it is sometimes necessary for a plaintiff to lead evidence as to what would or would not have happened if a particular common law duty had been performed [16] , generally speaking, if an injury occurs within an area of foreseeable risk, then, in the absence of evidence that the breach had no effect [17] , or that the injury would have occurred even if the duty had been performed [18] , it will be taken that the breach of the common law duty caused or materially contributed to the injury. However, the question whether some supervening event broke a chain of causation which began with or which relates back to an omission or a failure to perform a positive duty, is one that can only be answered by having regard to what would or would not have happened if the duty had been performed. It is only by undertaking that exercise that it is possible to say whether the breach was "still operating" [19] , or, continued to be causally significant when the harm was suffered.
1. See, e.g., Duyvelshaff v Cathcart & Ritchie Ltd. and Quigley v The Commonwealth, where there was an onus on a plaintiff employee to establish what he would have done if different working conditions had been provided.
2. McGhee v National Coal Board , [1973] 1 W.L.R. 1, at pp. 6-7; [1972] 3 All E.R. 1008, at pp. 1012-1013, per Lord Wilberforce, where it was said that in the circumstances of that case the defendant bore an onus to that effect. But cf. Wilsher v Essex A.H.A. , [1988] A.C. 1074, at pp. 1087, 1090, per Lord Bridge of Harwich, where the issue of causation in that case and the remarks of Lord Wilberforce in McGhee were analyzed in terms consistent with an inference arising from the evidence in the plaintiff's case in chief with a resultant evidentiary onus on the defendant. Also note the debate in Canada on a possible shift in the onus of proof, seemingly resolved in the manner indicated by Lord Bridge in Wilsher by the Canadian Supreme Court in Snell v Farrell , [1990] 2 S.C.R., at pp. 329-330; (1990) 72 D.L.R. (4th) 289, at p. 301.
3. See Barnett v Chelsea and Kensington Hospital Management Committee , [1969] 1 Q.B. 428 and British Road Services Ltd. v A.v Crutchley & Co. Ltd. , [1967] 2 All E.R. 785.
4. See S.S. Singleton Abbey v S.S. Paludina , [1927] A.C. 16, at p. 27, per Lord Sumner.
The question of causation was answered by the majority in the Full Court without regard to what would or would not have happened had the Director obtained independent legal advice for Mr. Bennett. As already indicated, that approach was wrong. At first instance, Nicholson J. adverted to an aspect of what would have happened and observed that "[t]o find [that the Director's failure in this regard caused the loss sustained by Mr. Bennett] is to assume that the advice would necessarily have been to the effect that he should issue proceedings."
The precise advice that Mr. Bennett would have received and the possibility that he might have received incorrect advice — a matter which loomed large in argument in this Court — are matters which cannot, in my view, be brought to bear in determining whether the Director's breach continued to be causally significant when Mr. Bennett's action became statute-barred.
There are two aspects to the question whether performance of a duty would have averted the loss or injury suffered. The first is the general sufficiency of the duty to avert or prevent harm of the kind in issue. The second involves a consideration of what would or would not have happened in the particular circumstances of the case. As has been seen, it is not always necessary to consider the second aspect of the question. And it is rare, indeed, that it is necessary to consider the first aspect. In the first place, proceedings are not usually brought for breach of a duty that is not or would not have been efficacious to avert or prevent the harm suffered [20] . And so far as general sufficiency is involved in the question of causation, there is usually no reason to separate or distinguish the question of breach of a common law duty from that of causation [21] . That is because a duty is imposed by the common law by reason that it is a precaution which a reasonable person in the position of the person sued would have taken to prevent a foreseeable risk of harm of the kind suffered [22] . Thus, questions of the sufficiency of the precaution to avert the harm are inevitably subsumed in the finding that there was a duty: a precaution is not classified as "reasonable" unless it can be said that its performance would, in the ordinary course of events, avert the risk that called it into existence.
1. But cf. Barnett v Chelsea and Kensington Hospital Management Committee, where breach of a duty to admit a person to hospital was held not to be causally related to that person's subsequent death because treatment would probably not have prevented his death from arsenic poisoning.
2. See McGhee v National Coal Board , [1973] 1 W.L.R., at p. 8; [1972] 3 All E.R., at p. 1014, per Lord Simon of Glaisdale, where it is said that in certain cases there is no real distinction between breach of duty and causation. See also Quigley v The Commonwealth (1981), 55 A.L.J.R., at p. 581; 35 A.L.R., at p. 539, per Stephen J.
3. McGhee v National Coal Board , [1973] 1 W.L.R., at p. 8; [1972] 3 All E.R., at p. 1014, per Lord Simon. See also John Pfeiffer Pty Ltd v Canny (1981), 148 C.L.R. 218, at pp. 241-242, per Brennan J. and Sutherland Shire Council v Heyman (1985), 157 C.L.R., at p. 487, per Brennan J.
The possibility that Mr. Bennett would not have been advised to issue proceedings or, if it be different, that he might have received wrong advice must have been taken into account by Nicholson J. in determining whether there was a duty on the part of the Director to obtain independent legal advice as claimed. The finding that there was a duty could only have been made on the basis that his Honour was satisfied, on the balance of probabilities, that in the ordinary course of events and by reason of that advice, Mr. Bennett would have been made aware of his right to recover damages and, thus, put in a position to bring proceedings within the time fixed by the Limitation Act. Consistency required that his Honour approach the question whether the breach continued to have causal significance when the appellant's action became statute-barred on that same basis, and not on the basis of some possibility that was set at naught by the finding that there was a duty of care as claimed.
It might be said that, where questions of causation depend on hypothetical considerations, allowance should be made, as in the assessment of damages, for the possibility that some event would not have occurred [23] . Possibilities, if they are not fanciful, must be taken into account, at least in a general way, when ever causation or the related issue of prevention is in issue. But questions of that kind are not answered "maybe" or, even, "more probably than not". They are answered "yes" or "no" depending on the probabilities for or against. In this respect, they are indistinguishable from the question whether an event happened [24] where possibilities are taken into account but, once the question has been answered, those possibilities have no further bearing on the matter. And as already indicated, the question whether independent legal advice would have been sufficient, in the ordinary course of events, to prevent Mr. Bennett from losing his right to bring proceedings for his 1973 injuries was, in effect, answered by the finding that there was a duty on the Director to obtain such advice for him. Indeed, the question whether the chain of causation was broken by the erroneous advice received only arises on the basis that that independent legal advice would ordinarily have had that result.
1. See, in relation to the assessment of damages, Malec v J.C. Hutton Pty Ltd (1990), 169 C.L.R. 638.
2. As to the "all or nothing" approach to whether an event happened, see Malec v J.C. Hutton Pty Ltd (1990), 169 C.L.R., at pp. 642-643.
For the purpose of considering what would or would not have happened if the Director had discharged his duty, it is necessary to have some regard to the duty itself. The duty may be likened to the duty to warn or the duty to instruct a person who might otherwise be at risk of injury. The immediate effect of the duty is to provide that person with information which he can use to protect himself. So too, Mr. Bennett would have been provided with information if the Director had discharged his duty in this case. And, consistent with the existence of that duty, it must be taken that that information would have enabled him to bring proceedings within the time fixed by the Statute of Limitations.
Ultimately it was the lack of information which put Mr. Bennett in the position whereby he lost his right to bring action to recover damages with respect to his 1973 injuries. That lack of information was clearly referable in the first instance to the Director's breach of duty. And it remained referable to that breach notwithstanding efforts on Mr. Bennett's part to obtain legal advice. That is because there would have been no occasion for him to seek further legal advice through the Legal Assistance Scheme had he been correctly advised in the first place. And, as already indicated, that is the basis on which this case must be approached.
It is common ground that Mr. Bennett wished at all times to pursue a claim for damages with respect to his 1973 injuries and would have done so if he had known of his right in that regard. As earlier indicated, his want of knowledge was at all times referable to the Director's failure to obtain independent legal advice for him. In that sense, it caused or contributed to the loss or damage which he suffered. Thus, the appeal should be allowed. The judgment of the Full Court of the Supreme Court of Western Australia should be set aside and, in lieu thereof, the appeal to that Court should be allowed. A verdict should be entered for the appellant and the matter should be remitted to the Full Court on the question of damages.
McHugh J.
This appeal is brought against an order of the Full Court of the Supreme Court of Western Australia dismissing an appeal against an order of Nicholson J. in that Court. The order of Nicholson J. dismissed an action brought by the appellant claiming damages for the loss occasioned by the vicarious failure of the respondent ("the Minister") to obtain legal advice on behalf of the appellant in respect of a cause of action for personal injury which became barred by the Limitation Act 1935 WA ("the Act"). The question in the appeal is whether the Minister is liable for the loss when, independently of the Minister and his Department, the appellant subsequently received and acted upon erroneous legal advice that he had no cause of action for damages in respect of that injury.
The factual background
The appellant was born on 22 May 1956. On 7 March 1973, he was placed under the care of the Department of Community Welfare ("the Department") for a period of two years. By statute, he became a ward of the State; the Director of the Department of Community Welfare ("the Director") became his legal guardian. The appellant was placed in Riverbank, a detention centre, where he was trained in woodwork. On 23 April 1973, he amputated the four fingers of his left hand while feeding a piece of timber through a circular saw which was not properly guarded. The appellant was not properly instructed or adequately supervised in respect of the use of the saw. Those facts gave him a right of action against the Minister for damages in respect of his injuries.
The appellant did not become aware of his right of action until 1982 by which time the right had been extinguished by the Act. At no time during the guardianship of the appellant or later did the Director arrange for legal advice to be given to the appellant in respect of the injury. Perhaps the Director thought that the appellant's rights were exhausted by the receipt by the Department on 17 September 1973 of the sum of $5,673 on behalf of the appellant pursuant to the terms of an insurance policy issued by the S.G.I.O. This sum together with interest was paid to the appellant on or about 18 March 1977. Whatever may have been the reason for the Director's failure to obtain competent legal advice on behalf of the appellant, the Minister does not now dispute that that omission of the Director constituted a breach of the duty of care which the Director owed to the appellant. Nor does the Minister dispute that he is vicariously responsible for that omission of the Director. The Minister's defence is that any causal connexion between the Director's breach of duty to the appellant and the appellant's loss of his right of action was severed by independent legal advice which the appellant received and acted upon between 1976 and the date upon which his right of action became barred by the Act.
In November 1976, while the appellant was in custody in Fremantle Prison, he sought legal advice concerning his injury. His application was made under the Legal Assistance Scheme which was sponsored by the Law Society of Western Australia. A Legal Aid Committee instructed a barrister to interview the appellant "in relation to an offer of damages or compensation made to him arising out of an accident in the workshops at "Riverbank" and advise him in relation thereto and represent him generally in negotiations". The barrister interviewed the appellant some time before Christmas 1976. The appellant testified that the interview took "fifteen or twenty minutes at the most" and that the barrister had told him that the Department "had put some money aside" and that in his opinion there "was no further action or claim". A copy of the barrister's notes of the interview were in evidence. They consist of twenty-seven lines of handwritten notes. Sparse as they are, they nevertheless suggest a case of common law negligence on the part of officers for whose conduct the Minister was vicariously responsible. The notes record, among other things, the circumstances of the accident, the plaintiff's age at the time, which was sixteen, and the statement "Never had any training in use of circular saw". In a letter to the Administrator of the Legal Assistance Scheme, the barrister said that he had made inquiries at the S.G.I.O., the Department of Community Welfare and the Department of Labour. He said that in his opinion the appellant "had been represented fully by the Director and had received proper advice from the Director". The barrister also said that he had forwarded advice to the appellant that "he had no claim other than at workers' compensation". The context makes it clear that the reference to workers' compensation was a reference to the appellant's entitlement under the insurance policy.
The findings of the trial judge
Nicholson J. held that, by reason of the negligence of the officers of the Department, the appellant had had a cause of action for damages against the Minister. His Honour also held that the Director "owed a fiduciary duty to [the appellant]; that included in that duty was the obligation to assert rights on his behalf; that in relation to a possible action for negligence arising from the accident in the premises occupied by the guardian, the guardian was in a position of conflict with the [appellant]; and that being such position it was the duty of the guardian to obtain for the [appellant] independent advice". The learned judge concluded that the duty continued until the conclusion of the guardianship on 7 March 1975 and that the failure of the Director to obtain independent legal advice at any time during that period constituted a breach of the duty. However, his Honour held that, after the appellant received legal advice in 1976, the reason for him "not issuing proceedings was the nature of the legal advice which he received, not the defendant's breach of duty in not getting him legal advice". He concluded that the causal connexion between the appellant's harm and the Director's breach of duty was broken by the act of the appellant in obtaining and acting upon the legal advice.
No claim for equitable compensation
Having regard to his Honour's finding that the Minister was in breach of a fiduciary duty, it might have been thought that the action of the appellant was one brought in the exclusive equitable jurisdiction "to enforce compensation for breach of a fiduciary obligation" [25] . If that jurisdiction had been invoked, there would be much to be said for the view that the Minister could not escape liability to compensate the appellant even if the receipt of legal advice by the appellant in 1976 constituted a novus actus interveniens [26] . In Caffrey v Darby [27] , where trustees had been guilty of neglect in not recovering a trust asset, the Master of the Rolls said:
if they have been already guilty of negligence, they must be responsible for any loss in any way to that property: for whatever may be the immediate cause, the property would not have been in a situation to sustain that loss, if it had not been for their negligence If the loss had happened by fire, lightning, or any other accident, that would not be an excuse for them, if guilty of previous negligence.
In Re Dawson (deceased) [28] , Street J. said that "causation, foreseeability and remoteness do not readily enter into the matter".
1. Nocton v Lord Ashburton , [1914] A.C. 932, at p. 946; and see Davidson, "The Equitable Remedy of Compensation" Melbourne University Law Review, vol. 13 (1982) 349.
2. Caffrey v Darby (1801), 6 Ves. Jun. 488 [31 E.R. 1159]; London Loan & Savings Co. v Brickenden , [1934] 3 D.L.R. 465, at p. 469; Re Dawson (deceased); Union Fidelity Trustee Co. Ltd. v Perpetual Trustee Co. Ltd. , [1966] 2 N.S.W.R. 211, at p. 215.
3. (1801) 6 Ves. Jun., at p. 496 [31 E.R., at p. 1162].
4. [1966] 2 N.S.W.R., at p. 215.
However, the case for the appellant was pleaded as an action for damages for common law negligence and not for equitable compensation. Moreover, notwithstanding the reference by Nicholson J. to a breach of fiduciary duty, his Honour decided the case on the basis that it was one involving a claim for damages for breach of a common law duty of care. That was also the way that the case was dealt with in the Full Court. At this stage of the proceedings, it would not be proper to approach the case on a basis which so fundamentally departed from the way in which the parties have hitherto conducted the litigation.
The appellant's cause of action
Nevertheless, it is not open to doubt that, in addition to the fiduciary duty which the Director owed to the appellant, the circumstances of the guardianship and the injury to the appellant while under the care and control of the Director gave rise to a common law duty on the part of the latter to take reasonable care to ensure that the appellant did not suffer economic loss by not being advised of his rights in respect of that injury. In this Court, the Minister did not dispute that the Director was in breach of his duty in not obtaining or arranging independent legal advice for the appellant.
In the Supreme Court, different opinions were expressed as to the date upon which the appellant suffered loss by reason of his claim in respect of the 1973 injury becoming barred by statute. Nicholson J. expressed the view that the action became barred on either 23 April 1979 or 25 June 1979. The reference to 23 April 1979 is explicable on the basis that that date was six years after the appellant sustained his injury. It is not readily apparent, however, why his Honour thought that 25 June 1979 was a relevant date although on that day the appellant wrote to the Director and stated that he still wished to obtain legal advice as to his entitlements in respect of the injury. In the Full Court, Rowland J., who dissented, said that, depending upon the construction of s. 47A of the Act, the action "became statute-barred on 23 April 1979 or 22 May 1980". The latter date was six years after the appellant turned eighteen and appears to represent the correct date upon which he lost his cause of action. That being so, the appellant did not sustain any financial loss until 22 May 1980. Until that date, the appellant had not suffered any loss because it was still open to him to commence an action for damages in respect of the injury which he sustained on 23 April 1973. The critical question in the appeal is whether the Director's breach of duty materially contributed to the loss which the appellant suffered on 22 May 1980.
Causation
Whether or not a causal connexion exists between a breach of duty and any harm suffered by the person to whom the duty is owed is a question of fact to be decided on the balance of probabilities [29] . The existence of the causal connexion is to be determined in accordance with common sense notions of causation and not in accordance with any philosophical or scientific theory of causation or any modification or adaptation of such a theory for legal purposes [30] . Moreover, the common law concept of common sense causation accepts that the chain of causation between breach and damage is broken for the purpose of attributing legal responsibility for that damage if there has been an intrusion of "a new cause which disturbs the sequence of events, something which can be described as either unreasonable or extraneous or extrinsic" [31] .
1. Bonnington Castings Ltd. v Wardlaw , [1956] A.C. 613, at p. 620.
2. March v Stramare (E. & M.H.) Pty Ltd (1991), 171 C.L.R. 506, at pp. 515, 522-523.
3. The Oropesa , [1943] P. 32, at p. 39, per Lord Wright.
Upon the facts of this case the conduct of the appellant in acting on the legal advice which he received in 1976 did not constitute the intrusion of a new cause which broke the chain of causation which existed between the Director's breach of duty and the loss which the appellant suffered. First, the negligence of the Director and the advice of the barrister were separate and independent acts each of which directly contributed to the appellant's loss. Secondly, the Director's duty to obtain legal advice was a continuing duty which remained in existence after the guardianship had expired and after the barrister had given his advice in 1976.
Separate and independent acts
The loss which the appellant suffered in 1980 was a direct result of the Director's breach of duty. If the Director had performed his duty, he would have arranged for the appellant to consult a legal practitioner of reasonable competence and skill in the field of negligence law and would have ensured that the practitioner was briefed with a full and accurate account of the facts of the case. The probability is very high that consultation with a practitioner, experienced in the field of negligence law, would have led to the institution of proceedings against the Minister for damages for negligence and that the appellant's cause of action would not have expired by effluxion of time. By itself, the account given by the appellant, as recorded in the notes of the interview in 1976, would have suggested a prima facie case of negligence which warranted a more detailed investigation. Performance of the Director's duty to take reasonable care that the facts were fully and accurately put before a competent practitioner would almost certainly have resulted in a competent practitioner advising that proceedings be instituted against the Minister. If the Director had performed his duty, it is more probable than not that the appellant would not have suffered any loss in 1980. The breach of duty by the Director was, therefore, a direct cause of the appellant's loss. The advice of the barrister was also a cause of the loss, but the breach of duty by the Director and the giving of the advice by the barrister were separate and independent acts.
It is "a well settled principle that when separate and independent acts of negligence on the part of two or more persons have directly contributed to cause injury and damage to another, the person injured may recover damages from any one of the wrongdoers, or from all of them" [32] . If a doctor has negligently omitted to diagnose a condition which leads to a patient's death, it is no answer to a claim of actionable negligence that subsequently another doctor negligently failed to diagnose the condition at a time when its ultimate consequence could have been avoided. Each negligent omission was a separate and independent cause of the patient's death. Nor does it make any difference to that conclusion, if the second doctor has stated positively that the patient was not suffering from that condition. The causal connexion between a defendant's negligence and the plaintiff's damage is negatived by the subsequent conduct of another person only when that conduct is "the free, deliberate and informed act or omission of a human being, intended to exploit the situation created by defendant" [33] . When the subsequent conduct is a cause of the damage but is unrelated to the situation created by the earlier negligence, the subsequent conduct and the earlier negligence are treated as separate and independent causes of the damage. The omission of the Director to obtain independent and competent legal advice as to whether the appellant had a right of action was, therefore, as much a cause of the appellant's loss as the subsequent advice of the barrister that he had no cause of action. Each was a separate and independent cause of the appellant not instituting proceedings for damages before 22 May 1980.
1. Grant v Sun Shipping Co. Ltd. , [1948] A.C. 549, at p. 563.
2. Hart and Honoré, Causation in the Law, 2nd ed. (1985), p. 136.
To hold that the breach of duty on the part of the Director was not a cause of the appellant's loss would be to fall into the error of assuming that the reason for the appellant not taking action after 1976 and the cause of his loss were one and the same thing. Even if contrary to my view (see below), the Director was not in breach of duty or his breach did not continue during the period Christmas 1976 to 22 May 1980, his original breach of duty was still a cause of the loss which the appellant suffered on the latter date. It was a cause of the loss because the loss would have been avoided if the Director had performed his duty prior to Christmas 1976. On the hypothesis that the barrister's advice was the sole reason that proceedings were not instituted after Christmas 1976, there were, nevertheless, two separate and independent causes of the loss which the appellant ultimately suffered in May 1980: (a) the failure to commence proceedings in the period before Christmas 1976 as the result of the Director's breach of duty; and (b) the failure to commence proceedings after that date as the result of the barrister's advice.
The Director's duty continued until 22 May 1980
The notion that the Director had no duty to obtain independent advice for the appellant after Christmas 1976 rests on the assumption that the Director's duty to obtain independent legal advice for the appellant was broken once and for all at the expiration of a reasonable period after 23 April 1973 or, at all events, came to an end on the termination of the guardianship on 7 March 1975. However, the terms of the duty which the Director owed to the appellant demonstrate that it was a duty which continued until 22 May 1980. It was a general duty to take such steps as were necessary to obtain independent legal advice for the appellant so as to avoid the loss which would arise if the appellant did not pursue any rights which he had in respect of his injury. No doubt the failure to carry out the duty within a reasonable period constituted a breach. But it is impossible to accept that the rights and liabilities of the appellant and the Director were fixed once and for all upon the expiration of that period even though it expired during the period of the guardianship. The distinction between a duty which is broken once and for all on a particular day and a duty which is a continuing one despite its breach is never easy to draw. But here the particular duty to obtain independent legal advice arose out of the more general duty of the Director to care for the welfare of the appellant. Moreover, it arose out of the guardianship and out of circumstances which occurred during the course of the guardianship. That being so, the better view is that it was a continuing duty to avoid economic loss to the appellant as the result of his injury occurring during the guardianship rather than a duty to obtain advice within a reasonable period or by 7 March 1975. Once the Director became charged with the duty, it continued to bind him until it was performed or discharged. It did not end on the day when the appellant was discharged from the Director's custody and care. The duty, having arisen during the period of the Director's guardianship, continued while it could be fulfilled. Consequently, the duty of the Director was still operative as at 22 May 1980. His failure to fulfil it before that date was a cause of the loss which the appellant suffered on that date, notwithstanding that the appellant, of his own motion, sought legal advice in 1976.
Order
The appeal should be allowed. |
high_court_of_australia:/showbyHandle/1/9891 | decision | commonwealth | high_court_of_australia | text/html | null | State Superannuation Board v Trade Practices Commission [1982] HCA 72 | https://eresources.hcourt.gov.au/showbyHandle/1/9891 | 2024-09-13T22:51:59.464633+10:00 | High Court of Australia
Gibbs C.J. Mason, Murphy, Wilson and Deane JJ.
State Superannuation Board v Trade Practices Commission
[1982] HCA 72
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
Dec. 14
Gibbs C.J. and Wilson J.
The history of this case and the facts that are relevant to its determination are set out in the judgment of the majority of the Court. We can therefore address the issues immediately.
The primary question is whether the appellant ("the Board") is a financial corporation within the meaning of s. 51(xx) of the Constitution and thus subject to the Trade Practices Act 1974 Cth, as amended; see the definitions of corporation and financial corporation in s. 4(1) of that Act.
The words trading and financial in s. 51(xx) are not terms of art, carrying some specialized legal meaning. They are ordinary words intended to identify particular types of corporation. The concept of "trading corporation" has been the subject of discussion in two earlier decisions of this Court: Reg. v. Trade Practices Tribunal; Ex parte St. George County Council [1] ("St. George"); Reg. v. Federal Court of Australia; Ex parte W.A. National Football League [2] (Adamson) . The judgments in those cases reflect a difference of judicial opinion as to the relative importance attaching to the criteria for determining whether or not a corporation is a trading corporation for constitutional purposes. The concept of "financial corporation" has not hitherto required the consideration of the Court. Nevertheless, in our opinion, the considerations which are material to the elucidation of the meaning and application of the term "trading corporation" are likewise material to the identification of a financial corporation, after making due allowance, of course, for the difference in function between them. The decisions to which we have referred therefore afford valuable guidance in the present case.
1. (1974) 130 C.L.R. 533.
2. (1979) 143 C.L.R. 190.
In St. George, a county council was established under the Local Government Act 1919 N.S.W. for "local government purposes". Its only activities were the supply of electricity and the supply and installation of electrical fittings and appliances. It was held by a majority (McTiernan, Menzies and Gibbs JJ., Barwick C.J. and Stephen J. dissenting) that the council was not a "trading corporation" within s. 5 of the Restrictive Trade Practices Act 1971-1972 Cth. A dichotomy was drawn between the nature of a corporation as seen from the purpose of its incorporation and its characterization by reference to its current activities. Barwick C.J. said [3] :
It seems to me that the activities of a corporation at the time a law of the Parliament is said to operate upon it will determine whether or not it satisfies the statutory and therefore the constitutional description. Thus, in my opinion, the identification of the corporation which falls within the statutory definition will be made principally upon a consideration of its current activities.
To say that a corporation's description for relevant purposes will be determined by its activities does not mean, of course, that a corporation which to any extent engages in trade is a trading corporation. It is evident that the legislative power given by s. 51(xx) is not a power to legislate with respect to trading. It is a legislative power with respect to some corporations. But a corporation whose predominant and characteristic activity is trading whether in goods or services will, in my opinion, satisfy the description (Our emphasis).
McTiernan J., after referring to the words "a trading corporation" in the definition of "corporation" in the Act, said that "It can hardly be contended that the legislature intended any corporation which trades" [4] and concluded by reference to the preamble that the Act was applicable to private enterprise and not to a public undertaking supplying goods or services.
1. (1974) 130 C.L.R., at pp. 542-543.
2. (1974) 130 C.L.R., at p. 546.
Menzies J. [5] summed up his opinion:
It is not my purpose to attempt to define all that falls within the limits of the classification of "trading corporation". Rather, I am concerned to indicate that the classification has limits and those limits are not to be ascertained simply by asking the question "Does the corporation trade?" As I have indicated, many corporations which do trade are clearly outside the limits of the classification and one group of corporations that is not comprehended is, in my view, corporations of an essentially different character, namely corporations for local government purposes.
Gibbs J. [6] said:
the power given by s. 51(xx) is not in respect of trading, and it does not extend to corporations generally; a corporation, even if trading, is not within the power unless it is a foreign, trading or financial corporation.
A trading corporation is one formed for the purpose of trading. It is necessary to determine the true character of the corporation, upon a consideration of all the circumstances that throw light on the purpose for which it was formed. Thus there is no difficulty in holding that the fact that a corporation carries on some trade which is merely incidental or ancillary to the fulfilment of its main purpose does not give it the character of a trading corporation.
Stephen J. [7] said:
I would of course accept that every corporation which happens to trade is not a trading corporation, the engaging in trading activities ancillary to some other principal activity cannot make the corporation one properly described as a trading corporation. But that proposition has no relevance in the present case since the County Council's activities, both as contemplated by the terms of its creation and as they are in fact undertaken, are concerned with trading and with nothing else.
1. (1974) 130 C.L.R., at p. 554.
2. (1974) 130 C.L.R., at p. 562.
3. (1974) 130 C.L.R., at p. 572.
It will be noted from this analysis of the judgments that every member of the Court in St. George looked for something more than mere trading activity. The majority placed it outside the constitutional category because they had regard to the purpose for which it was formed and its municipal or "non-private enterprise" character. The judgments of the minority reflect varying emphasis in relation to the significance of the trading activity carried on by the Council. Barwick C.J. was content to rely on its predominant and characteristic activity notwithstanding its governmental or municipal character, whilst Stephen J. relied on both the purpose of its formation and its activities.
Adamson was a professional football player (Australian Rules) and the question was whether the West Perth Football Club and the Western Australian and South Australian Football Leagues were trading corporations within s. 51(xx) of the Constitution and s. 6 of the Trade Practices Act 1974 Cth. That question was answered, by majority, in the affirmative (Barwick C.J., Mason, Jacobs and Murphy JJ., Gibbs, Stephen and Aickin JJ., dissenting). In the present case, Brennan J. at first instance [8] summed up his view of the effect of Adamson in these words [9] ):
In the light of the judgments in Adamson , it appears to me that the balance of judicial opinion would categorize as a trading corporation a corporation whose trading activity is its substantial activity or is among its substantial activities. Trading need not be the corporation's predominant or principal activity, but the substantiality of its trading activity cannot be determined without reference to the other activities of the corporation, if any. Trading activity which is merely incidental to a predominant or principal activity is prima facie insufficient to confer the character of a trading corporation.
With great respect to his Honour, we must confess to some difficulty with the statement that "Trading need not be the corporation's predominant or principal activity" because we are unable to discern a balance of judicial opinion in support of it, even if one pays attention to obiter dicta as well as to the ratio decidendi of the majority decision. Barwick C.J. reiterated his conviction, expressed in dissent in St. George, that the "only sure guide to the nature of the company is a purview of its current activities, a judgment as to its nature being made after an overview of all those activities" [10] . He then continued:
I remain of the firm conviction that for constitutional purposes a corporation formed within the limits of Australia will satisfy the description "trading corporation" if trading is a substantial corporate activity.
There is no suggestion in these words that his Honour intended to enunciate a new criterion in place of that which in St. George [11] he had expressed as "predominant and characteristic activity". The decision to which his Honour came followed naturally and inevitably from his view of the facts which placed trading at the very heart of everything that the Club and the Leagues stood for. The conclusion that trading was clearly the predominant and characteristic activity finds clear expression in his Honour's judgment [12] :
The central activity of the Club and of the League is the promotion of Australian Rules Football
It was objected by the prosecutors' counsel that the Club was merely conducting a sport and therefore could not be regarded as being in trade. Of course, football of any code may be a sport, as distinct from a trade, when played solely for its own sake as a pastime upon an amateur footing. But what the Club and the League conduct is far removed from any such concept of sport. The players are professionals employed for wages in the playing of the code
Charges are made for admission to the grounds under the control of the Club to view the matches promoted by it:
In my opinion, the presentation of a football match as a commercial venture for profit to the promoting body is an activity of trade.
His Honour then referred to the sale of advertising and television rights in connexion with the presentation of matches and to the clearance fees at times demanded by the Club for the release of its players to other clubs, and continued:
These activities, essentially commercial in nature, emphasize the trading quality of the manner in which the Club and the league promote Australian Rules Football. (Our emphasis).
1. (1980) 49 F.L.R. 216; 33 A.L.R. 105.
2. (1980) 49 F.L.R., at p. 227; 33 A.L.R., at p. 115.
3. (1979) 143 C.L.R., at p. 208.
4. (1974) 130 C.L.R. 533, at p. 543.
5. (1979) 143 C.L.R., at pp. 210-211.
Mason J., with whom Jacobs J. agreed, defined the term "trading corporation" in this way [13] :
Essentially it is a description or label given to a corporation when its trading activities form a sufficiently significant proportion of its overall activities as to merit its description as a trading corporation.
His Honour recognized that whether the trading activities of a particular corporation are sufficient to warrant its being characterized as a trading corporation is "very much a question of fact and degree" [14] . However, the facts in Adamson left no doubt in his Honour's mind as to the result. He said [15] :
The prosecutors' case is that the trading activities of the two Leagues are incidental to their main objects which are the promotion and encouragement of the sport as a recreation. This to my mind is an inversion of the true position. To me it seems that the sport is promoted and encouraged as a means of ensuring the receipt of the large financial returns which are associated with it. The financial revenue of the Leagues is so great and the commercial means by which it is achieved so varied that I have no hesitation in concluding that trading constitutes their principal activity.
His Honour came to a similar conclusion with respect to the West Perth Club, saying in effect that it carried on its principal activity, that of playing football, as a trade.
1. (1979) 143 C.L.R., at p. 233.
2. (1979) 143 C.L.R., at p. 234.
3. (1979) 143 C.L.R., at p. 235.
Murphy J. said [16] :
the description, "trading corporation" does not mean a corporation which trades and does nothing else or in which trading is the dominant activity. A trading corporation may also be a sporting, religious, or governmental body. As long as the trading is not insubstantial, the fact that trading is incidental to other activities does not prevent it being a trading corporation.
1. (1979) 143 C.L.R., at p. 239.
Gibbs J. adhered to what he had said of the meaning of "trading corporation" in St. George. He said that the words were used in s. 51(xx) as an epithet describing a particular kind of corporation and did not simply refer to what a corporation does, or to what its main activities happen to be. However, his Honour then added [17] :
If, contrary to my opinion, the activities of a corporation at the relevant time determine whether it satisfies the constitutional test, it is the "predominant and characteristic activity" that has to be considered:
referring to the passage from the judgment of Barwick C.J. in St. George which we have already cited.
1. (1979) 143 C.L.R., at p. 213.
Stephen J., with whom Aickin J. agreed, appears to have applied both the purposes test and the activities test. He took the view that the primary object of the prosecutors was to foster the game of football and to provide facilities for playing it and that in their activities there was no departure from that object. He added [18] :
Such trading as it "[the League]" undertakes is incidental to and a by-product of its principal activities and is undertaken the better to perform those activities. Accordingly I do not regard it as a trading corporation.
I have laid considerable stress upon the incidental character of the trading activities of these corporations and have done so because I think that there may well be a distinction between trading which is incidental to, and is undertaken in the course of carrying out, some other principal non-trading activity and trading which is engaged in as a distinct and unconnected activity.
1. (1979) 143 C.L.R., at pp. 220-221.
We have dwelt on Adamson at such length in order to avoid any misunderstanding as to the authoritative guidance it provides. In our opinion, the case is authority for the proposition that a corporation whose principal activity is trading is a "trading corporation" within s. 51(xx). Barwick C.J., Mason J. and Jacobs J. clearly grounded their decision on that view of the activity of the prosecutors. Murphy J. was content to say that their trading activities were substantial. So far as obiter dicta is concerned, while it is true that Mason J., with Jacobs J. concurring, adopted a relative test in terms of a "sufficiently significant proportion of overall activities" [19] and Murphy J. in terms of "not insubstantial" [20] , the remaining four members of the Court (Barwick C.J., Gibbs, Stephen and Aickin JJ.) all either expressly or in our opinion implicitly indorsed the predominant and characteristic activity test.
1. (1979) 143 C.L.R., at p. 233.
2. (1979) 143 C.L.R., at p. 239.
We should now state the view which we take of the proper approach to the question of characterizing a trading or financial corporation for the purposes of s. 51(xx) and the Trade Practices Act. If the matter were free of authority, we would favour in substance the view expressed by Gibbs J. in St. George. As a matter of language, s. 51(xx) seems to us to identify distinct types of corporations, thereby alluding more to their nature and purpose than to the activities in which they engage. Of course a consideration of what corporations do may well be relevant to a determination of their nature and purpose; but to concentrate exclusively or primarily on the current activities of a corporation in the process of classification is to construe the legislative power as a power with respect to trading or financial activities rather than as a power with respect to certain types of corporation.
However, the matter is not free of authority. We regard ourselves as bound by Adamson to give greater weight to the current activities test than we would otherwise have thought appropriate. On the other hand, the process of characterization is not to be narrowly pursued. It calls for a consideration of all the circumstances touching the corporation in question before one can determine whether it satisfies the constitutional description. Such an approach is in our view necessarily implicit in a process of characterization and we do not understand Adamson to deny it.
Although this Court has not had occasion to consider a case involving a financial corporation, such a case came before the Full Court of the Federal Court in Re Ku-ring-gai Co-operative Building Society (No. 12) Ltd. [21] . The Court held co-operative terminating building societies providing finance for their members to be financial corporations. Bowen C.J. [22] defined a financial corporation in terms of a corporation "which borrows and lends or otherwise deals in finance as its principal or characteristic activity"; cf. also Deane J. [23] . For present purposes, we think that is a sufficient definition and one which we accept.
1. (1978) 36 F.L.R. 134; 22 A.L.R. 621.
2. (1978) 36 F.L.R., at p. 138; 22 A.L.R., at p. 624.
3. (1978) 36 F.L.R., at pp. 159-160; 22 A.L.R., at p. 642.
The Full Court, in coming to the decision from which the present appeal is brought, recognized that the purpose of establishing the Board was the administration of a superannuation scheme for government servants in Victoria. Nevertheless, their Honours proceeded on the basis that the critical question in the case was whether commercial dealing in finance, such as the borrowing and lending of money, was a substantial and not a mere ancillary part of its activities. They answered that question in the affirmative and thus concluded, subject to the issue as to whether in the relevant respect it enjoyed the immunity of the Crown, that it was a financial corporation in the constitutional sense.
As we have endeavoured to show, we think with respect that the Federal Court, both at first instance and on appeal, misunderstood the authoritative guidance to be gleaned from Adamson . Although the current activities of a corporation are of central significance, mere quantity is not determinative. Brennan J. recognized this when as the primary Judge he said in the passage which we have already cited that the substantiality of the trading activity of a corporation cannot be determined without reference to its other activities. Taken in isolation from all the other circumstances of a case, the financial activities of a corporation may be substantial in a quantitative sense and yet be no more than incidental and therefore insignificant in relation to the other activities of the corporation. In such a case the financial activities may be both substantial and yet ancillary and therefore insufficient to fix their character to the corporation. Although in this respect we think that the distinction drawn by Brennan J. was correct, we have ventured earlier in these reasons with respect to join issue with the core of his Honour's analysis of Adamson . It is not a question solely of substantiality in either a quantitative or a relative sense but whether the activity is the predominant or characteristic activity.
Counsel for the appellant advanced a further ground for distinguishing the decision in Adamson from immediate relevance to the present case. He relied on the governmental character of the Board as a significant factor in the process of characterization. This is a factor which was absent in Adamson . If the submission is merely an attempt to reintroduce the notion of reserved State rights, then of course it invites summary rejection. As Barwick C.J. said in St. George [24] , speaking of the construction of s. 51(xx):
The words should therefore be construed according to the principles of construction appropriate to the construction of the Constitution. Thus, the words must be given their full import without any constraint derived from the circumstance that so construed the constitutional power they express will affect State power, legislative or executive, or that the exercise of the constitutional power so construed will or may effect the exercise of State power. The reserved powers doctrine of the past has been fully exploded: but care needs to be taken that it does not still in some form or another infiltrate one's reasoning when construing Commonwealth powers or Acts of the Parliament.
Further, if the terms of an Act expressed in the language of the constitutional power properly construed embrace a government or local government instrumentality or agency, the connexion of the corporation with the government of a State will not of itself place the corporation outside the scope of the power or the statute.
Cf., also, West v. Commissioner of Taxation (N.S.W.) [25] per Dixon J. However, as we understand Mr. Graham's submission, he does not challenge these ramparts of Commonwealth supremacy. He was asserting the governmental character of a corporation as relevant to the question whether, having regard to all the circumstances including its current activities the corporation came within the constitutional description. If it does, then its government character cannot save it from the operation of the Trade Practices Act, unless of course that Act in its intended operation does not apply to it: Bradken Consolidated Ltd. v. Broken Hill Proprietary Co. Ltd. [26] .
1. (1974) 130 C.L.R., at pp. 540-541.
2. (1937) 56 C.L.R. 657, at p. 682.
3. (1979) 145 C.L.R. 107.
The learned Solicitor-General for the State of New South Wales, Miss Gaudron, takes the governmental character argument a step further. She submits that there is a discrete category of governmental corporation established to perform administrative services in the nature of public services which was never intended to be included within s. 51(xx), whatever its activities might be. Such corporations are not to be confused with statutory trading instrumentalities, as to which different considerations apply. It follows, in her submission, not only that the decision in St. George relating to a municipal corporation may be supported on this ground but that its ratio decidendi is unaffected by the decision in Adamson . Having regard to the conclusion to which we have come, we do not find it necessary to examine this submission at any length and we reserve our opinion on its correctness. We would say, however, that the proper construction of the legislative power conferred on the Commonwealth by s. 51(xx) may well be elucidated by an examination of the connotation which in 1900 attached to the expressions "trading corporation" and "financial corporation" while recognizing that their denotation or content may have changed significantly in the course of the century.
In our opinion, the governmental character of the Board's activities is not irrelevant to the determination whether it falls within the constitutional description. It seems to us to be appropriate and indeed necessary to start with the proposition that here is a statutory body which is formed to carry out a governmental function, namely, the provision of emoluments to the servants of the government and their dependants. Everything that the Board does — the receipt of contributions, the classification of contributors, the determination of benefits and the management of the Fund — derives its significance from that fundamental premise. There is no doubt that, in the course of managing the Fund, the Board may be said to carry on a business of dealing in finance but in our opinion its activities in that regard must be described as ancillary or incidental to the Board's primary activity of administering the scheme. No doubt those activities are substantial in a quantitative sense but they are not such as to determine the character of the corporation. The predominant and characteristic activity of the Board is not to be described in terms of its financial dealings but by reference to the service it provides to government in Victoria by way of a superannuation scheme.
This conclusion makes it unnecessary for us to consider the alternative argument advanced for the appellant, namely, that the Board is entitled in the relevant respect to the shield of the Crown with the consequence that consistently with the decision of this Court in Bradken the Trade Practices Act does not apply to it.
We would allow the appeal.
Mason, Murphy and Deane JJ.
The appellant is a body corporate constituted by the Superannuation Act 1925 Vict. and continued in existence by the Superannuation Act 1958 Vict.. It is charged with the administration of the Superannuation Fund established by the first Act and continued by the second Act for the purpose of providing pensions for public servants and other officers and with the investment of the Fund in the manner set out in s. 6 of the 1958 Act. In the course of discharging its statutory responsibilities the appellant from time to time invests moneys forming part of the Superannuation Fund in mortgages of land.
On 19 November 1979 the respondent Commission wrote to the appellant stating that inquiries made by the Commission suggested that the appellant, in the course of lending moneys on the security of mortgages of land, may have engaged in the practice of exclusive dealing in contravention of s. 47(1) of the Trade Practices Act 1974 Cth. By notice expressed to be under s. 155 of that Act the Chairman of the Commission required the appellant to furnish certain information and produce certain documents.
The appellant then commenced an action against the Commission in the Federal Court of Australia, seeking declarations that it was not a "corporation" as defined by s. 4(1) of the Trade Practices Act, that s. 47 of that Act did not apply to it, that the notice given under s. 155 was not validly given and that any failure or refusal by the appellant to comply with the requirements of the notice would not constitute contravention of s. 155. Injunctive relief was also sought. Brennan J., sitting as a judge of the Federal Court, held that the appellant was a "corporation" as defined by s. 4(1), being a financial corporation within the meaning of par. (b) of that definition. His Honour accordingly dismissed the application with costs. [27] .
1. (1980) 49 F.L.R. 216; 33 A.L.R. 105.
The appellant unsuccessfully appealed to the Full Court of the Federal Court (Franki, Northrop and Ellicott JJ.) [28] . The Full Court affirmed Brennan J.'s conclusion that the appellant was a financial corporation within the meaning of par. (b) of the statutory definition. In the Full Court, the appellant advanced, for the first time, an argument that it was not bound by the provisions of the Trade Practices Act for the reason that it was an instrumentality of the Crown in right of the State of Victoria. In support of that argument, the appellant relied on Bradken Consolidated Ltd. v. Broken Hill Proprietary Co. Ltd. [29] , where this Court held that the Trade Practices Act did not bind the Queensland Commissioner of Railways for the reason that he was an instrumentality of the Crown in right of the State of Queensland. The Full Federal Court held that the appellant was not an instrumentality of the Crown and accordingly rejected the argument.
1. (1981) 60 F.L.R. 165; 41 A.L.R. 279.
2. (1979) 145 C.L.R. 107.
In its appeal to this Court the appellant challenges the correctness of each of the findings that it was a financial corporation and that it was not an instrumentality of the Crown in right of the State of Victoria. For its part, the Commission not only supported those findings in the Federal Court but argued that the decision in Bradken was confined to the case in which the instrumentality of the Crown was a trading corporation, as was the Commissioner of Railways (Q.), and that the decision says nothing about a case where an instrumentality of the Crown is a financial corporation. The short answer to this suggestion is that Bradken enunciated a broad proposition that the Trade Practices Act did not regulate the activities of an instrumentality of the Crown in right of a State and that the Commissioner's character as a trading, as distinct from a financial, corporation was immaterial to the decision. An application by the Commission for leave to present an argument challenging the correctness of Bradken was refused.
The consequence is that the two issues for our decision are those which engaged the attention of the Full Court of the Federal Court. In determining these issues we have the advantage of the comprehensive review made by Brennan J. at first instance and by Northrop and Ellicott JJ. on appeal of the nature of the appellant's financial and administrative activities. The correctness of their Honours' description of these activities is not in question, the point of departure in the argument being as to their legal significance.
It will be sufficient for present purposes if we summarize the appellant's activities. The summary which follows is based largely on the judgment of Brennan J. at first instance.
According to its preamble the Superannuation Act 1958 was enacted " to consolidate the Law making Provision on a Contributory Basis for Superannuation Benefits for certain Public Officers and Employés and Benefits for Certain of their Dependants".
The appellant administers the superannuation scheme for which the statutes provide, collecting contributions from contributors and payments from the State Treasurer, ascertaining entitlements and paying benefits. The appellant manages and invests the assests of the Fund. The six members of the appellant are each appointed by the Governor-in-Council for a term of five years, three being contributors elected by contributors (s. 49). The other three members must include an actuary and the Government Statist. A member may be removed during his term of office only by resolution of both Houses after suspension by the Governor-in-Council for misbehaviour or incompetence (s. 53).
Contributors to the Fund are officers employed by the Victorian Government, governmental authorities and institutions. The estimated numbers of contributors range from 80,000 on 30 June 1977 to 90,228 on 30 June 1980. Contributions collected in the year ended 30 June 1980 exceeded $67,000,000. The total amount paid out in pensions that year was $79,729,252 and the number of pensions being paid on 30 June 1980 was 27,004. Contributors are required to make certain minimum contributions in accordance with statutory scales. A ceiling is placed upon the amount of contributions for which a revised scheme contributor is liable, the effect being that the contributor is not liable to contribute more than nine per cent of his relevant salary.
In practice the contributions of contributors are deducted from their salaries fortnightly. A contributor is classified after medical examination as a contributor for full benefits, a limited contributor or a service benefit contributor (s. 12), and the classification affects the benefit available on retirement on account of ill health or physical or mental incapacity to perform his duties unless the ill health or incapacity is caused by traumatic bodily injury. The function of classification is entrusted to the appellant which engages the part time services of a panel of fifteen private medical practitioners to advise it.
The appellant is charged with the responsibility of determining whether a contributor is unable by reason of ill health or physical or mental incapacity to perform his duties. The appellant reaches its decision after receiving a report from its medical officer and on occasion after receiving a further report by a medical practitioner agreed upon by the contributor and the appellant (s. 68).
The Treasurer of Victoria pays into the Fund amounts calculated in accordance with various provisions of the 1958 Act. In general, the Government's subvention is fixed at five-sevenths of the amount paid out of the Fund by way of pension or five-sevenths of certain lump sum payments to which contributors may become entitled otherwise than by conversion of part of a pension entitlement. The remaining two-sevenths is paid by the Fund. The Treasurer makes the Government's contribution, not when the particular contributor starts to make his contribution to the Fund, but when that contributor's pension commences to be paid. The Treasurer then partially recoups the Fund for the amount to be paid out.
The Fund bears not only the net liability to pay the statutory pensions and lump sum payments in excess of the Government subvention, it bears also a proportion of payments of settlements to pensions whose finances were affected by inflation. The Pensions Supplementation Act 1973 Vict. provides for automatic updating of pension based upon the Consumer Price Index. The Fund's contributions towards the supplementation of pensions have been substantial, amounting to $16,956,393 in 1980. The appellant also administers two smaller funds — the Parliamentary Superannuation Fund and the Married Women's Superannuation Fund.
The appellant has an administrative and clerical staff of eighty-six who are employed under the provisions of the Public Service Act 1974 Vict. and whose salaries are paid by the Victorian Government. The appellant itself employs eight persons in property management whose salaries are paid by the Fund. It retains the services of a consultant actuary and a panel of medical practitioners. It hires some computer services and shares some computer services with the Motor Accidents Board. Apart from special staff engaged in property management the appellant is dependent on the Victorian Government for administrative and clerical staff whose numbers are fixed by the Public Service Board. In 1980 the number of staff solely employed in housing loans was brought up to nine and this resulted in acceleration of the processing of applications for such loans.
The 1958 Act (s. 6) authorizes the appellant to invest the Fund in a variety of governmental and semi-governmental debentures, unsecured stock and loans, in loans secured by mortgage of real estate and in loans to authorized dealers in the short term money market. The appellant is also authorized (s. 6A) to invest moneys standing to the credit of the Fund in the purchase of land in Victoria and in constructing, altering, maintaining and repairing buildings and carrying out other improvements on such land. Where any interest in land is obtained by the appellant, it may grant leases (or sub-leases) or sell the land for such consideration and on such terms and conditions as it thinks fit. The purchase or sale of land by the appellant must be with the consent of the Treasurer who is also given power to determine that the aggregate amount which may be invested in loans on mortgage security shall not exceed such percentage or proportion of the Fund as he determines. Otherwise the management and the investment in authorized investments of the Fund is under the control of the appellant.
As at 30 June 1980, the investments of the Fund stood in the books at $487,173,000. Longer term investments fell into four main groups: semi-government and local government loans, commercial loans, housing loans to contributors and real estate. Available surplus funds are invested, on a day-to-day basis, by way of loan on the short term money market. The investment of the Fund is, within the statutory limits, in the discretion of the appellant which is, however, on occasion, susceptible to influence from the Victorian Government and which has an understanding with that Government that it will lend support to semi-government loans. The following table shows the figures of the longer term investments made in the years ending 30 June 1977, 1978, 1979 and 1980 in each of the four broad classes.
1977 1979 1979 1980 (To nearest $000) Investment in— Semi-Government and Local Government loans 5,500 37,082 38,420 29,370 Commercial loans 17,556 16,879 28,651 46,024 Housing loans 8,041 10,431 10,869 13,760 Property purchases 3,470 4,091 6,048 324 Total: 34,567 68,483 83,988 89,478
Brennan J. had this to say about the appellant's management and investment of the assets of the Fund [30] :
In the management of the Fund, the Board draws upon its indigenous expertise in forming its financial judgments, and it receives advice from a budget investment officer, property consultant, accountant and other staff who are skilled in matters of finance. Taking account of the enhancement in the value of the Fund's assets, the Fund is yielding annually a fraction over 10% on the total investment.
The management of the Fund is a complex function, for the Fund itself is large and there is a large number of individual transactions involved in its management. Its management accordingly requires considerable clerical work, a great deal of administration at the executive level, and the sound exercise of financial and actuarial judgment and managerial skills.
1. (1980) 49 F.L.R., at p. 225; 33 A.L.R., at p. 114.
Is the Appellant a Financial Corporation?
Although this Court has had to consider the meaning of the expression trading corporation in s. 51(xx) of the Constitution in its suggested application to a county council formed under the Local Government Act 1919 N.S.W. (Reg. v. Trade Practices Tribunal; Ex parte St. George County Council [31] ) and in its application to a football league and a football club (Reg. v. Federal Court of Australia; Ex parte W.A. National Football League [32] (" Adamson ")), this is the first occasion on which it has been called upon to consider the associated expression "financial corporation". It is our view that the Court's approach to the ascertainment of what constitutes a "financial corporation" should be the same as its approach to what constitutes a "trading corporation", subject to making due allowance for the difference between "trading" and "financial". After all, the two adjectives form part of the general category "and trading or financial corporations formed within the limits of the Commonwealth". The two classes are not mutually exclusive — a corporation may be a financial as well as a trading corporation.
1. (1974) 130 C.L.R. 533.
2. (1979) 143 C.L.R. 190.
In this respect the decision in Adamson is of importance for two reasons. First, the majority of the Court (Barwick C.J., Mason, Jacobs and Murphy JJ.), rejecting the argument that the purpose for which a corporation is formed is the sole or principal criterion of its character as a trading corporation, concluded that the relevant character of the football leagues and the football club was to be ascertained by reference to their established activities [33] . In adopting this view their Honours disapproved the approach taken by the majority in St. George which placed emphasis on the purpose for which the County Council was formed (see, for example, p. 562).
1. (1979) 143 C.L.R., at pp. 208-211, 233-237, 239-240.
Secondly, the judgments of the majority in Adamson make it clear that, in having regard to the activities of a corporation for the purpose of ascertaining its trading character, the Court looks beyond its "predominant and characteristic activity" (cf. p. 213 per Gibbs J.). Barwick C.J. [34] spoke of making a judgment "after an overview" of all the corporation's current activities, the conclusion being open that it is a trading corporation once it is found that "trading is a substantial and not a merely peripheral activity". Mason J. [35] said that it "is very much a question of fact and degree" having earlier stated [36] that the expression is essentially "a description or label given to a corporation when its trading activities form a sufficiently significant proportion of its overall activities as to merit its description as a trading corporation."
1. (1979) 143 C.L.R., at p. 208.
2. (1979) 143 C.L.R., at p. 234.
3. (1979) 143 C.L.R., at p. 233.
Murphy J. [37] said "As long as the trading is not insubstantial, the fact that trading is incidental to other activities does not prevent it being a trading corporation". Indeed, it was essential to the majority's approach and to its rejection of St. George that a corporation whose trading activities take place so that it may carry on its primary or dominant undertaking, e.g., as a sporting club, may nevertheless be a trading corporation. The point is that the corporation engages in trading activities and these activities do not cease to be trading activities because they are entered into in the course of, or for the purpose of, carrying on a primary or dominant undertaking not described by reference to trade. As the carrying on of that undertaking requires or involves engagement in trading activities, there is no difficulty in categorizing the corporation as a trading corporation when it engages in the activities.
1. (1979) 143 C.L.R., at p. 239.
Indeed, we would go on to say that there is nothing in Adamson which lends support for the view that the fact that a corporation carries on independent trading activities on a significant scale will not result in its being properly categorized as a trading corporation if other more extensive non-trading activities properly warrant its being also categorized as a corporation of some other type.
If there be any difference in the comments made by the majority in Adamson it is one of emphasis only. And it is important to note that they were all directed to the issue as it arose for decision, an issue relating to a sporting club and the league with which it was affiliated; they were not aimed at the corporation which has not begun, or has barely begun, to carry on business. It might well be necessary to look to the purpose for which such a corporation was formed in order to ascertain whether it is a corporation of the kind described.
Like the expression "trading corporation", the words "financial corporation" are not a term of art; nor do they have a special or settled legal meaning. They do no more than describe a corporation which engages in financial activities or perhaps is intended so to do. The nature and the extent or volume of a corporation's financial activities needed to justify its description as a financial corporation do not call for much discussion in the present case. A finance company is an obvious example of a financial corporation because it deals in finance for commercial purposes, whether by way of making loans, entering into hire purchase agreements or providing credit in other forms, and this activity is not undertaken for the purpose of carrying on some other business. However, just as a corporation may be a trading corporation, notwithstanding that its trading activities are entered into in the course of carrying on some primary or dominant undertaking, so also with a corporation which engages in financial activities in the course of carrying on its primary or dominant undertaking. Thus a corporation which is formed by an employer to provide superannuation benefits for its employees and those of associated employers may nevertheless be a financial corporation if it engages in financial activities in order to provide or augment the superannuation benefits.
All that we have said so far accords with what this Court decided in Adamson and with what the Federal Court decided in Re Ku-ring-gai Co-operative Building Society (No. 12) Ltd. [38] where cooperative terminating building societies providing finance for their members were held to be financial corporations. There, Deane J. [39] , with whom Bowen C.J. and Brennan J. agreed, concluded that a corporation engaged in the activity of commercial dealing in finance was a financial corporation. By the expression "dealing in finance" his Honour referred "to transactions in which the subject of the transaction is finance (such as borrowing or lending money) as distinct from transactions (such as the purchase or sale of particular goods for a monetary consideration) in which finance, although involved in the payment of the price, cannot properly be seen as constituting the subject of the transaction". Notwithstanding certain distinctive features of the business activities of the societies in that case, viz., the object of providing benefits for members by making loans at moderate rates of interest, their inability to turn over their circulating capital in a repetitive way, their confinement in practice to making not more than one loan to each member and their performance of an important social function, the Federal Court held that the societies were financial corporations.
1. (1978) 36 F.L.R. 134; 22 A.L.R. 621.
2. (1978) 36 F.L.R., at p. 159; 22 A.L.R., at p. 642.
In order to dispose of the present case, it is unnecessary to decide whether the expression "trading or financial corporations" in s. 51(xx) might justify a broader interpretation of the constitutional power than that indicated by the majority judgments in Adamson or by the judgments in Ku-ring-gai .
The facts as we have recited them demonstrate beyond any question that the appellant engages in financial activities on a very substantial scale. Even if we confine our attention to such aspects of the appellant's investment activities as involve the making of commercial and housing loans, its business in this respect is very substantial and forms a significant part of its overall activities. No doubt these activities are all entered into for the end purpose of providing superannuation benefits to contributors, but, as we have seen, this circumstance constitutes no obstacle to the conclusion that the appellant is a financial corporation.
Is the Appellant the Crown in Right of the State of Victoria?
The ordinary canon of construction is that a statute does not bind the Crown unless it is mentioned expressly or by necessary implication (Province of Bombay v. Municipal Corporation of Bombay [40] ). This is the rule as it applies to the Crown in right of the enacting legislature. However, it has long been recognized that in a federal setting special problems arise for consideration, the important question being whether there is a general presumption that a statute enacted by the Commonwealth Parliament is not intended to apply to the Crown in right of the States as well as in right of the Commonwealth. These problems were discussed to some extent in Bradken [41] . It goes almost without saying that in a case such as the present the first step is to construe the Trade Practices Act because, subject to considerations of constitutional validity, the Commonwealth Parliament may exercise its legislative powers so as to affect either a State or an authority formed by a State which, according to State legislation, is to have the benefit of the privileges and immunities of the Crown in right of the State. In case of an inconsistency, the Commonwealth Act will prevail by virtue of s. 109 of the Constitution. These problems may be put to one side in the present case. In Bradken the Court held that the Trade Practices Act did not evince any intention to bind the Crown in right of a State. If the appellant is not the Crown in right of the State of Victoria it will not be to the point that the State legislation purports to confer some of the privileges and immunities of the Crown on it. The reason is that one finds in the Trade Practices Act neither an intention that the Act should not bind a financial corporation which is not an emanation of the Crown but which, under State legislation, enjoys some of the privileges or immunities of the Crown in right of a State nor a grant of authority to a State Parliament impliedly to confer general immunity upon such a financial corporation from the provisions of the Act.
1. [1947] A.C. 58, at p. 61.
2. (1979) 145 C.L.R., at pp. 116-123, 127-129, 134-136, 140-141.
The question whether the appellant can be described as the Crown in right of the State of Victoria falls to be answered by reference to the judgments in Superannuation Fund Investment Trust v. Commissioner of Stamps (S.A.) [42] . That it was a borderline case was shown by the even division of opinion on the question whether that Trust was a manifestation of the Crown in right of the Commonwealth — Barwick C.J. and Mason J. thought it was, Stephen and Aickin JJ. thought it was not, Murphy J. expressing no opinion on the point. There is on our reading of the judgments no inconsistency in principle between them. However, they differed in their application to the facts. Mason J. [43] was influenced by the circumstance that the Trust was brought into existence by the Crown in order to discharge its obligation to its employees to provide superannuation benefits for them. Stephen and Aickin JJ. [44] did not regard this factor as having weight in the circumstances of the case, regarding the absence in the executive government of any power to control the activities of the Trust as decisive.
1. (1979) 145 C.L.R. 330.
2. (1979) 145 C.L.R., at p. 355.
3. (1979) 145 C.L.R., at pp. 348-350, 365-366.
Stephen J. attached importance to the existence of a provision in the statute which, on his view, tended to suggest that the Trust was liable to pay stamp duty and was not to be equated to the Crown in right of the Commonwealth. His Honour went on to speak of the possibility that some only of a corporation's functions should attract the privileges and immunities of the Crown and that this was very much a matter of statutory interpretation [45] . Here, as we have pointed out, the question is whether the appellant is the Crown in right of the State of Victoria, not whether the State statute confers on an authority the privileges or immunities of the Crown in one or some of its functions.
1. (1979) 145 C.L.R., at p. 350.
There is no dispute that the appellant was established for an essentially identical purpose to that of the Superannuation Fund Investment Trust, that of providing superannuation benefits for public servants. However, it is argued, and in our opinion correctly, that there are significant differences between the appellant and the Trust. First, the appellant has greater autonomy and independence than the Trust. Three of the appellant's six members are elected by contributors; other members are to include an actuary and the Government Statist. The composition and mode of election of the membership of the appellant emphasize its autonomy and equip it to make independent decisions respecting the provision of benefits and investment of funds.
Secondly, the whole of the Fund administered by the Trust formed part of the Trust Fund for the purposes of the Audit Act 1901 Cth, as amended, and therefore constituted part of the Commonwealth Public Account as defined by that Act. Indeed, the Superannuation Act 1976 Cth provided that, on an employee ceasing to be an eligible employee, his accumulated contributions should be paid out of the Superannuation Fund into the Consolidated Revenue Fund and that any payment of a benefit under the Act should be payable out of the latter fund (s. 112). On the other hand, the moneys of the appellant, unlike those of the Trust, do not become part of the Consolidated Revenue. Section 7(1) of the Superannuation Act 1958 provides that moneys held uninvested by the appellant may be lodged either at call or on fixed deposit with the Treasurer or with any bank into which moneys are paid into "The Public Account" and all money so lodged with any such bank shall while in such bank be held to be moneys of the Crown. This section makes moneys lodged by the appellant with a bank Crown property but only whilst they are lodged with a bank. This special provision, which is designed to give the appellant the privileges of the Crown as a creditor against a bank with whom money is lodged, tends strongly against the view that the appellant is the Crown in right of the State of Victoria. Indeed, the absence of any corresponding provision governing the making of loans and investments generally serves to indicate that the statute does not even attempt to confer on the appellant privileges and immunities which it would have if it were the Crown.
For our part the position of the appellant is clearly distinguishable from that of the Trust in the earlier decision. The appellant has a greater degree of independent autonomy, and its funds and property are not dealt with by the Superannuation Act 1958 consistently with its having the character of the Crown in right of the State of Victoria.
For these reasons we would dismiss the appeal. |
high_court_of_australia:/showbyHandle/1/9491 | decision | commonwealth | high_court_of_australia | text/html | null | R v Taylor; Ex parte Professional Officers' Association Commonwealth Public Service [1951] HCA 1 | https://eresources.hcourt.gov.au/showbyHandle/1/9491 | 2024-09-13T22:52:04.208899+10:00 | High Court of Australia
Latham C.J. Dixon, McTiernan, Webb, Fullagar and Kitto JJ.
R v Taylor; Ex parte Professional Officers' Association Commonwealth Public Service
[1951] HCA 1
ORDER
Order nisi discharged. Prosecutor to pay costs of respondent association.
The following judgments were delivered:—
Latham C.J.
This is the return of an order nisi for prohibition directed to James Edward Taylor, the Industrial Registrar appointed under the Commonwealth Conciliation and Arbitration Act 1904-1949. There is an application before the Registrar for approval to the amendment of the rules of the respondent, the Association of Professional Officers. The rules of that association, which is an association registered under the Commonwealth Conciliation and Arbitration Act, provide in rule 3 that certain persons shall be eligible for membership of the organization. There follow provisions relating to what has been referred to as the "engineering industry". The rules require certain qualifications as engineers before persons can become members. After the definition of "eligibility" there is a proviso in rule 3 that "employees in the Public Service as defined in the Arbitration (Public Service) Act 1920-1947 shall not be eligible for membership." The basis of all the argument on behalf of the prosecutor, which is the Professional Officers' Association—Commonwealth Public Service (that is, consisting entirely of employees in the Commonwealth Public Service) is that there is a distinction between classes of such employees which is of a fundamental and radical nature in the industrial law of the Commonwealth, which makes a distinction between persons engaged in industry and persons engaged in non-industrial governmental services. It is pointed out on behalf of the prosecutor that the deletion of the proviso would bring about the result that the exclusion of employees in the Public Service would be removed from the rules and that the result would be, upon the contentions of the respondent organization, that any employees in the Public Service who fell within the other conditions of eligibility which would remain in the rules might become members of the respondent association, even though they were not employees in any industry.
The order nisi is directed to the Industrial Registrar and by that order nisi it is sought to prohibit the Industrial Registrar from proceeding with the hearing of the application for the amendment of the rules of the respondent association by striking out the proviso. The Registrar referred to the Arbitration Court under s. 30 of the Arbitration Act the question whether he had power to approve this suggested change. By a majority decision the Court held that he had such power. This is not a proceeding upon appeal from that decision. It is an independent proceeding concerned with the jurisdiction of the Registrar, and not with the merits of the application.
The grounds of the order nisi are:—"1. That the Commonwealth Conciliation and Arbitration Act 1904-1947 as amended does not authorize the registration of an organization the members of which include employees in the Commonwealth Public Service not engaged in industry." (The foundation for the distinction between persons engaged in industry and governmental employees not engaged in industry may be found in the decision of this Court in Federated State School Teachers' Association of Australia v. Victoria [1] ). "2. That the Commonwealth Conciliation and Arbitration Act 1904-1947 as amended and the Arbitration (Public Service) Act 1920-1924 do not authorize the registration of an organization the members of which are employees in the Commonwealth Public Service and others. 3. That if on their proper construction the said Acts do authorize such registration they are to that extent beyond the powers of the Parliament of the Commonwealth".
1. (1929) 41 C.L.R. 569.
Section 70 of what I have called the Arbitration Act provides that an association of employees may be registered as an organization under the Act if it is (s. 70 (b)) an association of "not less than one hundred employees in or in connexion with any industry, together with such other persons, whether employees in the industry or not, as have been appointed officers of the association and admitted as members thereof."
The other Act which has required consideration in this case is the Arbitration (Public Service) Act 1920-1947. Under that Act a Public Service Arbitrator is appointed for the purpose of dealing with terms and conditions of employment in the Public Service. Section 4 provides that:—"Employees in the Public Service, or in any division, class, grade or branch thereof, or in any calling, service, handicraft, occupation, or avocation in the Public Service, or in any division, class, grade or branch thereof, shall be deemed to be employees in an industry within the meaning of the Commonwealth Conciliation and Arbitration Act 1904-1918."
In s. 4 of the last-mentioned Act there is a definition of "industry". Section 4 of the Arbitration (Public Service) Act provides that, notwithstanding that definition in the Commonwealth Conciliation and Arbitration Act, employees of the Commonwealth shall be deemed to be employees in an industry. Section 5 of the Arbitration (Public Service) Act provides that an association of less than one hundred employees in an industry in the Public Service may be registered under the Commonwealth Conciliation and Arbitration Act as an organization if its membership comprises at least three-fifths of all the persons who are employees in that industry in the Public Service. Therefore that Act permits the registration as an organization under the Arbitration Act of a body of Commonwealth employees even though they are not engaged in industry in the ordinary sense. If the application to strike out the proviso should be granted, then the rules would stand with employment in the engineering industry of a person with certain professional qualifications as described in the rules as the sole condition of eligibility and there would be no express exclusion of employees of the Commonwealth.
The Industrial Registrar was performing the function assigned to him under s. 76 of the Arbitration Act. That section provides that:—"An organization may, in the prescribed manner, and on compliance with the prescribed conditions, change its name or the conditions of eligibility for membership or the description of the industry in connexion with which it is registered, and the Registrar shall thereupon record the change in the register and upon the certificate of registration."
Regulations have been made prescribing the manner in which a change referred to in s. 76 is to be made and prescribing the conditions which have to be complied with. Regulation 118 of the regulations made under the Act provides:—"The manner in which an organization may change its name or the conditions of eligibility for membership or the description of the industry in connexion with which it is registered shall be by complying with any relevant rules of the organization, but no such change shall become effective unless and until the approval of the Registrar to the change has been given."
The matter under consideration in these proceedings is an application for approval under reg. 118. Regulation 119 provides for the form of application and other associated matters.
The Registrar, therefore, is proposing to proceed with the hearing of an application with which he is directed to deal under this regulation.
The Registrar may give a wrong decision or a right decision. There is no appeal to this Court from his decision. The Commonwealth Court of Conciliation and Arbitration may give leave to appeal to it under s. 29 (e) of the Act. In my opinion it is plainly within the jurisdiction of the Registrar under the regulations to deal with the application. The objection of the prosecutor is based upon the contention that by no means, including a combination of the powers to make laws with respect to conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State under s. 51 (xxxv.) and the provisions of s. 52 of the Constitution which, with other provisions, give complete power to the Commonwealth Parliament to make laws with respect to the Public Service of the Commonwealth, is it possible to allow by law the combination in one organization of Commonwealth Public Servants not in industry together with persons not being members of such service who are employed in industry. If upon the true construction of the Act and the regulations to which I have referred such a combination is made possible it should then be held (it is argued) that some of the provisions of the Arbitration (Public Service) Act are beyond power. I see no foundation for such a contention. The Commonwealth Parliament has a power to legislate with respect to the Commonwealth Public Service which certainly includes power to determine the terms and conditions of employment and also to provide a specific manner of determining what those terms and conditions may be. There can be in my opinion no constitutional objection to the use for this purpose to such extent as Parliament thinks proper of the machinery which has been provided by legislation passed under s. 51 (xxxv.) of the Constitution.
I am therefore of opinion that it has not been shown that the Industrial Registrar in dealing with this application would be acting beyond the jurisdiction conferred upon him and in my opinion, therefore, the order nisi should be discharged.
Dixon J.
I agree that the order nisi should be discharged. I think that the case is outside the scope of a writ of prohibition. Prohibition is sought against the Industrial Registrar. The purpose of the prohibition is to restrain him from exercising the jurisdiction or power which is conferred upon him under the Conciliation and Arbitration Regulations. Section 70 (2) of the Commonwealth Conciliation and Arbitration Act provides that the conditions to be complied with by associations applying for registration and by organizations shall be, in effect, as prescribed. Regulation 106 prescribes as a condition that the affairs of the association shall be regulated by rules specifying the industry in connection with which the association is formed, the purposes for which it is formed and the conditions of eligibility for membership. It is thus clear that the conditions of eligibility for membership are governed by the rules of an organization. The application in the present case is to amend such a rule affecting the conditions of the eligibility for membership. That application is governed, so far as the Act is concerned, by s. 76, and I think by s. 79. Section 76 provides that an organization may, in the prescribed manner and on compliance with the prescribed conditions, change its name or the conditions of eligibility for membership or the description of the industry in connection with which it is registered, and the Registrar shall thereupon record the change in the register and upon the certificate of registration. Regulation 118 of the regulations and reg. 119 provide for applications of that description. They are, as I have said, necessarily regulations for the alteration of the rules. The case of R. v. Industrial Registrar of the Commonwealth Court of Conciliation and Arbitration; Ex parte Sulphide Corporation Ltd. [1] shows that regs. 118 and 119 are validly made and that among other things they operate to prescribe conditions within the meaning of s. 76. The conditions are consequently contained in rules. Section 79 (1) provides that no alteration of a rule of an organization shall be valid until registered and sub-s. (3) of the section provides that it shall be the duty of the Registrar, before registering any alteration, to satisfy himself that the alteration is not in conflict with the Act or the regulations or with any order or award.
1. (1918) 25 C.L.R. 9.
The Registrar had presented to him, as I have said, an application for the alteration of the conditions of eligibility. It was for the striking out of the provision which prevented members of the Public Service who are not engaged in an industry conducted by the Commonwealth from being members of the association. To strike it out merely removed a negative prohibition and left the general positive words of the condition of eligibility to speak for themselves and to operate as they might under the law. The Industrial Registrar, having considered this application, referred it under s. 30 to the court for decision. The court informed him by its reasons that he might proceed as asked but no formal order has been drawn up. It is not clear to me how the formal order of the court would have been drawn up and whether it would amount to a judicial decision. It has in this argument been treated as advisory only. In my opinion the Industrial Registrar in proceeding under regs. 118 and 119 was exercising the power reposed in him. He was considering an application for his approval and the registration of an alteration of the rules. This power enabled him to approve and required him before doing so to satisfy himself of the matters specified in s. 79 (3). He is engaged upon the very function assigned to him and none the less so because he may arrive at an erroneous conclusion. An officer may decide a matter before him wrongly without exceeding his power.
I think that the policy of the Act is that matters of this description should be dealt with by the Court of Conciliation and Arbitration and by its officers and that we should be very careful in maintaining the distinction between error in deciding a matter and excess of power so that we do not award a writ of prohibition in matters which are within the province of the court and of the Registrar to decide. We should be careful to exclude from our consideration matters which go to the correctness or incorrectness of the decisions of the Registrar or of the court when we are called upon to decide whether they have exceeded power. In the present case I do not think an erroneous determination of the Registrar would amount to an excess of power if he makes an erroneous determination, and on that ground I think that there is no room for a writ of prohibition. I shall say nothing about the appropriateness of the writ to the function of the Registrar in cases where he does exceed his powers.
The order nisi should be discharged.
McTiernan J.
I agree that the order nisi should be discharged for the reason that this is not a case for prohibition. It does not appear upon the materials that are before us that the Registrar exceeded the powers granted to him by the Act. He proposes to delete the proviso which has been mentioned from the constitution of the respondent organization. Taking the constitution as it would appear after this proviso has been deleted, on its face it would not be in conflict with any section of the Act (for example, s. 70); and it cannot be said that upon its proper construction it would, as amended, necessarily be in conflict with the Act; for this reason it cannot be said that the Registrar exceeded the jurisdiction that is granted to him. I refer especially to s. 79 (3) of the Commonwealth Conciliation and Arbitration Act. On that short ground I do not think that the case is one for prohibition.
Webb J.
I think the order nisi should be discharged solely because I am not satisfied that if the rules of the union had originally been presented without the proviso they should have been rejected, or should have led to the refusal of the registration of the union. I do not think then that the approval of the Registrar of the deletion of the proviso can be a ground for prohibition. I say nothing as to the constitutional ground. It may be, of course, that considerations of validity would lead to the rules of the association being read down so as to exclude public servants not in industry. However, no order can be based on that view in these proceedings.
Fullagar J.
I agree that the order nisi should be discharged. I am of opinion that the case lies altogether outside the scope of the writ of prohibition.
Kitto J.
I am of that opinion also. |
high_court_of_australia:/showbyHandle/1/11262 | decision | commonwealth | high_court_of_australia | text/html | null | Carseldine v Director of Department of Children's Services [1974] HCA 33 | https://eresources.hcourt.gov.au/showbyHandle/1/11262 | 2024-09-13T22:52:11.807820+10:00 | High Court of Australia
Barwick C.J. McTiernan, Menzies, Stephen and Mason JJ.
Carseldine v Director of Department of Children's Services
[1974] HCA 33
ORDER
Appeal allowed with costs. Order of the Full Court of the Supreme Court of Queensland set aside and in lieu thereof order that the appeal to that Court be allowed with costs, that the orders made by Andrews J. on 9th November 1973 be set aside, and that the appellants' application for custody be remitted to the Supreme Court for hearing, costs of the proceedings already held before Andrews J. to be in the discretion of the Court hearing the application for custody.
Cur. adv. vult.
The following written judgments were delivered:—
Sept. 19
Barwick C.J.
I have had the advantage of reading the reasons for judgment prepared for delivery in this matter by my brother Mason. I agree with his conclusion that the inherent jurisdiction of the Supreme Court of Queensland to make an order as to the custody of an infant is not displaced by ss. 47, 55 and 58 of The Children's Services Act, 1965-1973 Q., or by the action taken by the Director of the Department of Children's Services under s. 47 of that Act. I agree entirely with the reasons which my brother gives for that conclusion. In my opinion, the Supreme Court of Queensland did not lack jurisdiction to entertain the application made in this case by the appellants, such application being regarded as having been brought on behalf of the infant children. I also agree with my brother's reasons in this respect and with his concurrence with the reasons and judgment of Wanstall J. in Re L. (An Infant) [26] .
1. [1958] Qd.R. 489.
I would allow the appeal and remit the application to the Supreme Court of Queensland for hearing.
McTiernan J.
This appeal is from a judgment of the Full Court of the Supreme Court of Queensland dismissing an appeal from a decision of Andrews J. The matter involves a consideration of The Children's Services Act, 1965-1973 Q.. It is an application by the appellants for custody of four children, of whom the appellants are the maternal grandparents. The appellants issued out of the Supreme Court of Queensland an originating summons seeking an order for the custody of the children, naming the children's mother (the appellants' daughter) as the respondent to the summons. Andrews J. made an interim order giving custody of the children to the appellants and adjourned the hearing of the summons. The present respondent Director applied by notice of motion to have the interim order set aside on the ground that Andrews J. had no jurisdiction to make the order, since, following an application under s. 47 of The Children's Services Act, 1965-1973 made by their mother, and a declaration by the Director under that section the children had been admitted to the care and protection of the Director and continued to be under his care and protection. Andrews J. held that in those circumstances he had no jurisdiction to make an order granting custody of the children to the appellants and on appeal to the Full Court his decision was affirmed.
From the evidence, it appears that an application to have the children admitted to the care and protection of the Director was made by the mother under s. 47 of the Act and a declaration to that effect was made by the Director in April of 1970. The children had been placed in an orphanage, Nazareth House, Wynnum and the appellants had been granted access by the Director in March 1972. Then in July 1972 the Director found the appellants to be fit and proper persons to be foster parents of the children and until August 1973 the children lived with the appellants. In August 1973 the Director ordered that the children be permitted to spend their holidays with their mother. However, on 15th September the appellants took the children from their mother and brought them to their (the appellants') home. It would appear from the evidence that they did this because of their concern about the dangers to the health and morals of the children while living in their mother's house. On 24th September the Director had the children returned to their mother's home, claiming that since April 1970 the children had been under his care and protection and that the appellants' action had been contrary to the Act. Following these events, the appellants took out the summons applying for custody which is the subject of these proceedings.
No allegation was made before us of any supervening unfitness of the appellants to have custody of the children. However, a strong case based on ample evidence that the mother was not a fit guardian was put before us in argument.
It would seem from the evidence that the father of the children had deserted them and their mother permanently.
The essential point which arises on appeal is the question of whether or not the provisions of The Children's Services Act, 1965-1973 take away jurisdiction of the Supreme Court of Queensland to make orders for custody. The Supreme Court of Queensland was invested with such jurisdiction as part of its equitable jurisdiction by s. 22 of the Supreme Court Act, 1867 Q.. Section 22 reads:
The said court shall have equitable jurisdiction within the said colony of Queensland and its dependencies and such power and authority to do exercise and perform all acts matters and things necessary for the due execution of such equitable jurisdiction as is possessed by the Lord High Chancellor or other equity judges of England in the exercise of similar jurisdiction within the realm of England and also to do all such other acts matters and things as can and may be done by the said Lord High Chancellor or other equity judges within the realm of England in the exercise of the common law jurisdiction to him belonging and to appoint guardians and committees of the persons and estates of infants and of natural-born fools lunatics and persons deprived of understanding and reason by the act of God and unable to govern themselves or their estates and for that purpose to inquire into hear and determine by inspection of the person the subject of such inquiry or by examination on oath or otherwise of the party in whose custody or charge such person may be or of any other person or persons or by such other ways and means by which the truth may be best discovered and to act in all cases whatsoever as fully and amply to all intents and purposes as the said Lord High Chancellor or other equity judges or the grantee from the Crown of the persons and estates of infants and lunatics natural-born fools and persons deprived of understanding as aforesaid may now lawfully do.
I would interpret the term "infant" in its legal sense for the purposes of this provision. Of this equitable jurisdiction Professor Holdsworth wrote in his History of English Law, vol. VI, p. 648:
The equitable control over infants, and the guardians of infants, arose in its modern form after the abolition of the military tenures, and the court of Wards and Liveries. The equitable jurisdiction was based, it is said, not on any inherent jurisdiction, but upon a special delegation by the crown of its prerogative right, as parens patriae, of looking after their interests. In 1696, in the case of Falkland v. Bertie (per Lord Somers L.C. [27] ), it was said, "In this court there were several things that belonged to the king as pater patriae, and fell under the care and direction of this court, as charities, infants, idiots, lunatics, etc. Afterwards such of them as were of profit and advantage to the king were removed to the Court of Wards by the statute; but upon the dissolution of that court, came back again to the Chancery." This view has generally been accepted as the origin of this jurisdiction of the court
1. (1696) 2 Vern. 333, at p. 342 [23 E.R. 814, at p. 818].
Referring to the nature of this jurisdiction Kay L.J. said in Reg. v. Gyngall [28] , "it is essentially a parental jurisdiction, and that description of it involves that the main consideration to be acted upon in its exercise is the benefit or welfare of the child".
1. [1893] 2 Q.B. 232, at p. 248.
The material part of the long title of The Children's Services Act, 1965-1973 is "An Act to Promote, Safeguard and Protect the well-being of the Children and Youth of the State through a Comprehensive and Co-ordinated Programme of Child and Family Welfare " Lord Moulton said in Vacher & Sons, Ltd. v. London Society of Compositors [29] : "The title of an Act is undoubtedly part of the Act itself, and it is legitimate to use it for the purpose of interpreting the Act as a whole and ascertaining its scope." I do not find in the title of The Children's Services Act, or in the body of the Act, any indication that the amendment or repeal of s. 22 of the Supreme Court Act, 1867 was within the contemplation of the legislature. Reading the whole of the Act I do not think that the jurisdiction and power conferred thereby on the Children's Court and the Director are intended to supplant entirely the Supreme Court in its equitable jurisdiction. I consider that the Act intends to supplement such jurisdiction in the way provided therein.
1. [1913] A.C. 107, at p. 128.
As the equitable jurisdiction of the Supreme Court derives from a delegation of the prerogative of the Crown to the Court, that jurisdiction could only be taken away by a statute, if the statute does so expressly or by necessary implication. Indeed s. 13 of the Acts Interpretation Act, 1954-1970 Q. provides, "No Act hereafter passed shall be binding on the Crown or derogate from any prerogative right of the Crown unless express words are included therein for that purpose". In my judgment there is no such express intention in The Children's Services Act nor is any such intention to be implied of necessity from the whole scheme of the Act.
Section 47 of The Children's Services Act, 1965-1973 Q. is in the following terms:
(1) An application may be made to the Director in or to the effect of the prescribed form to admit any child to his care and protection by any of the following persons:—
(a) a parent of such child;
(b) a guardian of such child;
(c) a relative of such child;
(d) a person of good repute.
Upon receipt of such an application the Director shall make such inquiry and investigation as he considers necessary and shall hear all objections made to him concerning such application.
(2) If the Director is satisfied that the child in respect of whom such an application is made is in need of care and protection and that such care and protection cannot be secured to such child by the giving of assistance under Part V of this Act he shall by writing under his hand declare such child to be admitted to his care and protection.
Such declaration shall be sufficient authority for any person acting on behalf of the Director at any time while such declaration continues in force to take the child in care into his custody and to deliver such child in care to such place as the Director, from time to time directs, and for the person in charge of any such place to receive and keep the child in care until such child in care is otherwise lawfully dealt with.
(3) No provision of this section shall be construed to render it mandatory upon the Director to take any child into his custody.
It was suggested in argument that the case of Minister for the Interior v. Neyens [30] , a case which involved the Child Welfare Ordinance 1957 A.C.T., was a precedent on which to decide the question of jurisdiction in the present case adversely to the appellant. In my view, the relevant provisions of that Ordinance differ materially from s. 47 of the Queensland statute. Section 19 of the Ordinance by its terms states that "the Minister is the guardian of a child or young person who is a ward", "notwithstanding any other law of the Territory relating to the guardianship or custody of children or young persons". I find nothing in s. 47 of The Children's Services Act, 1965-1973 or in any part of the Act to indicate that its provisions are to take any precedence over existing laws relating to custody or guardianship or over the Supreme Court's equitable jurisdiction in particular. Indeed, s. 102 in Pt IX of the Act suggests the contrary. Section 102 reads:
No provision of this Part shall be construed to restrict or prejudice the jurisdiction of the Supreme Court of Queensland to appoint and remove guardians or otherwise in relation to infants.
As was said by Barwick C.J. in Minister for the Interior v. Neyens [1] the jurisdiction said to be displaced "ought only to be treated as lost or withdrawn where this is done expressly or by necessary, indeed inescapable, implication". In my view the equitable jurisdiction of the Supreme Court of Queensland in custody and guardianship matters affecting infants is preserved by The Children's Services Act to the extent that it is not necessarily inconsistent with the provisions of the Act. The Act does not presume to cover the whole field of the law relating to custody and guardianship of infants.
1. (1964) 113 C.L.R. 411.
2. (1964) 113 C.L.R., at p. 419.
I would allow the appeal and would order that the matter be remitted to the Supreme Court of Queensland for the determination of the appellants' application for custody of the children.
Menzies J.
Donald and Violet Carseldine, the father and mother of Jean O'Brien and the grandparents of her infant children, Mary aged eleven, Donna aged ten, Michelle aged nine and Erin aged seven, commenced proceedings in the Supreme Court of Queensland against Jean O'Brien seeking the custody of her children. The originating summons was, it seems, taken out pursuant to an undertaking given upon the hearing of an ex parte application made to the court by the grandparents, upon which an interim order was made giving them custody of the infants and directing service of the proceedings upon the Director of the Department of Children's Services (Queensland). The Director moved to set aside this order. The summons and the motion to set aside the order were heard by Andrews J. who rescinded the order for interim custody and dismissed the grandparents' application for custody. The Full Court dismissed an appeal from these orders and this appeal has, by special leave, been brought to this Court against that order of the Full Court.
Nothing is known about the father of the infants beyond that he disappeared in 1968.
The infants were, upon the application of the mother, admitted to the care and protection of the Director, pursuant to s. 47 of The Children's Services Act, 1965-1973 Q., on 14th April 1970 and have since so remained.
The grounds for the grandparents' application for custody were supported by an affidavit of Violet Carseldine alleging that Jean O'Brien's home at 57 Everest Street, Sunnybank, was no place for the infants. It is a house in which it is deposed that she lives in drunkenness, squalor and strife with a man called Parsons who joined her when her husband left her. It is alleged that Parsons assaulted the infants. The children, it was said, were in other ways ill-treated by their mother and Parsons, and left hungry and uncared for.
The infants, who had been in an orphanage run by the Catholic Church, were, with the consent of the Director, in the custody of the grandparents from June 1972 to August 1973. During this time they lived comfortably in the grandparents' home at Southport from which they attended the Labrador State School where they did well. The house, it is said, is a fourteen square house with land upon which the children can play. The grandparents are in modest circumstances and during the time the children were with them received a fostering allowance of $68.00 per fortnight. It is apparent that the grandparents are concerned about the welfare of their grandchildren.
In August 1973 Donna and Michelle were, with the authority of the Director, escorted from the home of the grandparents to the home of their mother, and the infants Mary and Erin joined them there a few days later. On 15th September 1973 the grandparents, with the assistance of the police, took the children from the home of their mother, where she and Parsons were in a drunken state, to their own home. On 24th September 1973 the Director issued an authority to take the infants into custody and deliver them to 57 Everest Street, Sunnybank. At the same time the Director wrote to Mrs. Carseldine informing her that the action "in removing the O'Brien children from their mother on 15th September was contrary to the provisions of this Act", i.e. The Children's Services Act. The letter concluded as follows:
In the light of recent events and in order that the children may be given the opportunity of settling in their mother's home you are hereby ordered not to visit or communicate with the children unless approval, pursuant to s. 132(4), is obtained.
The Child Care Officer of the Department is supervising the placing of the children with their mother.
It was this removal of the children from the home of the grandparents to that of their mother, under the authority of the Director, that precipitated the grandparents' application for custody.
The application for custody made by the grandparents was refused by the Supreme Court because The Children's Services Act was construed as excluding the intervention of the court in relation to a child in care thereunder. In so deciding the Court relied upon the decision of this Court inMinister for the Interior v. Neyens [2] . A survey of the Act is therefore necessary. Part VI relates to "children in need of care and protection". A child in such need is defined by s. 46. Section 47 authorizes an application by the parent of a child to admit the child to the care and protection of the Director. Section 47(2) is as follows:
If the Director is satisfied that the child in respect of whom such an application is made is in need of care and protection and that such care and protection cannot be secured to such child by the giving of assistance under Part V of this Act he shall by writing under his hand declare such child to be admitted to his care and protection.
Such declaration shall be sufficient authority for any person acting on behalf of the Director at any time while such declaration continues in force to take the child in care into his custody and to deliver such child in care to such place as the Director, from time to time directs, and for the person in charge of any such place to receive and keep the child in care until such child in care is otherwise lawfully dealt with.
It was pursuant to these provisions that the infants became children in care on 14th April 1970. A child might, however, become a child in care by virtue of an order of the Children's Court: s. 49. Section 50 authorizes the Director at any time during the continuance in force of a declaration under s. 47 to apply to the Children's Court for an order that the child be admitted to his care and protection and gives the court power to decide such an application after investigation and the hearing of objections. An explanation of this section seems to be that it enables the Director to forestall the automatic termination of the force of this declaration by reason of an application on the part of the person upon whose request the declaration was made to undertake the care and protection of the child: see s. 48(b). If such an application is made, the Director is given time to apply to the Children's Court, under s. 50, to retain the child in his care and protection. In this matter an application was, in fact, made to the Director by Jean O'Brien pursuant to s. 48(b), but this was withdrawn. No application was made by the Director pursuant to s. 50.
1. (1964) 113 C.L.R. 411.
Section 55 is a key section and is as follows:
(1) When the Director has declared a child to be admitted to his care and protection or a Children's Court has ordered that a child be admitted to the care and protection of the Director the guardianship of such child in care shall pass to and, for so long as the declaration or, as the case may be, order continues in force, vest in the Director.
(2) When a declaration made by the Director that a child be admitted to his care and protection ceases to be in force the guardianship of such child in care shall—
(a) where such declaration has ceased to be in force by reason of the order of a Children's Court that the child in care in respect of whom such declaration was made be admitted to the care and protection of the Director, remain vested in the Director for so long as such order continues in force;
(b) in any other case, pass to and vest in the person or persons who, but for such declaration, would in law be guardian of such child in care.
(3) When an order of a Children's Court that a child be admitted to the care and protection of the Director ceases to be in force, the guardianship of such child in care shall pass to and vest in the person or persons who, but for such order, would in law be guardian of such child in care.
The duty of the Director with regard to a child in care is governed by s. 58 which provides:
(1) When a child is admitted to the care and protection of the Director either by declaration of the Director or by order of a Children's Court it shall be the duty of the Director to utilize his powers and the resources of the Department so as to further the best interests of such child in care and, in the performance of that duty and without limiting the Director's discretion in that regard, the Director may, from time to time, make use of such facilities and services as may be available or be made available by—
(a) any parent of such child in care;
(b) a relative or friend of such child in care;
(c) any person approved by the Director;
(d) placing such child in care in an institution established or licensed pursuant to Part IV of this Act;
(e) placing such child in care in a boarding school, hostel or any other place considered by the Director to be in the best interests of such child in care.
The Director may impose such conditions upon the use he makes or proposes to make of any of such facilities and services as he considers to be in the best interests of the child in care concerned.
(2) A child admitted to the care and protection of the Director shall not be placed, while so admitted, in a child training centre except with the approval of the Minister first had and obtained.
Section 59 is as follows:
Except as is expressly provided in this Part the provisions of this Part or the making of an order pursuant to this Part or the fact that such an order has ceased to be in force shall not be construed or taken to avoid, or prejudice the rights of any person who, except for the provisions of this Part would be, in law, guardian of any person.
There are in Pt VII of the Act—headed "Children in Need of Care and Control"—more stringent provisions than those appearing in Pt VI for the control of children subject to a court order subjecting the child to care and control. Such a court order has the effect of vesting the guardianship of the person subject to it in the Director: s. 64.
It appears to me that the guardianship of a child vested in the Director by either s. 55 or s. 64 is absolute and no court could interfere with the guardianship which the Act itself creates in positive terms. Had, therefore, the grandparents here applied to the court for the guardianship of their infant grandchildren, such an application must have been refused.
The grandparents' application, however, was not for guardianship; it was for custody, and the problem is whether the court could grant this application consistently with the Act.
At the outset the question arose how it is that the court can entertain an application for custody of infants by grandparents against their mother and the Director in whom guardianship is vested by statute. The authority for making such an application was, it was argued, to be found in the Rules of the Supreme Court of Queensland, O. 76, r. 1, which inter alia provides:
An infant may be made a ward of court in any of the following modes, that is to say:
(1) By the commencement of an action for the administration of property in which the infant has an interest, or for the direction of the court with relation to the estate or person of the infant and for his benefit;
Reference was made to Re L. (An Infant) [3] in which Wanstall J. decided that, by virtue of the foregoing rule, an application by the father of an illegitimate infant for custody of the infant constituted the infant a ward of court, and the court then has power under its inherent jurisdiction to award custody. This decision has been followed by other judges of the Supreme Court of Queensland. It seems to me that this construction is questionable. It is unlikely that it was intended that an application for the custody of a child, made to the court by any person, should ipso facto bring that child within the supervision which a court exercises over its wards. If it be so, it is likely that there are many unrecognized wards of court in Queensland. It is also unlikely that the effect of the rule was that an application for custody could be dealt with by the court under its inherent jurisdiction and not under the statute then in force, viz. The Guardianship and Custody of Infants Act, 1891 to 1952 Q. notwithstanding that the Act did preserve the operation of the Rules. Furthermore, the context of the rule suggests that a child is made a ward of court so that the court can better protect its interests. When an application is made to the Court for the custody of a child there is no need for the court to find some source of power to protect the interests of the child beyond those which it always has in dealing with application for custody. In my opinion the institution in the Supreme Court of Queensland of proceedings for the custody of the children by the grandparents on their own behalf against the mother was misconceived. Section 102 of The Children's Services Act does preserve the inherent jurisdiction of the Supreme Court but, in my opinion, that jurisdiction did not extend to the application here made for custody.
1. [1958] Qd.R. 489.
Furthermore, I agree with the Supreme Court of Queensland that when a child is in the care of the Director pursuant to the Act the Supreme Court cannot order the child to be taken from the custody in which the Director has placed him and award custody to some other person instead. The responsibility for the care of children has been placed by the Act in the Director as guardian of children in care, and I find no warrant for the court interfering with the exercise of the discretions which are comprehended in that care.
If s. 55 of the Act is absolute, and I think it is, then this case, to my mind, is within the principle of Minister for the Interior v. Neyens [4] .
1. (1964) 113 C.L.R. 411.
It appears to me that the Director can, if he sees fit, make an application to the Children's Court under s. 50 to enable that Court to decide what would be best for the children in question. It may be that, having regard to all the circumstances, the Director will decide to make such an application, notwithstanding that it could result in the termination of his care and protection of the children and the giving of the custody of the children to the grandparents: s. 50(3). To adopt such a course would not be an avoidance by the Director of his responsibilities under the Act; it would be an appropriate method of discharging them if there are contested matters of fact to be resolved.
I would dismiss the appeal.
Stephen J.
Having had the opportunity of reading the reasons for judgment of Mason J. I find myself in agreement with those reasons and with the conclusions which they support.
Mason J.
This appeal raises an important question as to the jurisdiction of the Supreme Court of Queensland to make an order for custody of children who had been declared by the Director of the Department of Children's Services under s. 47 of The Children's Services Act, 1965-1973 Q. to be admitted to his care and protection. The Full Court of the Supreme Court held that by virtue of the provisions of that Act the inherent jurisdiction of the Court to make orders for custody in respect of the four children the subject of the proceedings was displaced once the Director had made such a declaration.
On 14th April 1970, on the application of the mother, the Director of the Department of Children's Services declared under s. 47 of the Act that the four children, Mary Ellen now aged eleven years, Donna Veronica aged nine years, Michelle Bridget aged eight years and Erin Kathleen aged seven years, were admitted to his care and protection. In March 1972 they were placed in Nazareth House, Wynnum. The circumstances in which they were so placed do not appear but it seems that for some time previously their mother had been unable to care for them. On 1st March 1972 the Director requested the Mother Superior of Nazareth House to allow the appellants, the maternal grandparents of the children, to have access to them. On 12th July 1972 the Director approved of the appellants as fit and proper persons to act as foster parents to them. From that date until August 1973 the appellants had possession of the four children.
In August 1973 the Director gave his approval to the four children spending their vacation with their mother at her residence. They stayed with their mother until 15th September 1973 when they were removed by the appellants. On 19th September the mother made written application to release the children from the care and protection of the Director. This application was orally revoked on 2nd October and the revocation was confirmed in writing on 15th October. In order to avoid the possibility that an application to release the children from his care and protection was irrevocable the Director obtained from the mother a fresh application dated 15th October to admit the children to his care and protection and on 20th October made a further declaration under s. 47.
On 24th September 1973 the Director, purporting to act under s. 136 of the Act, authorized a Child Welfare officer to take the children and deliver them to their mother the respondent, claiming that since 14th April 1970 the children had been in his care and protection pursuant to s. 47. On 3rd October the Director notified the appellants that their action in removing the children from the home of the mother was contrary to the provisions of the Act. On 9th October the appellants made an ex parte application for custody of the children on the ground that the mother was unfitted to care for them because she and the man with whom she was living drank to excess, that the children were ill-treated, one of them having been indecently interfered with, and that they were living in squalid conditions. The Supreme Court judge who dealt with the application made an interim order for custody. On 17th October the Director made an application to have the order set aside on the ground that it was made without jurisdiction.
This application was heard by Andrews J. who held that the Act abrogated the Court's jurisdiction to make an order for the custody of children in respect of whom the Director had made a declaration under s. 47. On appeal to the Full Court this order was upheld.
The Children's Services Act is a detailed statute which, according to its title, is designed to promote, safeguard and protect the well-being of children through a comprehensive and co-ordinated programme of child and family welfare. It regulates the exercise of jurisdiction by Children's Courts and the conduct of institutions providing for the care and welfare of children. It makes provision for the giving of assistance to families whose child or children are in need of it (Pt V). It provides for the admission to the care and protection of the Director by means of his declaration or by an order of a Children's Court of those children who are in need of his care and protection and it defines the powers and duties of the Director in relation to a child so admitted (Pt VI). The Act also authorizes the admission to the care and control of the Director by means of an order of a Children's Court of those children who are in need of care and control. Again the powers and duties of the Director in relation to children so admitted are defined (Pt VII). The guardianship of children in the care and protection and in the care and control of the Director passes to and vests in him (ss. 55, 64).
The circumstances in which a child is in need of care and protection and those in which he is in need of care and control overlap to some extent. However, the regime of care and control is designed to meet the more serious cases in which a child of more advanced years (a) is falling or is likely to fall into a life of vice or crime or addiction to drugs; (b) is exposed to moral danger; or (c) is or appears to be uncontrollable (s. 60). The regime of care and protection may apply in some of these instances but it also applies in a variety of cases in which a child's welfare is neglected, cases to which the provisions of Pt VII do not extend.
Part IX of the Act confers a statutory jurisdiction on the Supreme Court and on Children's Courts to make orders for custody and access, to appoint or remove guardians, and determine who shall be the guardian of a child.
Whether the inherent jurisdiction of the Court in relation to infants has been ousted turns largely on the provisions of Pt VI, which commence with s. 46. This section defines the circumstances in which "a child shall be deemed to be in need of care and protection". The particular circumstances which give rise to a deemed need for care and protection are enumerated in a series of paragraphs, (a) to (o). The submission made by the appellants' counsel that the section authorizes the making of a declaration by the Director that a child is in need of care and protection is plainly misconceived. The sole function of the section is to provide a comprehensive definition or description of the circumstances which give rise to a need for care or protection.
As I have already observed, a child in need of care and protection may be admitted to the care and protection either by means of a declaration made by the Director under s. 47 or a Children's Court order under s. 49. It is convenient to examine in the first instance the jurisdiction of the Court to make such an order and the consequences which attend its making.
Application for an order is made by an authorized officer of the Department (s. 49(1)). He, or a police officer, may without further authority, before making such application, take into custody on behalf of the Director any child suspected on reasonable grounds to be in need of care and protection (s. 49(2)). The Court is bound to hear objections (s. 49(3)). Then, if it is satisfied that the child is in need of care and protection, i.e. that circumstances mentioned in s. 46 are shown to exist, it may (i) order a parent or guardian to enter into a recognizance conditioned that the parent or guardian exercise proper care, protection and guardianship in respect of the child; or (ii) order that the Director shall have protective supervision over the child; or (iii) order that the child be admitted to the care and protection of the Director (s. 49(4) (a)). But the Court shall not make an order in terms of (iii) above unless it is not satisfied that care and protection can be secured by any other order it may make (s. 52).
Thus, the Court, if satisfied that care and protection can be secured by an order in terms of (i) or (ii) cannot make an order in terms of (iii) above. In order to appreciate the extent of this limitation on the Court's power it is necessary to bear in mind that s. 56 requires that the Court in making a protective supervision order shall specify the matters and objects in relation to which the Director is to exercise his supervision and the section enables the Director to order the child, parent or guardian or any of them to act or refrain from doing any act or thing which pertains to a matter or object so specified in the order. Failure to comply with such an order of the Director is an offence.
The powers given to the Director in relation to a child by a protective supervision order are far more restricted than the powers which he enjoys when a child is admitted to his care and protection under s. 47 or s. 49. In the case of admission to care and protection it is his duty to utilize his powers and the resources of his Department so as to further the best interests of the child. In performing that duty he may make use of the facilities and services provided by parents, relatives, friends or persons whom he approves and may place the child in an institution, boarding school, hostel or other place (s. 58).
Orders made under s. 49(4) (a) (ii) and (iii), subject to any extension by the Minister under s. 57, continue in force until the child attains eighteen years of age unless a Children's Court otherwise orders or the Director releases the child from the operation of the order under s. 54 (s. 53(1)). An order under s. 49(4) (a) (iii) is sufficient authority for any person acting under the authority of the Director, so long as the order remains in force, to take the child into his care and custody and deliver the child to such place as the Director may direct and for the person in charge of such place to receive and keep the child until it is otherwise lawfully dealt with (s. 53(2)). It is an offence to remove a child in care without the written authority of the Director (s. 133). An order made by a Children's Court may be revoked by the Court on application made by the Director, a former parent or guardian (s. 51).
Whether these provisions, considered together with s. 55 which vests in the Director the guardianship of a child in the Director's care and protection, are sufficient to displace the inherent paternal jurisdiction of the Supreme Court in relation to a child the subject of an order by a Children's Court under s. 49(4) (a) (iii) during the currency of that order, notwithstanding the absence of specific provision in the statute speaking to that effect, it is not strictly necessary to decide.
Such a conclusion could be sustained only on the footing that it is achieved by "necessary, indeed inescapable, implication", to use the words of Barwick C.J. in Minister for the Interior v. Neyens [5] , for the inherent jurisdiction of the Supreme Court with respect to infants which derives from the Supreme Court Act of 1867 Q. and the Equity Act of 1867 Q. is the paternal or prerogative jurisdiction formerly exercised by the Court of Chancery on behalf of the Crown. The common law principle is that the Crown is not bound by statute unless it is expressly named or it so appears by necessary implication. Section 13 of the Acts Interpretation Acts 1954-1971 Q. provides that no Act shall be binding on the Crown or derogate from any prerogative right of the Crown "unless express words are included therein for that purpose". It may be that, if as a matter of construction of the statute there is manifest an intention that the Crown is to be bound, the result is the same as if the Crown were named and that effect must then be given to the statute according to its tenor. However, in this case there is no occasion to decide whether s. 13 merely expresses the common law principle or works an alteration to it for, as will appear, it is my view that jurisdiction to make an order of the kind sought is not displaced expressly or by necessary implication.
1. (1964) 113 C.L.R. 411, at p. 419.
The extensive nature of the powers vested in the Director by ss. 55 and 58, the circumstance that the order for admission to care and protection made by the Children's Court can only be brought to an end by the means described in s. 53 (there being no provision for its termination by the Supreme Court), the provisions which confer lawful authority on those who deal with a child in care on the authority of the Director and s. 133 which makes it an offence to remove a child without his written authority provide some support for the view that the jurisdiction of the Supreme Court is displaced or restricted in relation to a child in care and protection by virtue of an order under s. 49. In addition there is the fact that the regime of care and protection commences with a court order, albeit not an order of a superior court. It would be "anomalous", as was said in Neyens' Case [6] , if the Supreme Court could, by making an order for custody otherwise than by way of appeal, displace the order made by a Children's Court, after a judicial consideration of the circumstances of the case.
1. (1964) 113 C.L.R., at p. 424.
Even so, notwithstanding the far-reaching nature of the statutory scheme, it may be possible to say that the inherent jurisdiction is not wholly ousted and that it remains available to be exercised, not in competition with the care and protection which is vested in the Director by the Act, but in aid of his statutory responsibilities, and if need be, when the Director is not performing his duties and exercising his powers in accordance with the Act. Be this as it may, this case turns on a declaration made under s. 47 and I turn to the circumstances in which the Director's power to make such a declaration arises and the consequences which attach to its making.
Before a child can be voluntarily admitted under s. 47 to the care and protection of the Director on the application of a parent, guardian, relative or a person of good repute, the Director is required, before making his declaration, to make such inquiry and investigation as he considers necessary. If satisfied that the child is in need of care and protection and that such care and protection cannot be secured by the giving of assistance, he is bound to make the delaration. When made, it is sufficient authority for a person acting on behalf of the Director to take the child in care into his custody and to deliver the child to such place as the Director may from time to time direct (s. 47).
A declaration normally continues in force until the child attains the age of eighteen years unless (a) it is revoked by the Director; or (b) the parent or former guardian applies to undertake the care and protection of the child, in which event the declaration terminates one month after the making of the application; or (c) a Children's Court makes an order under Pt VI with respect to the child (s. 48).
The Director may, during the continuance in force of a declaration made under s. 47, apply to a Children's Court for an order that the child be admitted to his care and protection (s. 50). His power to apply to the Children's Court is discretionary and the Part contains no provision requiring him to make such an application. The declaration made by the Director is not subject to appeal or review, although, if the Director makes an application under s. 50, the Court may conclude that the child should not be admitted to his care and protection, in which event pursuant to s. 48 his declaration comes to an end.
It will be noticed that the Director's power to make a declaration is not limited, as is the power of a Children's Court to make an order under s. 49(4) (a) (iii), by the provisions of s. 52. The Director is bound to make a declaration if there is a need for care and protection and it cannot be secured by assistance. The probability that the need for care and protection could be sufficiently secured by orders of the kind for which s. 49(4) (a) (i) and (ii) provide is not a ground upon which the Director can decline to make a declaration. This probability may constitute a reason for his applying to a Children's Court for an order under s. 50, but it has no relevance to the declaration which he is called upon to make under s. 48.
It will be seen, therefore, that the Director enjoys the extensive powers conferred by ss. 55 and 58, that his declaration can only be brought to an end by the means described in s. 48, that his declaration is sufficient authority for any person acting on his behalf, so long as the declaration remains in force, to take the child into his custody and delivery it to such place as the Director may direct and for the person in charge of such place to receive and keep the child until it is otherwise lawfully dealt with (s. 47(2)) and that it is an offence under s. 133 to remove a child in care without the written authority of the Director. In these respects the admission of a child to the care and protection of the Director by his declaration stands in the same position as the admission of a child to such care and protection by means of a court order.
However, there is significance in the differences between the two forms of admission to care and protection. In the case of voluntary admission the Director is more restricted than a Children's Court in the means by which the need for care and protection may be satisfied. Indeed, it is the exercise of an administrative discretion by the Director himself which initiates the regime of care and protection. Although the Director is required to make inquiry and investigation and to hear objections, his decision is not a judicial determination. Nor does the Act make his decision subject to review or appeal by a court in which the welfare of the child can be evaluated in the light of claims made by persons who have an interest in its welfare. The Director's right to apply to the Children's Court may not be exercised because a determination by that Court does not offer him additional powers with respect to a child; rather does it offer the possibility that his care and protection may come to an end (an event which he can bring about by his own act under s. 48) or that there will be substituted for his care and protection an order under s. 49(4) (a) (i) or (ii).
The vesting of the guardianship in the Director by s. 55 is not to my mind a decisive consideration against the view that the inherent jurisdiction of the Supreme Court is preserved. The courts have always been prepared, when the welfare of the child requires it, to divorce custody from guardianship; the existence of guardianship in one person is not a bar to the making of an order for custody in favour of another. And the remarks made by the Chief Justice in Neyens' Case [7] , with respect to s. 19 of the Child Welfare Ordinance have no application here because there the words "notwithstanding any other law of the territory relating to the guardianship or custody of children", words which have no present counterpart, were regarded as indicating that the vesting of guardianship in the Minister was paramount over other laws.
1. (1964) 113 C.L.R., at p. 419.
In considering whether there is a necessary implication that the inherent jurisdiction is displaced, it must be kept firmly in mind that in accordance with tradition the guardianship and custody of infants has been the subject of judicial determination. Hitherto curial orders have been central to the entire concept of guardianship and custody. A total departure from the procedure of judicial determination and the substitution for it of a system of administrative discretion is, I think, a conclusion not lightly to be attributed to the statute unless its language and provisions clearly compel that result. Although the legislative scheme is far-reaching I do not think that its extensive character is a sufficient ground for concluding that the prerogative jurisdiction of the Supreme Court is entirely displaced. There may be occasions for its exercise in aid of the Director's statutory responsibilities or when it appears that the Director is not discharging his responsibilities or exercising his powers in conformity with the Act. The vesture of wide and general powers in the Director is not inconsistent with the continued existence of the Supreme Court's inherent jurisdiction, notwithstanding a reluctance, or perhaps an incapacity, on the part of the Court to exercise that jurisdiction when the Director is acting in conformity with the Act and is not invoking the assistance of the Court.
What action should be taken in particular circumstances in the exercise of that jurisdiction is a difficult question. Clearly enough the Court will not lightly interfere once the Director has made a declaration under s. 47. But if it should appear that he is not acting in conformity with the Act, or, to put it more specifically, that he is acting in breach or disregard of his statutory duties (In re M. (An Infant) [8] ) the Court will exercise its paternal jurisdiction, if need be, by making an order for custody, although in the framing of such an order it may be necessary to take some care to preserve the rights of the Director under the Act.
1. [1961] Ch. 328, at p. 345.
I make no comment on the facts of the present case otherwise than to say that if the evidence remained in its present state the Supreme Court would be amply justified in exercising the jurisdiction which in my view it possesses, for the conclusion would be irresistible that the Director has failed to apply himself to the welfare of the children. However, I have gathered that the Director has thus far refrained from adducing evidence by way of answer of the appellants' allegations so that the question of jurisdiction may be determined at the threshold. It is not for this Court, then, to concern itself with the issues of fact which may hereafter arise.
In the course of argument a question arose as to the jurisdiction of the Supreme Court to make an order for custody on the application of grandparents. It is well established that the inherent jurisdiction extends to the making of an order in favour of a grandparent on his application as next friend of the child: In re Fynn [9] (which was disapproved on other grounds in J. v. C. [10] ); In re McGrath (Infants) [11] . In my opinion this power may be exercised without making the child a ward of Court as a preliminary to the making of such an order. In this respect I agree with the conclusion reached by Wanstall J. in Re L. (An Infant) [12] and with the construction which he gave to O. 76, r. 1 of the Rules of the Supreme Court, although it may well be that a similar conclusion would be reached in the absence of such a rule.
1. (1848) 2 De G. & Sm. 457 [64 E.R. 205].
2. [1970] A.C. 668.
3. [1892] 2 Ch. 496, at p. 511.
4. [1958] Qd.R. 489.
The application by the appellants was not expressed to be made as next friend of the four children. I would be disposed to regard it as having been made on behalf of the children and I have dealt with it on that footing.
In the result I would allow the appeal. |
high_court_of_australia:/showbyHandle/1/8635 | decision | commonwealth | high_court_of_australia | text/html | null | CE Heath Underwriting & Insurance (Aust) Pty Ltd v Edwards Dunlop & Co Ltd [1993] HCA 21 | https://eresources.hcourt.gov.au/showbyHandle/1/8635 | 2024-09-13T22:52:13.800242+10:00 | High Court of Australia
Deane, Dawson, Toohey, Gaudron and McHugh JJ.
CE Heath Underwriting & Insurance (Aust) Pty Ltd v Edwards Dunlop & Co Ltd
[1993] HCA 21
ORDER
Appeal allowed. Set aside the judgment of the Court of Appeal of New South Wales and in lieu thereof order that the appeal to that Court be dismissed and that each party bear its own costs of that appeal. Order that the appellant pay the respondent's costs of and incidental to the appeal to this Court.
Cur. adv. vult.
The following written judgments were delivered:—
1993, March 30
Deane J.
The appellant ("the Insurer") carries on the business of an insurer. It issued a "Blanket Fidelity Policy" ("the Policy") to the respondent ("the Insured") under which it agreed to indemnify the Insured against "loss of money or other property which the Insured shall sustain through any fraudulent or dishonest act or acts committed" by employees. The first sentence of Section 1 of the Policy provided: "Loss is covered under this Policy only if discovered not later than one year from the end of the Policy Period."
The critical question on the appeal is whether, in circumstances where the policy was for an initial period of twelve months and was subsequently renewed for successive annual periods, the phrase "the Policy Period" in Section 1 should be construed as referring to the particular annual period of insurance in which a loss occurred or to the overall period in which "the Policy" remained in operation, that is to say, the total of the original annual term and of the subsequent terms for which "the Policy" was renewed. The learned trial judge (Brownie J.) and Meagher J.A., who dissented in the New South Wales Court of Appeal, preferred the construction for which the Insurer contends, namely, that the phrase "the Policy Period" refers only to the particular annual term of insurance in which a loss occurs. The majority of the Court of Appeal (Clarke J.A. and Hope A.J.A.) preferred the construction for which the Insured contends, namely, that the phrase refers to the overall period in which "the Policy" remained in operation. It can be said at once that I agree with the majority of the Court of Appeal. Accordingly, I would dismiss the appeal.
The detailed facts are set out in the judgments in the courts below which have been reported [1] and in the judgment of Dawson, Toohey and McHugh JJ. in this Court. It is unnecessary that I repeat them. Nor, in a context where the outcome of the appeal turns upon the construction of a particular phrase in a particular policy of insurance and where the conclusion which I have reached is a dissenting one, is it necessary that I do more than indicate that, subject to the comments which follow, I am in general agreement with the judgment of Clarke J.A. (in which Hope A.J.A. concurred) in the Court of Appeal.
1. See Edwards Dunlop & Co. Ltd. v C.E. Heath Underwriting & Insurance (Australia) Pty Ltd (1989), 6 A.N.Z. Insurance Cases 76,238 (Brownie J.); (1991), 6 A.N.Z. Insurance Cases 77,066 (Court of Appeal).
As has been seen, the function of the Policy was to cover the Insured against any loss of money or other property sustained through "fraudulent or dishonest act or acts" committed by its employees. It is commonplace for losses sustained by the fraudulent or dishonest conduct of an employee to remain successfully concealed by the employee concerned for a considerable period of time. Indeed, in a case of a continuing course of fraud or dishonesty, it may be very difficult to ascertain precisely when the relevant "loss of money or property" was sustained. In these circumstances, the construction for which the Insurer contends would result in a significant gap in the cover against relevant losses notwithstanding that they were sustained and discovered within the overall period of insurance with the Insurer. A loss would be excluded from the Insurer's continuing cover if it remained concealed for between one and two years, the precise period of concealment necessary to give rise to exclusion depending upon whether the loss occurred at the end or beginning of the then current year of the policy. Such a gap in cover is something which a prudent insured could be expected to anticipate and guard against when changing from one insurer to another. In my view, however, it is not something which would ordinarily be expected in the cover under a policy which is renewed from year to year with the same insurer. In that regard, it is relevant to note that no such gap existed in the earlier "Industrial Special Risks" policy between the Insurer and the Insured which the Blanket Fidelity Policy partially replaced. Under that earlier policy, the period of insurance was defined to include any "renewal of [the] policy" and the relevant restriction applied only to exclude a loss resulting from employee fraud or dishonesty if the loss was not discovered "within twelve months of the termination of [the] policy" (emphasis added).
As the difference of opinion between the judges in the courts below [2] indicates, there is real ambiguity about the meaning of the phrase "the Policy Period" in Section 1 when that phrase is construed in the context of the Policy as a whole. Indeed, Meagher J.A., who favoured the Insurer's construction, robustly commented that the difficulty of the question of construction "chiefly arises because the policies, and other documents, emanating from the insurer could not be more perplexing if they had been specifically drafted in order to generate ambiguity" [3] . I would not, for my part, put the matter quite as strongly as that. It does, however, seem to me to be plain that an ordinary commercial person would construe the phrase "the Policy Period" in a policy of insurance which was renewed from year to year as prima facie referring to the overall period during which the cover provided by the policy continued. That is certainly the prima facie meaning which a lawyer would be expected to give to the phrase since "policy of insurance" is ordinarily understood by lawyers as referring not to a particular annual contract but to the written terms and conditions of the cover [4] . Indeed, the word "Policy" is clearly used in that sense by the Insurer in some other parts of the Policy [5] . It is true that the contrary construction for which the Insurer contends obtains some support from a detailed analysis of the relationship between different provisions of the Policy. It is scarcely to be expected, however, that it would occur to an insured person that he or she should pursue that kind of detailed analysis for the purpose of ascertaining whether the prima facie meaning of a phrase such as "the Policy Period" has been displaced by obscure contextual considerations.
1. See, (1989) 6 A.N.Z. Insurance Cases, pp. 76,239-76,240, per Brownie J.; (1991) 6 A.N.Z. Insurance Cases, p. 77,071, per Clarke J.A.; p. 77,073, per Meagher J.A.
2. (1991) 6 A.N.Z. Insurance Cases, at p. 77,073.
3. See, e.g., Halsbury's Laws of England, 4th ed., vol. 25, pars 405-406; Davies v Sprod , [1943] S.A.S.R. 53, at pp. 57-58.
4. See, e.g., Section 9 which speaks "of the number of years this Policy shall continue in force."
In these circumstances, the construction for which the Insured contends and which I consider to be the preferable one derives strong support from the application of the settled rule of construction that, if there be difficulty or obscurity of meaning, the words of an instrument are to be interpreted more strongly [6] against him or her whose instrument it is. That rule of construction has been subjected to some distinguished criticism [7] . It is, however, deeply rooted in the common law [8] and fully justified by considerations of justice and common sense [9] . It is, "particularly applicable to contracts of insurance" [10] . As Willes J. said more than one hundred and twenty-five years ago in Fitton v The Accidental Death Insurance Co. [11] : "[I]t is extremely important with reference to insurance, that there should be a tendency rather to hold for the assured than for the company, where any ambiguity arises upon the face of the policy." Put differently, the courts should avoid a construction of a policy of insurance which has the effect that the insured, having paid a premium to be indemnified against loss caused by a particular kind of occurrence, is subjected to a new risk of not being insured against a loss of that kind by reason of the ambiguity or obscurity of the language which the insurer has seen fit to use in its policy.
1. More often "strongest" or, in some old texts, "strongliest".
2. See, in particular, Taylor v Corporation of St. Helens (1877), 6 Ch. D. 264, at pp. 270-271, per Jessel M.R.
3. See, e.g., Co. Litt. 36(a); Anderson v Fitzgerald (1853), 4 H.L.C. 484, at pp. 507, 510 [10 E.R. 551, at pp. 560, 561]; Fowkes v Manchester and London Life Assurance and Loan Association (1863), 3 B. & S. 917, at pp. 929-930 [122 E.R. 343, at pp. 347-348]; Western Australian Bank v Royal Insurance Co. (1908), 5 C.L.R. 533, at pp. 559, 567-568; Wilshire v Guardian Assurance Co. Ltd. (1912), 15 C.L.R. 516, at p. 528; Guardian Assurance Co. v Condogianis (1919), 26 C.L.R. 231, at pp. 235, 239, 242-244; Condogianis v Guardian Assurance Co. Ltd. , [1921] 2 A.C. 125, at p. 130; Maye v Colonial Mutual Life Assurance Society Ltd. (1924), 35 C.L.R. 14, at pp. 22, 27; Minucoe v London & Liverpool & Globe Insurance Co. Ltd. (1925), 36 C.L.R. 513, at p. 523; Halford v Price (1960), 105 C.L.R. 23, at p. 30; Steadfast Insurance Co. Ltd. v F. & B. Trading Co. Pty Ltd (1971), 125 C.L.R. 578, at p. 581.
4. See Bacon, The Elements of the Common Lawes of England, in Classics of English Legal Theory in the Modern Era (1978), Maxim 3 at p. 11: "a rule drawn out of the depth of reason."
5. Australian Widows' Fund Life Assurance Society Ltd. v National Mutual Life Association of Australasia Ltd. (1912), 14 C.L.R. 141, at p. 155, per Griffith C.J. See also Halford v Price (1960), 105 C.L.R., at p. 34; Life Association of Scotland v Forster (1873), 11 M. 351, at p. 369 [11 Ct. of Sess. 371, at p. 387]; American Surety Co. v Pauly [No. 1] (1897), 170 U.S. 133, at p. 144; Mutual Insurance Co. v Hurni Co. (1923), 263 U.S. 167, at p. 174.
6. (1864) 17 C.B. (N.S.) 122, at pp. 134-135 [144 E.R. 50, at p. 55].
Dawson, Toohey and McHugh JJ.
The respondent took out an insurance policy with the appellant underwriters which was described as an "Industrial Special Risks Policy". Amongst other things it insured the respondent against "loss of the property insured resulting from any fraudulent or dishonest act(s) committed by any employee of the Insured" occurring during the period specified in the schedule (the "period of insurance"). There were two material limitations in respect of this type of loss. First, the amount of the appellant's liability was limited to $500,000 "in respect of any one person acting alone or in collusion with others, and in the aggregate during the period of insurance". Secondly, the loss covered did not include "any loss unless discovered within twelve months of the termination of [the] policy".
Under the heading "period of insurance" in the schedule were the following clauses:
(i) This policy attaches and is effective from 4.00 p.m. local time, 31st May, 1983 and terminates at 4.00 p.m. local time, 30th April 1984
(ii) Any subsequent period for which the Insured shall pay or agree to pay and [the appellant] agree to accept a premium for the renewal of this policy.
The respondent and the appellant renewed the Industrial Special Risks Policy for the period from 30 April 1984 to 30 April 1985.
The respondent subsequently took out another policy, a "Blanket Fidelity Policy", with the appellant. Under that policy the appellant undertook to indemnify the respondent "against any loss of money or other property which the Insured shall sustain through any fraudulent or dishonest act or acts committed by any of the [Insured's employees], acting alone or in collusion with others". The policy comprised sections headed respectively "Insuring Agreement", "General Agreements", "Conditions and Limitations" and "Declarations". General Agreement C provided:
If the coverage of this Policy is substituted for any prior policy of insurance carried by the Insured , which prior policy is terminated, cancelled or allowed to expire as of the time of such substitution, the [appellant] agrees that this Policy applies to loss which is discovered as provided in Section 1 of the Conditions and Limitations and which would have been recoverable by the Insured under such prior policy except for the fact that the time within which to discover loss thereunder had expired; provided:
1. the indemnity afforded by this General Agreement C shall be a part of and not in addition to the amount of insurance afforded by this Policy;
2. such loss would have been covered under this Policy had this Policy with its agreements, limitations and conditions as of the time of such substitution been in force when the acts or defaults causing such loss were committed; and
3. recovery under this Policy on account of such loss shall in no event exceed the amount which would have been recoverable under this Policy in the amount for which it is written as of the time of such substitution, had this Policy been in force when such acts or defaults were committed, or the amount which would have been recoverable under such prior policy had such prior policy continued in force until the discovery of such loss, if the latter amount be smaller.
Section 1 of the Conditions and Limitations provided:
Loss is covered under this Policy only if discovered not later than one year from the end of the Policy Period. Subject to General Agreement C, this Policy applies only to loss sustained by the Insured through fraudulent or dishonest acts committed during the Policy Period by any of the [Insured's employees] engaged in the regular service of the Insured within the Commonwealth of Australia.
The "Policy Period" was defined in Item 2 of the Declarations as "12 months from noon on 30th April, 1985". Item 3 of the Declarations limited the appellant's liability under the policy to $500,000 "any one employee and in all". Item 5 of the Declarations provided that acceptance of the Blanket Fidelity Policy by the respondent constituted notice to the appellant terminating or cancelling the Industrial Special Risks Policy, such termination or cancellation being effective as of the time the Blanket Fidelity Policy became effective. It is common ground that the Blanket Fidelity Policy was effective from 30 April 1985.
The Blanket Fidelity Policy was renewed for the years ending 30 April 1987, 30 April 1988 and 30 April 1989 subject to the terms and conditions of the policy. In the case of the first renewal the sum insured was $500,000 and in the case of the later renewals it was $1,500,000. Each renewal was expressed to be "any one employee/all employees any one period of insurance" (or words to similar effect).
Between 20 January 1982 and 29 June 1988 one of the respondent's employees misappropriated $695,450.62. The respondent discovered the misappropriations in July or August 1988. There is no dispute that the appellant was not liable to indemnify the respondent against the losses which occurred before 31 May 1983. This is because there was no relevant policy of insurance in existence before that time.
On the other hand, there is no dispute that the appellant was liable to indemnify the respondent in respect of the losses incurred after 30 April 1987 because those losses were clearly covered by the Blanket Fidelity Policy.
What is in dispute is the liability of the appellant under the Blanket Fidelity Policy to indemnify the respondent against the losses incurred between 31 May 1983 and 30 April 1987. The appellant's liability for losses incurred during that period depends upon the proper meaning to be attributed to the expression "Policy Period" in the Blanket Fidelity Policy. The respondent contends that the Policy Period was extended from time to time by the renewals which took place, so that there was one Policy Period which extended from 30 April 1985 to 30 April 1989. Upon this construction of the policy, the appellant would be liable for losses occurring during that period provided that the losses were discovered not later than 30 April 1990. Not only this, but on the substitution of the Blanket Fidelity Policy for the Industrial Special Risks Policy, the losses which would have been recoverable under the Industrial Special Risks Policy but for the failure to discover them within the time allowed by that policy would be recoverable under the Blanket Fidelity Policy provided they were discovered not later than 30 April 1990.
The appellant, on the other hand, contends that there were successive Policy Periods of twelve months each under the Blanket Fidelity Policy. Thus, in relation to the first year during which that policy was in force, the Policy Period was that year and, in relation to each of the succeeding years, the yearly period covered by each renewal. Accordingly the appellant argues that, so far as the losses incurred during the currency of the Industrial Special Risks Policy are concerned, they were not discovered within one year of the end of the first Policy Period of the Blanket Fidelity Policy, that is to say, before 30 April 1987, and so were not recoverable under that policy. Nor, upon this argument, were the losses incurred between 30 April 1985 and 30 April 1987 covered by the Blanket Fidelity Policy because they were not discovered within one year of the relevant Policy Period during which they were incurred, discovery of the losses not having taken place until July or August 1988.
In the course of argument considerable attention was devoted to whether the successive renewals of the Blanket Fidelity Policy resulted in a series of new contracts being entered into by the respondent and the appellant. The distinction between the renewal of a policy and the extension of a policy was expressed in the following terms by Mayo J. in Re Kerr [12] :
Strictly, a "renewal" is descriptive of a repetition of the whole arrangement by substituting the like agreement in place of that previously subsisting, to be operative over a new period, whereas an "extension" betokens a prolongation of the subsisting contract by the exercise of a power reserved thereby to vary one of its provisions, that is, by enlarging the period. Upon a renewal similar rights revest A contract reserving continuous rights of renewal will, if these be exercised, lead to succeeding contracts in a series, the identity of each contract [being] separate and distinct. On the other hand, the exercise of the right of extension augments the length of time over which the contract operates, without changing its identity.
1. [1943] S.A.S.R. 8, at p. 16.
Whether there is a renewal or an extension of an insurance policy is a question of construction [13] , the term "renewal" often being used to refer to both "renewal" and "extension" in the sense that those words are used above. It is, however, well established that, where a policy is renewable only by mutual consent (i.e. not as of right), the renewal results in a fresh contract rather than the extension of an existing contract [14] . Of course, a policy may expressly stipulate that it is not to continue in force beyond the period of insurance, unless renewed by mutual consent [15] . And where a policy, such as the ordinary form of life policy, expressly provides for continuation beyond the specified period of insurance unless a particular event, such as the non-payment of the premium, takes place, the renewal is an extension of the original contract [16] . But where a policy is silent on the question of renewal, renewal of it will generally constitute a new contract [17] .
1. See, e.g., Government Insurance Office (N.S.W.) v Kimmedy (1988), 5 A.N.Z. Insurance Cases 75,539, at p. 75,541.
2. See Re Kerr, [1943] S.A.S.R., at p. 15; Halsbury's Laws of England, 4th ed., vol. 25, par. 494.
3. See, e.g., Stokell v Heywood , [1897] 1 Ch. 459.
4. See In re Anchor Assurance Co. (1870), L.R. 5 Ch. App. 632, at p. 638.
5. See Ivamy, General Principles of Insurance Law, 5th ed. (1986), pp. 249-250.
In this case, there is no basis upon which to reach any conclusion other than that each renewal of the Blanket Fidelity Policy required the consent of both the respondent and the appellant underwriters. Accordingly, each renewal when it occurred constituted a new contract.
However, the fact that a fresh contract came into existence upon each renewal does not necessarily mean that the term "Policy Period", as used in the Blanket Fidelity Policy, was not capable of meaning the aggregate of the periods during which each insurance contract was in force. The question is, again, ultimately one of construction. The term "policy" is popularly used to refer to the terms and conditions of insurance which continue over a number of years, notwithstanding that renewal of the policy results in a fresh contract from year to year [18] . Thus, it has been recognized that a reference to a "policy" may be a reference to "a person's condition or state of being insured" [19] , notwithstanding that a contract or series of contracts is necessary to give the policy legal force.
1. See Stokell v Heywood , [1897] 1 Ch., at p. 464; Davies v Sprod , [1943] S.A.S.R. 53, at p. 57.
2. See Re Kerr, [1943] S.A.S.R., at p. 15.
Nevertheless, we do not think that the term "Policy Period" in the Blanket Fidelity Policy in this case can be construed as referring to the aggregate of the initial period of insurance and each of the periods for which the insurance contract was renewed. The loss covered under the policy was limited to loss incurred during the "Policy Period" and discovered not later than one year from the end of the "Policy Period". That period was defined in Item 2 of the Declarations as "12 months from noon on 30th April, 1985". It was not, for example, defined as meaning "12 months from noon on 30th April, 1985 and any subsequent period for which the Insured shall pay or agree to pay and the Insurer shall accept or agree to accept a premium for the renewal of this Policy".
The insurance and renewal certificates afford little assistance. The certificate for the year ending 30 April 1986 spoke of insurance "from loss or damage on the terms and conditions of the [Blanket Fidelity] Policy [f]rom 30 April 1985 [t]o 30 April 1986 and for such further period or periods as may be mutually agreed upon". Subsequent renewal notices stated that "This insurance is renewed for a further period of 12 months subject to the terms and conditions of the policy". In these later notices, the sum insured was expressed to be a lump sum "any one employee/all employees any one period of insurance" (or similar words). The reference to "any one period of insurance" is, however, suggestive of successive periods of insurance which are coextensive with the periods of renewal.
The respondent places some reliance on Section 9 of the Conditions and Limitations. That section provided:
Regardless of the number of years this Policy shall continue in force and the number of premiums which shall be payable or paid, the limit of liability stated in Item 3 of the Declarations shall not be cumulative from year to year or period to period.
This provision clearly contemplates that the Blanket Fidelity Policy might remain in effect for a number of years, but it is not inconsistent with each contract of insurance constituted by renewal being coextensive with the Policy Period. The effect of the provision is that Item 3 of the Declarations applied to the whole of the "Policy Period"; to say that it indicates that the Policy Period encompassed the aggregate of the periods of renewal simply begs the question. Similarly, other references in the Blanket Fidelity Policy to periods within the Policy Period — for example, the reference in General Agreement A to "the current premium period" — do not necessarily indicate that the aggregate of the periods of renewal were included within the Policy Period.
The respondent further contends that the reference in General Agreement C to "any prior policy of insurance" would, upon the interpretation advanced by the appellant underwriters, include any prior contract of insurance and would therefore include prior renewals of the Blanket Fidelity Policy, a result which is said to render General Agreement C otherwise largely superfluous. But the phrase "any prior policy of insurance" is followed by the words "which prior policy is terminated, cancelled or allowed to expire as of the time of [the] substitution " of the coverage of the Blanket Fidelity Policy for that prior policy of insurance. Those words are hardly apt to describe the situation where the terms and conditions of a policy (except for the amount insured and the premium payable) remain the same with successive renewals. In our view, General Agreement C was intended to apply to the substitution of the Blanket Fidelity Policy for a different policy and not to the renewal of the same policy. The Industrial Special Risks Policy was such a different policy and so was within the contemplation of General Agreement C.
The respondent also points to the fact that the same policy number was retained despite successive renewals of the Blanket Fidelity Policy and that the renewal certificates did not purport to replace any previous policy but were simply expressed to be subject to the terms and conditions of "the policy". But the retention of the same number for the Blanket Fidelity Policy throughout the periods of renewal is inconclusive and the reference to the terms and conditions of "the policy" in the renewals involves the use of the word "policy" in the sense of a document that contains the terms and conditions of an insurance contract.
As is apparent from what we have said we do not find the Blanket Fidelity Policy "obscurely worded" [20] in any relevant sense and consequently there is no scope for the application of the contra proferentem rule on which the respondent relies.
1. See Western Australian Bank v Royal Insurance Co. (1908), 5 C.L.R. 533, at p. 567, per O'Connor J.
For these reasons it is our view that the term "Policy Period" as used in Section 1 of the Conditions and Limitations of the Blanket Fidelity Policy means the annual period for which the Blanket Fidelity Policy was initially taken out and thereafter the successive periods of renewal of one year each. Accordingly, we would allow the appeal.
Gaudron J.
The respondent, Edwards Dunlop & Co. Ltd. ("Edwards Dunlop"), was insured between 1983 and 1988 with the appellant, C.E. Heath Underwriting & Insurance (Australia) Pty Ltd ("the insurer"), against fraud on the part of its employees. In July or August 1988, it was discovered that Edwards Dunlop had been systematically defrauded by one of its employees over a period extending back to 1982. The question in this appeal is the extent to which the losses involved can be recovered by way of insurance.
The facts and the terms of the insurance policies relevant to this appeal are set out in the joint judgment of Dawson, Toohey and McHugh JJ. I shall repeat them only to the extent necessary to make clear my reasons for concluding that Edwards Dunlop is entitled to recover those, but only those, losses it sustained as a result of fraudulent acts committed between 30 April 1986 and their discovery in 1988.
There were two distinct periods of insurance: the first was from 31 May 1983 until 30 April 1985 when Edwards Dunlop was insured under an Industrial Special Risks Policy ("the I.S.R. Policy"); the second was from 30 April 1985 when it took out a Blanket Fidelity Policy ("the Fidelity Policy"). The Fidelity Policy was renewed on 30 April in each of the following years, the last relevant renewal occurring on 30 April 1988 for a further period of one year.
It is common ground that losses sustained prior to 31 May 1983 when Edwards Dunlop took out the I.S.R. Policy are not recoverable, being covered neither by that policy nor by the Fidelity Policy. It is also common ground that losses are recoverable only under the Fidelity Policy: the I.S.R. Policy, which terminated when the Fidelity Policy was taken out on 30 April 1985, expressly provided that the insurer's liability under that policy should not "include any loss unless discovered within twelve months of [its] termination".
Section 1 of the Fidelity Policy relevantly provides:
Loss is covered under this Policy only if discovered not later than one year from the end of the Policy Period. Subject to General Agreement C, this Policy applies only to loss sustained by the Insured through fraudulent or dishonest acts committed during the Policy Period.
General Agreement C relevantly provides:
If the coverage of this Policy is substituted for any prior policy of insurance which prior policy is terminated, cancelled or allowed to expire as of the time of such substitution, this Policy applies to loss which is discovered as provided in Section 1 and which would have been recoverable under such prior policy except for the fact that the time within which to discover loss thereunder had expired.
It is not disputed that, on 30 April 1985, the Fidelity Policy was substituted for the I.S.R. Policy and that, subject to discovery as required by that policy, it covered losses resulting from fraudulent acts committed between 31 May 1983 and 30 April 1985.
It is apparent from the terms of Section 1 and those of General Agreement C that, as a matter of strict logic, there are two exercises to be undertaken before it can be said whether losses may be recovered under the Fidelity Policy. The first is to identify the loss insured against; the second is to identify the period in which it must be discovered, that being the period signified in Section 1 by the words "not later than one year from the end of the Policy Period".
The argument for Edwards Dunlop was that "Policy Period" means the period commencing when the Fidelity Policy was first issued and running for so long as the policy was or is renewed. On that approach, all losses resulting from fraudulent acts committed between April 1985 and their discovery in 1988 are covered under Section 1 of the Fidelity Policy as "loss[es] sustained through acts committed during the Policy Period". And, losses resulting from acts committed during the cover of the I.S.R. Policy are recoverable pursuant to General Agreement C as losses which "would have been recoverable under [a] prior policy except for the fact that the time within which to discover loss ha[s] expired", they being losses discovered as provided in Section 1 because they were discovered during the Policy Period. On that approach it is largely unnecessary to engage in the separate exercises involved in ascertaining what losses are insured against by the Fidelity Policy and the period in which they are to be discovered.
The argument on behalf of the insurer was that the Fidelity Policy, when first issued, was a contract for one year and that, each time it was renewed, a new contract came into existence for the following year. In that context it was then put that, cancellation apart, "Policy Period" in Section 1 refers to a particular period of one year, being the year involved in each contract of insurance. That approach, if correct, enables it to be said that the losses insured against in each contract are recoverable only if discovered during the year following that particular contract. But it also requires an examination of Section 1 and General Condition C to ascertain precisely what losses are insured against and are, thus, recoverable if discovered within that period.
So far as the meaning of "Policy Period" is concerned, I adopt what is said in the joint judgment of Dawson, Toohey and McHugh JJ. In particular, I agree with their Honours' conclusions that each renewal of the Fidelity Policy constituted a new contract of insurance and that, cancellation aside, the expression "Policy Period" in Section 1 means the particular period of one year involved in each contract and not the aggregate of those periods. But, as already indicated, that does not resolve the question raised by this appeal.
The second part of Section 1 identifies the losses insured against in each contract of insurance as those which "[s]ubject to General Agreement C [are] sustained through fraudulent or dishonest acts committed during the Policy Period". It is quite clear from the terms of that agreement that the words "[s]ubject to General Agreement C" are words of extension and not words of limitation. Their effect is to extend the losses insured against to include not only those losses "sustained through fraudulent acts committed during the Policy Period" but also those which, but for the expiry of a discovery period, would have been recoverable under a prior policy for which the current policy was substituted, provided they are discovered as required in Section 1, namely, "not later than one year from the end of the [new] Policy Period."
Two interrelated questions arise with respect to General Agreement C. The first is whether the words "substituted" and "substitution" comprehend the entering into a fresh contract of insurance, whether by renewal or otherwise, upon the expiry of the cover provided by an earlier policy. And if "substituted" does have that meaning, a question then arises whether General Agreement C is concerned with renewal of the Fidelity Policy or only with the substitution of that policy for some quite different policy. More precisely, the question is whether, in terms of General Condition C, on renewal of the Fidelity Policy, the coverage of "[that] policy is substituted for [a] prior policy which is terminated, cancelled or allowed to expire as at the time of such substitution".
The word "substitute" ordinarily signifies the putting of one thing in the place of another, with the former performing the function properly or normally performed by the latter. However, it can also signify replacement, in the sense of taking the place of something that no longer performs or is no longer able to perform its ordinary function. In a context involving insurance policies which have been "terminated, cancelled or allowed to expire" and which, at least ordinarily, are contracts for a finite period, the notion of substituted coverage extends, in my view, to embrace insurance cover effected by a policy which replaces or takes over from an earlier policy upon the termination or expiry of its cover and the words "substituted" and "substitution" in General Agreement C should be so read.
Once it is accepted that each renewal of the Fidelity Policy effects a new contract of insurance, the words "this Policy" in General Agreement C must be taken to refer to the Fidelity Policy as incorporated in the contract current from time to time. And when so read, the words "prior policy" inevitably include the Fidelity Policy as incorporated in the contract for the previous year. On that basis, General Agreement C must be read as referring to the situation involved whenever one contract of insurance takes over from another, including the situation brought about by renewal of the Fidelity Policy. And where contracts are made with effect from the day on which the previous contract comes to an end, as they were in this case, the prior policy is one that "is terminated or allowed to expire as of the time" the new contract is made, or, to use the language of General Agreement C, as of the time the new policy is "substituted" for it.
The consequence of the words "[s]ubject to General Agreement C" in Section 1 of the Fidelity Policy is that each contract of insurance effected by a renewal of that policy was a contract insuring against loss by fraud which was discovered "not later than one year from the end of [that] Policy Period" and which, but for the expiry of a discovery period, would have been recoverable under the contract effected by the previous renewal as well as against loss resulting from fraud committed during the year of that contract.
It was argued on behalf of Edwards Dunlop that, if General Agreement C operates on renewal of the Fidelity Policy, it operates so that the contract of insurance effected by renewal covers loss resulting from fraud committed at any time while the Fidelity Policy was on foot and at any time while the I.S.R. Policy was on foot. So far as the I.S.R. Policy is concerned, this is because that policy was one for which the Fidelity Policy was substituted and, subject to its discovery period, one that covered all losses sustained as the result of fraudulent acts committed between 31 May 1983 and 30 April 1985.
The argument that General Agreement C operates so as to render recoverable all losses sustained as the result of fraudulent acts committed after 31 May 1983 proceeds on the basis that the loss insured against in a contract of insurance effected by a renewal of the Fidelity Policy includes that recoverable under a prior policy which, in turn, covers that recoverable under the previous policy and so on indefinitely, provided that there was a substitution of one policy for another as contemplated in that agreement. That overlooks the fact that, upon renewal, the new contract insures against prior undiscovered loss only if discovered as provided in Section 1, namely, "not later than one year from the end of the [new] Policy Period". Unless discovered within that period, the loss is simply not a loss insured against in the new contract. Not being insured against, it is not a loss that is recoverable under that new policy, much less one that, given the passage of sufficient time, "would have been recoverable" but for the expiry of a discovery period.
The language of General Agreement C may leave something to be desired, but, in general terms, it effects what one would expect of insurance of this kind, namely, cover for a rolling period so that, on each renewal, cover begins to roll forward for the following year but falls away for some past period unless loss referable to that period has already been discovered. Its precise effect varies according to the point in the Policy Period when loss is discovered: there is longer cover if discovery is late in the life of the policy period and shorter cover if earlier in that period.
In the present case the losses were discovered in July or August 1988 and, thus, were discovered during the cover of the 1988 policy (12 months from 30 April 1988) and during the discovery period of the 1987 policy, being "not later than one year from the end of the [1987] Policy Period", that "Policy Period" having ended on 30 April 1988.
The 1987 policy insured against losses sustained as the result of acts committed during its cover and losses which "would have been recoverable" as losses "sustained through fraudulent acts committed during [the 1986] Policy Period" but for the discovery period in the 1986 policy, provided they were discovered, as they were, within the discovery period of the 1987 policy. As already explained, the 1987 policy did not insure against loss sustained through fraudulent acts committed in 1985 or during any earlier period as no part of that loss was insured against unless discovered, at the very latest, immediately prior to the expiry of the discovery period for the 1986 policy.
The 1988 policy insured against losses sustained as the result of acts committed during the period of its cover, namely, on and after 30 April 1988. So far as is presently relevant, they were the only losses insured against by that policy: it simply did not apply to losses sustained during the cover of the 1987 policy, they being losses which, having been discovered within the discovery period of that policy, were recoverable under it and, hence, not losses that "would have been recoverable" under it but for the fact that its discovery period had expired.
The judgment at first instance was to the effect that Edwards Dunlop could recover only those losses sustained as a result of fraudulent acts committed after 30 April 1987. That failed to give effect to General Agreement C under which losses sustained as the result of acts committed during the cover of the 1986 policy were, in the circumstances, insured against by the 1987 policy and recoverable under it. On the other hand, the Court of Appeal of the Supreme Court of New South Wales held that Edwards Dunlop was entitled to recover for all losses sustained through fraudulent acts committed after 31 May 1983. The appeal must be allowed, but it should only be allowed to the extent that the decision and order of the Court of Appeal allow for the recovery of losses sustained through fraudulent acts committed before 30 April 1986. |
high_court_of_australia:/showbyHandle/1/9640 | decision | commonwealth | high_court_of_australia | text/html | null | Vocisano v Vocisano [1974] HCA 14 | https://eresources.hcourt.gov.au/showbyHandle/1/9640 | 2024-09-13T22:52:22.190237+10:00 | High Court of Australia
Barwick C.J. Stephen and Jacobs JJ.
Vocisano v Vocisano
[1974] HCA 14
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
April 24
Barwick C.J.
The appellant and the respondent are brothers. The appellant sued his brother in the Supreme Court of the Australian Capital Territory for damages for the negligent driving by the respondent of a vehicle in which, beyond dispute, they were both travelling at the time it was overturned causing serious injury to the appellant. The respondent was insured under a third party policy of insurance as required by s. 51 of the Motor Traffic Ordinance 1936-1973 A.C.T.. His insurer, as it was entitled under the policy of insurance, took charge of the litigation and briefed counsel to appear on behalf of the respondent at the hearing of the action.
Apart from the question of damages, the sole issue at the trial was whether the respondent was driving the car. The appellant, due to the nature of the injuries received when the car overturned, had no recollection whatever either of what occurred or as to who was driving the car when the accident happened. The only witness called on this issue by the appellant was a man named Paragalli. He said that he had seen the respondent driving the vehicle at a time not long before the time when the vehicle overturned, but long enough for there to have been a change of driver in the interval. The respondent had answered interrogatories administered by the appellant saying that he, the respondent, was driving the car at the relevant time. However, counsel for the appellant at the trial did not rely particularly on these answers to interrogatories.
The conduct of the case for the respondent followed an unusual course. The respondent gave evidence on his own behalf, saying that he was driving the car at the time the car overturned and that at that time his brother was in the passenger seat beside him. Thereupon his counsel applied for leave to cross-examine him on the basis of his having made prior inconsistent statements. This leave was granted, pursuant to s. 60 of the Evidence Ordinance 1971 A.C.T.. The section is in the following terms:
20. —
(1) The party by whom a witness is called is not entitled to impeach the credit of the witness by general evidence of bad character.
(2) On the application of the party by whom a witness has been called, the court may grant leave to the party—
(a) to prove that the witness has, at another time, made a statement inconsistent with his evidence; or
(b) to cross-examine the witness as to whether he has, at any time, made a statement inconsistent with his evidence.
(3) The court may grant an application under the last preceding sub-section whether or not it is alleged or proved that the witness is adverse to the party by whom he was called.
(4) A party is not entitled to prove that a witness has made a statement inconsistent with his evidence unless the witness has been informed of sufficient of the circumstances of the making of the statement to identify the occasion on which the statement was made and has been asked whether he made the statement.
His counsel did cross-examine the respondent and, as a result, inconsistent oral statements were proved by witnesses who were called by the respondent. Two of these witnesses were husband and wife who had come to the scene of the accident very shortly after its occurrence. They said that statements had been made to each of them by the respondent that the appellant had been driving the car when it overturned. At the time of the making of the first of these statements the brother, who had been thrown out of the car, was lying in an injured state on the roadway. His appearance was such that the respondent might well have thought that the appellant was dead.
A statement written out by a police officer to record what the respondent had said to him was signed by the respondent. In this statement the respondent said that his brother had been driving the car. This writing, signed by the respondent, was received in evidence pursuant to s. 28 of the Evidence Ordinance, aided by s. 35. These sections are as follows:
28. —
(1) Where direct oral evidence of a fact or of an opinion would be admissible in a proceeding, a statement made by a person in a document tending to establish the fact or expressing the opinion, as the case may be, is, subject to this Part, admissible as evidence of the fact or the opinion in the proceeding if—
(a) in the case of a statement tending to establish a fact, the maker of the statement had personal knowledge of the matters dealt with by the statement or, in the case of a statement expressing an opinion, the person expressing the opinion is qualified to give evidence of his opinion;
(b) the maker of the statement is called as a witness in the proceeding; and
(c) the court is satisfied that the statement was made at a time when the facts stated in the document were fresh in the memory of the witness or, in the case of a statement expressing an opinion, the facts on which the opinion was based were fresh in the mind of the person expressing the opinion.
(2) The last preceding sub-section applies whether the statement is or is not consistent with the evidence given by the maker of the statement but, where—
(a) the statement is tendered by the party by whom the witness is being called; and
(b) the statement is inconsistent with the evidence given by the witness in the proceeding,
the statement is admissible in evidence only with the leave of the court.
(3) A statement referred to in this section shall not, without the leave of the court, be tendered in evidence by the party by whom the witness has been called except at the conclusion of the examination-in-chief of the witness and before the witness is cross-examined.
35. For the purposes of this Part, a statement in a document shall be deemed to have been made by a person if the document or the material part of the document was written, made or produced by him with his own hand or was signed or initialled by him or otherwise recognised by him as his statement.
The learned trial judge found a verdict for the respondent. In his reasons for judgment he discussed the question but, as I read those reasons, did not decide whether the oral inconsistent statements constituted evidence of the facts which were referred to in them. But he did treat the oral statements made to the two witnesses proximately to the occurrence of the accident as evidence of the facts contained in them on the footing that the making of the statements by the respondent formed part of the res gestae.
The learned judge, for reasons which he gave and which included his impression of Paragalli, did not accept the evidence of that witness. He found himself unable to find that the respondent was driving the car at the relevant time. Accordingly, he found a verdict for the defendant in the action.
The appellant has challenged the allowance of cross-examination of the respondent by his counsel and of the proof of the oral inconsistent statements. He has also challenged the admissibility of the written inconsistent statement and both the admission and use made of the oral statements thought by the judge to be part of the res gestae. Because of these matters, the appellant claims the trial to have miscarried and seeks a new trial.
Although, as will be seen, I do not think the allowance of these objections of the respondent to the course of the trial would entitle the appellant to a new trial of the action, it is proper, in my opinion, that the Court should express itself as to what was done at the trial.
In my opinion, the judge was in error in allowing cross-examination of the respondent by his own counsel. The matter turns, in my opinion, on the proper meaning of s. 60 of the Evidence Ordinance and, in particular, on the meaning to be assigned to the word "party" in that section. Having considered the careful and well-presented argument of counsel for the appellant, I am unable to treat the word "party" in that section as referring to any other than the party on the record. The section, it seems to me, places in juxtaposition the party and the witnesses whom he has called. Although in other sections in the same part of the Ordinance as that in which s. 60 is to be found no distinction is made between a party and a witness when giving evidence, in the section itself the distinction is, in my opinion, clearly drawn. It is not, in my opinion, the intention of the section to give a party the right to cross-examine himself. There is no warrant in the law for such a course unless derived from the section.
But it is said that by reason of the rights of the insurer and his interest in the action and its result, the insurer is properly regarded as a party for the purpose of such a section as s. 60. Reliance was placed in support of this view upon expressions in the decision of this Court in McCann v. Parsons [1] , and upon the decision of the Supreme Court of New South Wales in Rostek v. Keegan [2] .
1. (1954) 93 C.L.R. 418.
2. (1967) 85 W.N. (Pt 1) (N.S.W.) 555.
It is, of course, quite true that one cannot for all purposes disregard the fact that the authorized insurer of a defendant has an interest in the cause and, indeed, a contractual, and in some systems a statutory, right to conduct the defence of the action in the name of the insured. This relationship of the insured and insurer was regarded as of significance in this Court's decision in McCann v. Parsons [1] . In considering an application for a new trial upon the ground that fresh evidence had been discovered, it was necessary to consider the efforts of the insurer as well as the insured in connexion with the preparation for and conduct of the trial. But nothing in the Court's reasons in that case, in my opinion, lends any colour to the proposition that the authorized insurer is, for a purpose such as that to which s. 60 is directed, the party to the action or that the insurer can be regarded as distinct and separate from the party on the record and because so distinguished be accorded rights in the action which are other than those of the party on the record. In my opinion, nothing in the reasons for judgment in McCann v. Parsons [1] justifies the conclusion drawn by the Supreme Court (Lee J.) in Rostek v. Keegan [2] . Accordingly, that case in so far as it decided that counsel for a defendant may be allowed to cross-examine his client because of prior inconsistent statements was not correctly decided.
1. (1954) 93 C.L.R. 418.
2. (1954) 93 C.L.R. 418.
3. (1967) 85 W.N. (Pt 1) (N.S.W.) 555.
As, in my opinion, the trial judge ought not to have allowed the respondent to be cross-examined by his counsel, it follows that the prior oral inconsistent statements of the respondent were not properly admitted into evidence.
Being of this opinion, there is no need for me to pursue, as the trial judge did, the question of whether, being admitted, the prior inconsistent statements may, in some circumstances, be evidence of the facts to which they relate.
The question of whether statements form part of a res gestae is fraught with difficulty at any time. In the present case, the learned trial judge relied upon the views expressed by the Privy Council when giving its advice in Ratten v. The Queen [1] . This is not an appropriate occasion, it seems to me, to discuss whether any change in the established law, and if so its precise extent, was intended by their Lordships in expressing their views in that case. A reason for the doctrine that statements made as part of the res are admissible as evidence is that, because of their contemporaneity and the circumstances of their making, they were unlikely to be concocted and therefore might well be reliable: but that does not mean that statements made on an occasion when they are unlikely to be concocted are for that reason admissible. It is the contemporaneous involvement of the speaker at the time the statement is made with the occurrence which is identified as the res which founds admissibility. In Ratten's Case [1] , Lord Wilberforce seems to have regarded the relevant occurrence as the "drama" which began when it may be supposed a threat to kill his wife was made by the appellant in that case and which ended with her death. So regarded, the telephone call was necessarily involved in the occurrence and the deceased's statement to the telephonist clearly contemporaneously identified with it. But, in the present case, there was, in my opinion, no sufficient contemporaneity of the statements made to either of the witnesses Smith to warrant the conclusion that the statements were made as part of the res. The occurrence was the accident, and although the statements by the respondent were made proximately to the occurrence of the accident, they were in the nature of a historical account rather than in the nature of a statement made as part and parcel of the occurrence. Although, as the trial judge said, the circumstances may satisfy some of the expressions used by the Privy Council in expressing their Lordships' view, the statements were not, in my opinion, admissible as part of the res gestae. Accordingly, the evidence of those witnesses was inadmissible either as prior inconsistent statements or as statements made as part of the res gestae.
1. [1972] A.C. 378.
2. [1972] A.C. 378.
The writing signed by the respondent is in quite a different case. Section 28 makes a statement made by a person in writing admissible as evidence of the facts in the statement if oral evidence of them would have been admissible. Section 35 provides, so far as presently relevant, that a statement signed by a person is to be deemed to have been made by him. I am unable to accept a submission of counsel for the appellant that it is necessary for the operation of s. 35 that it be established that the person signing the statement could read and did understand the writing. It is sufficient, in my opinion, for the purpose of s. 35 that he has signed the writing. Of course, whilst the statement is by the statute deemed to have been made if the writing is signed, the statement and the circumstances of its making will be examinable: on such examination it may be concluded that the writing does not in fact represent a statement of the person signing it. But that possibility does not deny the effect of s. 35 read with s. 28 in making the writing signed by the person admissible as evidence of the facts which it contains.
The counsel for the appellant, however, submitted that s. 28 does not extend so far as to make admissible a prior inconsistent statement of a party as distinct from a prior inconsistent statement of a witness called by a party. In this connexion, he called attention to sub-s. (2) of s. 28 and sought to find in its language a parallel with s. 60 to which I have already referred. But I am unable to accept this submission. It seems to me that s. 28 is general in its terms. It does not in its first sub-section draw a distinction between the party and the witness he has called. It speaks of the maker of a statement which is a neutral expression no doubt designedly adopted. The section expressly says that the circumstance that the statement otherwise falling within its provisions is an inconsistent statement will not make it inadmissible but may subject it to the need to obtain the leave of the judge for its tender. The grant of that leave is not associated with the terms of s. 60 or with any grant of leave for which that section provides. Accordingly, I am unable to accept the submission that the writing signed by the respondent was not admissible. Being admitted, it was evidence that the respondent was not driving the car at the relevant time. It was thus available to the trial judge in deciding whether he would accept the evidence of the witness Paragalli.
There was a submission made by the appellant that a statement contradicting his own evidence could not be tendered by a party in any event. However, I know of no reason why a party should not contradict himself, whether it be by oral evidence by himself or of a witness or by means of a statement which has been signed by him and made admissible by statute.
The remaining question is whether it can be said that the irregularities in the trial to which I have referred warrant the grant of a new trial. Of course, if the evidence of the oral statements had been admitted in a trial by a jury, there must be a new trial for, in that case, it could not be said that they did not affect the jury's conclusion. But, in the case of a trial by a judge, we have the reasons he has expressed for giving his verdict on the facts. Consequently, it is necessary to scan those reasons carefully to ensure that the inadmissible material has not entered in any substantial degree into the conclusion which the trial judge has formed. In my opinion, before a new trial is ordered in a case where the verdict is in accordance with the evidence, it should be seen that the inadmissible matter has been used by the judge in reaching his verdict. Consequently, I have carefully scanned the reasons expressed by the trial judge. Apart from the evidence of the witness Paragalli, there was no evidence to support the appellant's case if, as appears, no reliance was placed on the answers to interrogatories. Indeed, the writing admitted under s. 28 was evidence that the respondent was not the driver at the time the car overturned. His Honour did not believe Paragalli. Unless it can be seen that the inadmissible material influenced that conclusion, there is no ground consistently with what I have so far written for ordering a new trial. After considering the reasons of the trial judge, I have come to the conclusion that they did not. Notwithstanding passages in the reasons for judgment to which the appellant's counsel called attention, any use which the trial judge made of the inconsistent statements was at most merely confirmatory of an opinion which he had independently formed of the credit of Paragalli. Those passages do not warrant the conclusion that in fact the trial judge used those statements as part of his estimation of that witness's credit or of the acceptability of his evidence.
The matter then presents itself as one in which the appellant had no evidence which the trial judge was prepared to accept that the respondent was the driver of the car. The onus was on the appellant. The verdict founded on the want of conviction that the respondent was the driver of the car ought not, in my opinion, to be disturbed. Notwithstanding that there were irregularities in procedure and evidence wrongly admitted in the case, in my opinion, the appeal should be dismissed.
Stephen J.
I have had the advantage of reading the reasons for judgment of the Chief Justice with which I agree and to which I have nothing to add.
Jacobs J.
I agree with the conclusion of the Chief Justice and with the reasons expressed by him for reaching that conclusion. There is nothing which I would wish to add. |
high_court_of_australia:/showbyHandle/1/8863 | decision | commonwealth | high_court_of_australia | text/html | null | West Australian Newspapers Ltd v Bridge [1979] HCA 10 | https://eresources.hcourt.gov.au/showbyHandle/1/8863 | 2024-09-13T22:52:25.118709+10:00 | High Court of Australia
Barwick C.J. Gibbs, Stephen, Jacobs and Aickin JJ.
West Australian Newspapers Ltd v Bridge
[1979] HCA 10
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
1979, March 13
Barwick C.J.
The applicant was a defendant in an action in the Supreme Court of Western Australia for defamation of the first respondent. The publication of the defamatory matter was in a daily newspaper published by the applicant. The second respondent was also a defendant in the action. As one of its defences, the applicant had pleaded in the language of s. 357 (8) of the Criminal Code of Western Australia ("the Code") enacted by and as a schedule to the Criminal Code Act, 1913 W.A. ("the Act").
At the conclusion of the trial before a jury, the presiding judge stated a case for the opinion of a Full Court upon two questions, namely: (A) Is s. 357 (8) of the Code available as a defence in these proceedings? (B) If Yes: Are there any elements of that defence as relate to question (iii) asked of the jury, questions of law for the decision of the trial judge?
The Full Court by majority (Burt C.J. and Brinsden J., Wallace J. dissenting) answered the first question in the negative and found no need to answer the second [42] . In consequence of these answers the trial judge held that s. 357 did not provide a defence in the action.
1. [1978] W.A.R. 177.
The answer to the first question asked of the Full Court is to be found in the construction of the Act and the Code. We have had the assistance of arguments in writing which have discussed the opposing views on the question.
Having read and considered these arguments, the Act, the Code and the reasons for judgment of the Chief Justice and judges of the Supreme Court, I am of opinion that the answer given by that Court to the first question was correct.
I have had the advantage of reading the reasons for judgment prepared by my brother Jacobs, with which in general I agree. I will briefly state, however, my own reason for the same conclusion.
It will be conducive to an understanding of my view to set out the relevant sections:
The Act.
5. When, by the Code, any act is declared to be lawful, no action can be brought in respect thereof.
Except as aforesaid, the provisions of this Act shall not affect any right of action which any person would have had against another if this Act had not been passed; nor shall the omission from the Code of any penal provision in respect of any act or omission, which before the time of the coming into operation of the Code constituted an actionable wrong, affect any right of action in respect thereof.
The Code.
348. Any person who, by spoken words or audible sounds, or by words intended to be read either by sight or touch, or by signs, signals, gestures, or visible representations, publishes any defamatory imputation concerning any person is said to defame that person.
350. It is unlawful to publish defamatory matter unless such publication is protected, or justified, or excused by law.
357. It is a lawful excuse for the publication of defamatory matter—
(8) If the publication is made in good faith in the course of, or for the purposes of, the discussion of some subject of public interest, the public discussion of which is for the public benefit, and if, so far as the defamatory matter consists of comment, the comment is fair.
For the purpose of this section, a publication is said to be made in good faith if the matter published is relevant to the matters the existence of which may excuse the publication in good faith of defamatory matter; if the manner and extent of the publication does not exceed what is reasonably sufficient for the occasion, and if the person by whom it is made is not actuated by ill-will to the person defamed, or by any other improper motive, and does not believe the defamatory matter to be untrue.
360. Any person who unlawfully publishes any defamatory matter concerning another is guilty of a misdemeanour, and is liable to imprisonment for twelve months, and to a fine of six hundred dollars.
If the offender knows the defamatory matter to be false, he is liable to imprisonment with hard labour for two years, and to a fine of one thousand dollars.
I should add that several sections, namely, ss. 354, 355 and 356 set out a number of matters which each of the sections expressly says "it is lawful" to publish.
The rights of parties in relation to defamation as a tortious cause of action are regulated in Western Australia by the common law. The Act is an Act to establish a Criminal Code as it is said in its preamble to be "desirable to declare and consolidate the Criminal Law".
It is plain to my mind from the terms of s. 5 of the Act that the provisions of the common law as to defamation are not to be impinged upon by the Act or the Code except in so far as "by the Code, any act is declared to be lawful", in which event no action may be brought in respect of the performance of that act. Section 5 thus segregates the civil law of defamation from the criminal law of defamation except in those cases in which an act is declared, and as I think, specifically declared, by the Code to be lawful. Such a declaration by the Code precludes action at law in respect of the act so declared to be lawful.
Section 357 occurs in a group of sections which to my mind are plainly directed to the creation of criminal offences and the provision of defences thereto.
Section 350 makes the publication of defamatory matter unlawful, in the sense of being a breach of the criminal law. Section 360, to my mind, makes this plain: it visits the unlawful publication with criminal consequences.
Sections 354, 355 and 356 declare certain publications to be lawful, and, s. 5 of the Act apart, thereby ensure that such publications are not visited with criminal consequences. Were it not for the first paragraph of s. 5, I should have thought that ss. 354, 355 and 356 would have had no impact upon the common law of defamation. But that paragraph of s. 5 does ensure that what is made lawful for the purposes of the Code will not give rise to a cause of action at law.
Sections 351, 352 and 353 achieve a similar result to that produced by ss. 354, 355 and 356 by the use of a different formula, namely, a described person making a particular publication is said "not to incur any liability as for defamation". Whether this formula satisfies the prescription of the first paragraph of s. 5 of the Act need not now be discussed or decided. But such sections clearly preclude criminal liability in respect of the described publications.
I conclude that the excuses provided by s. 357 are relevant to s. 350 in which the word "unlawful" carries the connotation "a breach of the criminal law". As I have indicated, the terms of s. 350 supply the content to s. 360. Section 357 does not, in my opinion, provide a defence to an action at law in Western Australia for defamation. Whether or not the common law provided any kindred defence need not be considered. The plea here was limited to the precise terms of s. 357.
The Court was strenuously pressed by the written arguments to hold that the provision of a lawful excuse was equivalent to a declaration of lawfulness of the act excused: that it was equivalent for the purpose of s. 5 to a declaration of lawfulness. But, in my opinion, the language and evident purpose of s. 5 is too strong to permit of a constructive declaration of lawfulness. For one thing, the language of those sections which expressly declare certain publications to be lawful, ss. 354, 355 and 356, is in high contrast to the language of s. 357. For another, to provide a defence by way of excuse is not in any case the equivalent, in my opinion, of a statement or declaration that what is excused is in itself lawful. The excuse is of an act in itself unlawful.
Much emphasis was placed by the applicant on the similarity, or indeed the identity, of the relevant sections of the Act to or with sections of the Queensland Criminal Code which was interpreted by this Court in Hall-Gibbs Mercantile Agency Ltd. v. Dun [1] ; Ryan v. Ross [2] ; and Telegraph Newspaper Co. Ltd. v. Bedford [3] .
1. (1910) 12 C.L.R. 84.
2. (1916) 22 C.L.R. 1.
3. (1934) 50 C.L.R. 632.
But there is a radical difference both in the legislative history of the Queensland Code and that of this Code. Section 9 of The Defamation Law of Queensland 53 Vic. No. 12 works a significantly different operation to the former than is the case under s. 5, not affected by a like provision to s. 9.
I am content to dispose of the argument based on the Queensland Criminal Code by adopting the assumptions and reasons of the Chief Justice of Western Australia with which I agree.
For all these reasons and for those expressed by my brother Jacobs, I am of opinion that the Full Court was not in error in answering the first question in the negative. I would dismiss the appeal.
Gibbs J.
I have read the reasons for judgment prepared by my brother Aickin and agree with his conclusion that s. 357 (8) of the Criminal Code of Western Australia is available as a defence in civil proceedings for defamation. I am in agreement with the reasons by which my brother reaches that conclusion but since other members of the Court are of a different opinion I would add a few remarks of my own.
The effect of the Criminal Code on civil remedies is dealt with by s. 5 of the Criminal Code Act, 1913 W.A.. That section provides, inter alia: "When, by the Code, any act is declared to be lawful, no action can be brought in respect thereof." In my opinion to satisfy those words of s. 5, no formula is required. In deciding whether an act is declared by the Code to be lawful the substance and effect of the relevant provision of the Code, and not its form, has to be regarded.
Section 350 of the Criminal Code provides that it is unlawful to publish defamatory matter "unless such publication is protected, or justified, or excused by law". Section 357 of the Code provides that "It is a lawful excuse for the publication of defamatory matter" if the circumstances of qualified protection set out in the following eight numbered paragraphs exist. The combined effect of those two sections is that it is not unlawful to publish defamatory matter in the circumstances set out in s. 357. To say that it is not unlawful to publish defamatory matter is equivalent in my opinion to saying that it is lawful to do so. The two sections together declare in effect that it is lawful to publish defamatory matter in the circumstances mentioned in s. 357. Therefore the publication of defamatory matter in those circumstances is not actionable.
I would accordingly allow the appeal and would answer question (A) in the affirmative. Since I understand that a majority of the Court take a different view it is unnecessary for me to consider what answer should be given to question (B).
Stephen J.
Having had the advantage of reading the reasons for judgment of Jacobs J. I agree both with his Honour's conclusion and with his reasons for arriving at that conclusion.
I would dismiss this appeal accordingly.
Jacobs J.
To an action for libel brought against it and the second respondent by the first respondent the appellant in its defence pleaded that the occasion of the publication was privileged and gave particulars of that defence in the terms of s. 357 (8) of the Criminal Code of Western Australia. That section, so far as is material provides:
It is a lawful excuse for the publication of defamatory matter—
(8) If the publication is made in good faith in the course of, or for the purposes of, the discussion of some subject of public interest, the public discussion of which is for the public benefit, and if, so far as the defamatory matter consists of comment, the comment is fair.
The question which arises on this appeal is whether s. 357 is applicable to civil as well as to criminal proceedings for defamation. A question to that effect was stated by the trial judge to the Full Court of the Supreme Court of Western Australia, which by majority answered it in the negative [3a] . The question can be put another way by asking whether s. 5 of the Criminal Code Act, 1913 W.A. covering the Criminal Code applies to s. 357. Section 5 provides as follows:
When, by the Code, any act is declared to be lawful, no action can be brought in respect thereof.
Except as aforesaid, the provisions of this Act shall not affect any right of action which any person would have had against another if this Act had not been passed; nor shall the omission from the Code of any penal provision in respect of any act or omission, which before the time of the coming into operation of the Code constituted an actionable wrong, affect any right of action in respect thereof.
Do the words in s. 357 "It is a lawful excuse for the publication" amount to a declaration that the act of publication is lawful? On the one hand there is the precise language of s. 5 which is not satisfied. It requires that by the Code the act be declared lawful. On the other hand by s. 350 it is provided that it is unlawful to publish defamatory matter unless it is, inter alia, excused by law. Does that amount to a declaration that it is lawful to publish defamatory matter if it is excused?
1. [1978] W.A.R. 177.
A number of considerations have led me to the conclusion that s. 357 is not applicable to civil actions for defamation and that the majority in the Full Court were correct. First, there is the fact that s. 357 does not in its terms satisfy the condition in s. 5. That very real difficulty could perhaps be overcome if it were clear that Ch. XXXV of the Code, dealing with defamation, was generally intended to introduce substantive principles of the general law governing actions for defamation as well as to codify the criminal law upon that subject matter. That brings me to the second consideration which has led me to my conclusion. There is nothing intrinsically clear from the language of Ch. XXXV that all its general enunciations of what was and what was not to amount to defamation and when the publication of defamatory matter was unlawful and when a person would incur liability for publication of defamatory matter were intended to apply to civil actions as well as to criminal prosecutions; and after all it is a criminal code. The basis of the submission that the general enunciations cover civil as well as criminal defamation is that three sections, ss. 354-356, expressly provide that "it is lawful" to publish defamatory matter of the kind and in the circumstances set out in those sections. Upon that basis it has been submitted that ss. 351-353, which provide that certain persons in certain circumstances "do not incur any liability" for publishing certain defamatory matter and s. 357 itself should be applicable to civil actions in the same way as the interposed ss. 354-356. However, it appears to me that the inference which should in such circumstances be drawn is that the draughtsman and the legislature framed ss. 351-354 and s. 357 in different language from ss. 354-356 with the intention of differentiating their legal effect. It is idle to speculate upon the question why s. 354 and s. 355 were introduced into the civil law and any such speculation cannot lead to a conclusion that not only those sections but other sections in their different terms were also intended to affect the civil law. As to s. 356, although in its terms and by application of s. 5 of the covering Act it applies to civil actions, it does not appear to have any operation in relation thereto. Section 356 provides that it is lawful to publish defamatory matter if the matter is true, and if it is for the public benefit that the publication complained of should be made. However, apart from that section, it is a defence to a civil action for publishing defamatory matter if the matter is true. Public benefit does not come into it. Section 5 of the covering Act, after its opening provision with which we are here particularly concerned, goes on to provide that with that exception the provisions of the Act shall not affect any right of action which any person would have had against another if the Act had not been passed. So truth remains a defence in a civil action. For an example of such a defence in Western Australia see Gobbart v. West Australian Newspapers Ltd. [4] . In the light of the second provision in s. 5, s. 356 cannot be regarded as a code on justification as a defence in a civil action and it would appear to have no area of operation in such an action. This, I think, is some indication that the whole group of sections should not be regarded as a partial codification of the civil law. One is left with an application of s. 5 to the Criminal Code according to the terms of that section. No further or other legislative intent can be divined.
1. [1968] W.A.R. 113, at p. 115.
Further, there is not only the fact that s. 357 does not in terms fall within s. 5 of the covering Act but there is also the presumption that the legislature does not intend to alter the common law. This principle can, I think, be fairly invoked in order to answer the contention that the legislature had a purpose so to do beyond the language which it actually employed.
For the contrary view the appellant has relied upon the operation which has been given to sections in the same terms in the Queensland Criminal Code. The conclusion that s. 377 of the Queensland Criminal Code (the equivalent of s. 357 in the Western Australian Code) applies to civil actions has not depended upon the Queensland equivalent (s. 6) to s. 5 of the covering Act to the Western Australian Criminal Code. It has depended upon the retention in the law of Queensland of s. 9 of The Defamation Law of Queensland (1889). That section provides that the unlawful publication of defamatory matter is an actionable wrong. Sections 8 and 10 to 17 of that Act were in practically the same terms as ss. 350-357 of the Criminal Code of Western Australia but they were repealed when the Queensland Criminal Code was enacted. That Code contained ss. 365-377 in the same terms with the exception that some words were added to s. 377 (8) (words which also appear in s. 357 (8) of the Western Australian Code). Thus the Queensland Code in s. 370 reproduced s. 8 of the Defamation Law — "It is unlawful to publish defamatory matter, unless such publication is protected, or justified, or excused by law." It was s. 8 which had given its special content to the word "unlawful" in s. 9 but then s. 8 was repealed. It was held that in this situation it became necessary to look at the sections as they had been transposed into the Criminal Code in order to give meaning and content to the words of s. 9 of the 1889 Act. This approach may not have been inevitable as Virtue J. pointed out in Logan v. West Australian Newspapers Ltd. [5] , but it was taken by this Court in Hall-Gibbs Mercantile Agency Ltd. v. Dun [6] and later in Telegraph Newspaper Co. Ltd. v. Bedford [7] . The law in Queensland is thus settled. But the same course of reasoning cannot be applied in Western Australia because of the absence of any provision equivalent to s. 9 of the Queensland 1889 Act.
1. [1968] W.A.R. 104, at p. 109.
2. (1910) 12 C.L.R. 84.
3. (1934) 50 C.L.R. 632.
I would dismiss the appeal.
Aickin J.
This is an appeal by special leave from a decision of Wickham J. in the Supreme Court of Western Australia in which he entered judgment against the appellant, the West Australian Newspapers Ltd., and one Tozer, who was also a defendant in a libel action in which the respondent Bridge was the plaintiff.
The appellant had published a letter addressed to its editor by the defendant Tozer. At the trial the following questions were put to the jury:
(i) "Would any of the statements of fact be understood as referring to the Plaintiff?"
(ii) "Are any of those statements of fact defamatory of the Plaintiff?"
(iii) "Was the letter published by the Newspaper in the course of, or for the purposes of, the discussion of some subject of public interest, a public discussion of which was for the public benefit?"
(iv) "Are there any statements which are comment upon statements of fact?"
(v) "If yes, would any of this comment be understood as referring to the Plaintiff?"
The jury answered the first four questions in the affirmative and the fifth question in the negative. The trial judge then referred the following questions for the consideration of the Full Court of the Supreme Court of Western Australia pursuant to s. 43 of the Supreme Court Act, 1935 W.A.—
(A) Is s. 357 (8) of the Criminal Code available as a defence in these proceedings?
(B) If Yes: Are there any elements of that defence as relate to question (iii) asked of the jury, questions of law for the decision of the trial judge?
The Full Court (Burt C.J. and Brinsden J., Wallace J. dissenting) answered question (A) in the negative and did not answer question (B) [8] . Upon that answer having been given by the Full Court the trial judge entered judgment against both defendants. The point which arises on this appeal is whether the answer given by the Full Court was correct. The answer depends upon the proper construction in the relevant circumstances of the Criminal Code Act, 1913 W.A. ("the W.A. Code Act") and the Criminal Code of Western Australia scheduled thereto ("the W.A. Criminal Code"). That legislation repealed and substantially re-enacted the Criminal Code Act, 1902 and the Criminal Code scheduled thereto.
1. [1978] W.A.R. 177.
Section 357 (8) of the W.A. Criminal Code is as follows:
It is a lawful excuse for the publication of defamatory matter—
(8) If the publication is made in good faith in the course of, or for the purposes of, the discussion of some subject of public interest, the public discussion of which is for the public benefit, and if, so far as the defamatory matter consists of comment, the comment is fair.
It will be observed that the third question put to the jury follows the wording of s. 357 (8) but does not refer to the element of good faith. However, the plaintiff had admitted that the publication by the appellant was made in good faith. It will, however, be necessary to refer to a number of other sections of the W.A. Criminal Code.
The Criminal Code Act, 1902 W.A. and the Criminal Code scheduled thereto were copied almost exactly from the corresponding Criminal Code Act, 1899 and Criminal Code of Queensland. The problems which arise in the present case may be said to arise out of the fact that the Queensland Criminal Code contained a number of provisions dealing with the civil law of defamation. There had been enacted in Queensland in 1889 an Act entitled The Defamation Law of Queensland (53 Vic. No. 12) which had in effect codified both the civil and criminal law of defamation, including its procedural requirements. By the Criminal Code Act, 1899 Q. the substantive provisions of The Defamation Law of Queensland were repealed and re-enacted in Ch. XXXV of the Criminal Code so that, notwithstanding that it is a "Criminal Code", it applies also to proceedings with respect to the tort of defamation.
Section 9 of The Defamation Law of Queensland (1889) which was not repealed, provided that: "The unlawful publication of defamatory matter is an actionable wrong."
When in 1902 the West Australian Parliament enacted the Criminal Code Act, 1902 it copied without relevant alteration Ch. XXXV of the Queensland Code. In addition the somewhat unusual course was taken of publishing with the W.A. Code Act, the Criminal Code and the Criminal Practice Rules, by way of "introduction", substantial extracts from a letter dated 29th October 1897 by Sir Samuel Griffith, then Chief Justice of Queensland, by which he transmitted to the Attorney-General of Queensland a draft Criminal Code which he had prepared and which became, without significant change, the Queensland Criminal Code in 1899. However no tenable basis exists for resort to that letter as an aid to the interpretation of the Criminal Code of Western Australia. As Windeyer J. said in Mamote-Kulang v. The Queen [9] when speaking of the Queensland Criminal Code: "We, of course, are concerned with the true construction of the words, not with the intention of the author."
1. (1964) 111 C.L.R. 62, at p. 81.
The principal material difference between the state of the law as to defamation in Queensland at the time of the passing of the Criminal Code Act, 1899 Q. and that in Western Australia at the time of the passing of the Criminal Code Act, 1902 W.A. was that in Queensland the law with respect to civil and criminal liability had been codified in 1889. In Western Australia, however, the common law applied save in so far as it had been varied by The Newspaper Libel and Registration Acts, 1884 (48 Vic. No. 12), and 1888 W.A.. The former Act by s. 2 made privileged a report in a newspaper of a public meeting called for a lawful purpose if the report was fair and accurate, published without malice and for the public benefit. Sections 3-6 related to the criminal prosecution of newspaper proprietors and editors. The latter Act required a plaintiff to give evidence at any trial of a newspaper proprietor or editor at the risk of non-suit, imposed a limitation period and by s. 6 provided for absolute privilege in the case of a fair and accurate report of a public meeting. It provides that: "it shall be a good and sufficient defence for any person sued or prosecuted for libel published in a registered newspaper to prove that the said report was fair and accurate." By the Criminal Code Act, 1902 W.A. ss. 3 to 6 of the 1884 Act were repealed and the words "or prosecuted" deleted from s. 6 of the 1888 Act and thus the absolute privilege of a newspaper was confined to civil proceedings, unless the Criminal Code provided for such a defence.
The W.A. Code Act and the W.A. Criminal Code contain a number of provisions which are directly relevant to the present problem. The W.A. Code Act provides in s. 5 as follows:
When, by the Code, any act is declared to be lawful, no action can be brought in respect thereof.
Except as aforesaid, the provisions of this Act shall not affect any right of action which any person would have had against another if this Act had not been passed; nor shall the omission from the Code of any penal provision in respect of any act or omission, which before the time of the coming into operation of the Code constituted an actionable wrong, affect any right of action in respect thereof.
The relevant sections of the W.A. Criminal Code are as follows: "It is unlawful to publish defamatory matter unless such publication is protected, or justified, or excused by law." (s. 350). The expression "defamatory matter" is defined in s. 346 as follows:
Any imputation concerning any person, or any member of his family, whether living or dead, by which the reputation of that person is likely to be injured, or by which he is likely to be injured in his profession or trade, or by which other persons are likely to be induced to shun or avoid or ridicule or despise him, is called defamatory, and the matter of the imputation is called defamatory matter.
An imputation may be expressed either directly or by insinuation or irony.
Sections 351-353 each provide that each of the persons there referred to "does not incur any liability as for defamation" by the publication of defamatory matter in the circumstances there referred to. Section 354 then provides that "it is lawful" to "publish in good faith, for the information of the public" certain reports and documents as there described. That section also defines the meaning of the expression "in good faith". Section 355 then provides that "it is lawful" to publish "a fair comment" in the various circumstances set out in sub-ss. (1) to (8) and concludes by saying: "If it is not fair, and is defamatory, the publication of it is unlawful." Section 356 then provides that: "It is lawful to publish defamatory matter if the matter is true, and if it is for the public benefit that the publication complained of should be made." Section 357 provides: "It is a lawful excuse for the publication of defamatory matter if the publication is made in good faith" by the persons or for the purposes and on the occasions specified in sub-ss. (1)-(8) of that section, and the expression "in good faith" is defined. Section 358 provides for the onus of proof where a question arises whether a publication of defamatory matter was in good faith. Section 359 provides that questions of whether any defamatory matter is relevant to any other matter or whether public discussion is for the public benefit are questions of fact. Section 360 then provides that: "Any person who unlawfully publishes any defamatory matter concerning another is guilty of a misdemeanour, and is liable to imprisonment for twelve months, and to a fine of six hundred dollars."
The words "it is lawful", "does not incur any liability as for defamation", "is not criminally responsible" occur in many different parts of the W.A. Criminal Code. The word "liable" is defined in s. 2 as follows: "the term "liable", used alone, means liable on conviction upon indictment", i.e. on conviction for a crime or misdemeanour. However, there are offences which are neither crimes or misdemeanours and, where such offences may be dealt with summarily, the words used are "guilty of an offence and is liable on summary conviction" to a fine.
Accordingly the expression "does not incur any liability as for defamation" in ss. 351-353 is not confined to "criminal liability". The phrase used throughout the W.A. Criminal Code, "not criminally responsible", would have been used in this instance also if that were the intention, and the word "liable" used alone would likewise convey that intention.
The critical question is whether the provision in s. 357 (8) is one by which the publication there referred to can be said to be "declared to be lawful" within the meaning of s. 5 of the W.A. Code Act, or, more generally, whether only provisions which include the precise words "it is lawful" or "it is declared that [something] is lawful" fall within s. 5. It seems an unlikely intention that the W.A. Code Act requires some specific incantation before s. 5 produces the consequence that no action can be brought in respect of some specific act done to which no civil or criminal liability is otherwise attached. If the W.A. Criminal Code itself were to say that no civil or criminal liability shall arise from some specified conduct, it would not need s. 5 of the W.A. Code Act to produce the result that no action could be brought.
The principal relevant expressions used in the W.A. Criminal Code in Ch. XXXV are as follows:
(a) A person "does not incur any liability as for defamation" by publication in certain stated circumstances—see s. 351 (1), (2), (3), s. 352 and s. 353.
(b) "It is lawful "—see ss. 354, 355, 356.
(c) "It is a lawful excuse"—see s. 357.
(d) "Any person who unlawfully publishes any defamatory matter " is guilty of a misdemeanour—see ss. 360 and 361.
(e) "A person is not criminally responsible as for the unlawful publication of defamatory matter "—see ss. 365, 366 and 367.
These expressions and their equivalents are found in many sections in other chapters of the W.A. Criminal Code.
In the context of s. 5 of the W.A. Code Act, which indicates that the Code is to have some effect outside the criminal law, and of the use throughout the Code of the expressions to which I have referred above, I am unable to discern any material difference in meaning or operation between the expressions "it is lawful" and "it is a lawful excuse". The contrast between the expressions "does not incur any liability as for defamation" and "a person is not criminally responsible as for the unlawful publication of defamatory matter" points very strongly towards the conclusion that the former expression includes civil as well as criminal liability.
I am, with respect, unable to agree that the prima facie meaning of the word "excuse" is, as Brinsden J. says [10] , "to regard or judge with indulgence; pardon or forgive; overlook a fault, error etc." though those are meanings which the word may bear in some contexts. In this context, however, it seems to me to mean "to justify an action", "to obtain exemption for" or "to exempt" when used as a verb, and to mean "justification" or "exemption" when used as a noun. I find it impossible to read the words in s. 350 as meaning "it is unlawful to publish defamatory matter unless such publication is protected, or justified, or [regarded or judged with indulgence, pardoned or forgiven or overlooked] by law". In my opinion the word "excused" in that section conveys that what would, without more, be an unlawful publication of defamatory matter, is rendered lawful by the presence of some additional circumstance.
1. [1978] W.A.R., at p. 185.
In my opinion, therefore, the findings by the jury, when coupled with the admission that the appellant acted in good faith, bring the case within s. 357 (8) of the W.A. Criminal Code so that the appellant had a "lawful excuse" for the publication. For the W.A. Criminal Code so to provide is, in my opinion, for it to declare the act done to be "lawful". It follows, therefore, that no action may be brought against the appellant in respect of such publication.
In the written argument submitted by the parties a number of cases are cited, but, having read them, I am of opinion that it is not necessary to discuss them here. None bear directly on the point; some deal with general propositions not open to doubt, the application of which depends on particular circumstances. I have not found it necessary to discuss the problem of construction of this legislation by reference to such cases.
In the Full Court the second question did not arise for the majority because they answered the first question "No". Wallace J. took the view that as he was in the minority it was not necessary for him to deal with it. It does not appear whether it was argued in the Full Court. In the written argument no reference is made to the manner in which the second question should be answered if it arises. On the view which I take, that question does arise, but in the absence of any argument it is undesirable that I should attempt to deal with it at this stage; if necessary it can be reserved for further argument or referred back to the Supreme Court for argument there. |
high_court_of_australia:/showbyHandle/1/10059 | decision | commonwealth | high_court_of_australia | text/html | null | Graham v Paterson [1950] HCA 9 | https://eresources.hcourt.gov.au/showbyHandle/1/10059 | 2024-09-13T22:52:33.731674+10:00 | High Court of Australia
Latham C.J. McTiernan, Williams, Webb and Fullagar JJ.
Graham v Paterson
[1950] HCA 9
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
May 15
Latham C.J.
This appeal comes to this Court under the Judiciary Act 1903-1948, s. 39 (2) (b). The appellants were convicted of an offence against s. 43 of The Profiteering Prevention Act of 1948 Q.. Section 43 provides that a person shall not sell any declared goods at a greater price than the maximum price fixed in relation thereto by or under the Act for the sale of those goods. The defendants contended, inter alia, that the Act was invalid because, in providing for the fixing of prices for the sale of goods, it infringed s. 92 of the Constitution of the Commonwealth, which provides: "On the imposition of uniform duties of customs, trade, commerce and intercourse among the States, whether by means of internal carriage or ocean navigation, shall be absolutely free."
In the first place, the appellants contend that there was no evidence that, even if the Act is valid, they committed the offence with which they were charged. The precise charge was that the appellants "did contravene a provision of Part III. of " The Profiteering Prevention Act of 1948 " in that contrary to the provisions of Section 43 of the said Act they the said Charles Graham and Frank Akehurst did sell by offering for sale declared goods namely a standard loaf of bread at a price of Eightpence such price being a greater price than the maximum price to wit Sevenpence halfpenny fixed in relation thereto under the said " The Profiteering Prevention Act of 1948 " for the sale of such goods." It was proved that bread was "declared goods" under the Act and that a price of sevenpence halfpenny had been fixed under the Act for a two-pound loaf of bread. Section 6 of the Act provides that "sell" includes, inter alia, offer or expose for sale. Section 43 (6) provides that for the purpose of s. 43 "a person shall be deemed to sell by offering for sale goods if he notifies the price or rate proposed by him for a sale of the goods by the publication of a price list, by furnishing a quotation, by exposing the goods for sale in association with a mark indicating price, or otherwise howsoever." The evidence of the complainant, who was an investigating officer belonging to the Prices Branch, was that he entered the defendants' baker's shop in Coolangatta in Queensland, which is a town very close to the border of New South Wales, and bought a two-pound loaf of bread for which he was charged eightpence. The defendants told the officer that the saleswoman who sold the bread at that price did so with their authority. The facts stated showed that the defendants notified, by their servant, a price for a sale of the bread. That price was a greater price than that fixed for a two-pound loaf of bread and therefore there was evidence upon which the defendants, if the Act were valid, could properly be convicted of the offence of selling by offering for sale in breach of the Act.
It is contended, however, that the Act is invalid because it applies in general terms to all sales (that is to all sales in Queensland) of declared goods in respect of which prices are fixed and therefore applies to sales in inter-State trade and commerce. It is argued that the Act therefore imposes a restriction upon such sales by fixing prices therefor, with the result that such sales are not "free" so that the Act is invalid as infringing s. 92 of the Constitution. The Court will not decide such a question unless it is necessary to do so for the purpose of determining a particular case before the Court.
Section 2 of The Profiteering Prevention Act of 1948 is in the following terms:—"(1) This Act and every Proclamation, Order in Council, regulation, declaration, order, approval, direction, requirement, determination, notice, authority, notification, or prohibition or other act of executive or administrative authority made, issued, published, given, or done under or pursuant to this Act by the Governor in Council, the Minister, the Board, the Commissioner, any delegate of the Commissioner, or any other person or authority, shall be read and construed so as not to exceed the legislative power of the State to the intent that where any enactment contained in this Act, or provision contained in any such Proclamation, Order in Council or regulation, or any (or any term, provision, condition, or limitation of any) such declaration, order, approval, direction, requirement, determination, notice, authority, notification, or prohibition or other act of executive or administrative authority would but for this section be construed as being in excess of that power, it shall nevertheless be a valid enactment, provision, declaration, order, approval, direction, requirement, determination, notice, authority, notification, prohibition, or, as the case may be, other act of executive or administrative authority to the extent to which it is not in excess of that power."
"(2) It is hereby declared to be the intention of the Legislative Assembly—(a) That if any enactment of this Act is inconsistent with the Commonwealth of Australia Constitution Act, or if any executive or administrative act done under or pursuant to this Act is in part so inconsistent, that enactment and all the other enactments in this Act, or, as the case may be, that part and all the other parts of the executive or administrative act in question shall nevertheless operate to the full extent to which they can operate consistently with the Commonwealth of Australia Constitution Act; and (b) That the provisions of paragraph (a) of this subsection shall be in addition to, and not in substitution for, the provisions of subsection one of this section."
It is unnecessary to examine in detail the possible effect of this provision in relation to all conceivable circumstances and contingencies because at least it is clear that the Legislature has declared its intention that the provisions of the Act should have no operation in any case to which they cannot validly be applied by reason of any inconsistency of the Act with any provision of the Commonwealth Constitution. The relevant provisions of the Act relate to sales of goods and the Act therefore deals with trade and commerce. It is plain, therefore, that s. 2 (2) refers to s. 92 of the Constitution, whether or not it has any relation to any other provision in the Commonwealth Constitution. Accordingly the Act has thus provided a criterion whereby the application of the Act to different sets of circumstances may be determined in accordance with the intention of the Legislature. As the Act has provided this criterion, difficulties which were referred to in Pidoto v. Victoria [1] do not arise in the present case. The effect of s. 2 in relation to the present case is that if the application of the Act to the sale of the bread by the appellants would infringe s. 92 the Act should not have any operation in relation to that sale. Therefore, if, as contended for the appellants, the Act in its general terms applies invalidly to transactions protected by s. 92 and is therefore invalid in such application, the intention of the Parliament has been clearly declared that the Act should not so apply, but that it should apply to transactions to which it is validly applicable.
1. (1943) 68 C.L.R. 87.
The sale in question had no inter-State element whatever. The fact that bread sold in Coolangatta might be taken across the border to New South Wales did not bring about the result that a sale across the counter in Coolangatta was an inter-State transaction to which s. 92 applied. It is therefore unnecessary to consider whether the Act, if applied to inter-State transactions, is invalid. It is certainly valid in relation to other transactions and so far as s. 92 is concerned is valid in relation to the sale in this case.
But the appellants also contend that the Act is invalid for two other reasons, first, that the Act is an amendment of the earlier Commonwealth Powers Act of 1943 Q. and that it has not been passed in the manner prescribed by s. 3 of that Act, so that it is therefore invalid.
The Commonwealth Powers Act of 1943 recites an agreement between representatives of the Commonwealth and State Governments and of the Oppositions in the Parliaments of the Commonwealth and the States that adequate powers to make laws in relation to post-war reconstruction should be referred to the Parliament of the Commonwealth by the Parliaments of the States and that such reference should be for a period ending at the expiration of five years after Australia ceased to be engaged in hostilities in the then present war. It was also agreed that it was desirable that the reference should not be revoked during that period. Australia ceased to be engaged in hostilities in the said war in September 1945, so that the period referred to in the recital (and in s. 4 of the Act) has not yet expired. Section 2 of the Act provides: "The following matters are hereby referred to the Parliament of the Commonwealth, that is to say," inter alia, "(f) Profiteering and prices (but not including prices or rates charged by State or semi-governmental or local governing bodies for goods or services." Other paragraphs refer to other subjects, e.g. employment and unemployment, organized marketing of commodities, uniform company legislation, trusts, combines and monopolies, air transport, family allowances, people of the aboriginal race &c. Section 3 provides that the Act shall not be repealed or amended except in the manner provided by the section. The section requires the approval of a majority of the electors voting on the question whether a bill for an Act should be approved or not. Section 4 provides that the reference shall continue in force for a period ending at the expiration of five years after Australia ceases to be engaged in hostilities in the war and that no law made by the Parliament of the Commonwealth with respect to matters referred to it by the Act shall continue to have any force or effect by virtue of the Act or the reference made by the Act after the expiration of that period.
The first objection to the 1948 Act based upon the 1943 Act is that the 1948 Act, providing for price fixing and the repression of profiteering, is an amendment of the 1943 Act and that it has not been enacted as provided by s. 3. There is no substance in this objection. The 1948 Act does not amend or repeal any provision of the 1943 Act.
Secondly, it is objected that by the 1943 Act the Parliament of Queensland, by referring to the Commonwealth Parliament the matter of profiteering and prices, transferred all power to legislate in respect of that matter in Queensland to the Commonwealth Parliament so that the Queensland Parliament deprived itself of that power. This contention raises the question of the meaning of s. 51 (xxxvii.) of the Commonwealth Constitution. Section 51 provides that: "The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to" forty specified matters, including "(xxxvii.) Matters referred to the Parliament of the Commonwealth by the Parliament or Parliaments of any State or States, but so that the law shall extend only to States by whose Parliaments the matter is referred, or which afterwards adopt the law."
No objection is made on behalf of the appellants to the validity of the 1943 Act. The argument proceeded upon this basis, though the respondent was prepared to contend, if necessary, that the Act was not valid. Indeed, the argument of the appellants which is now under consideration depends upon the proposition that that Act is valid. It has sometimes been suggested that a reference under s. 51 (xxxvii.) must be an irrevocable reference for all time—that while the matter referred must necessarily be described by reference to its attributes or qualities, yet the reference cannot be limited by reference to a quality or attribute of a temporal character. Such a contention would involve the proposition that a State Parliament can pass an unrepealable statute, or at least that any attempt to repeal an Act referring a matter under s. 51 (xxxvii.) would necessarily produce no result. The result of the adoption of such a suggestion would be that one State Parliament could bind all subsequent Parliaments of that State by referring powers to the Commonwealth Parliament. It is unnecessary to consider this question in this case because the essence of the appellants' argument is that the 1943 Act is valid and that it deprived the Queensland Parliament of power to make laws with respect to the matter referred—as in the case of a transfer of property where, after the transfer has been made, the transferor has not, and the transferee has, the property which has been transferred. This analogy is not in my opinion applicable. Section 51 confers powers upon the Commonwealth Parliament to make laws with respect to the matters set forth in the section. These powers are not declared to be exclusive powers of the Commonwealth Parliament. Most of these powers can be exercised concurrently by the State Parliaments with the Commonwealth Parliament. Some of the powers, it is true, are, by reason of the nature of the subject matter, exclusive, for example—"(iv.) Borrowing money on the public credit of the Commonweath (xxx.) The relations of the Commonwealth (i.e. the Commonwealth as a whole) with the islands of the Pacific." But the terms of s. 51 do not exclusively vest in the Parliament of the Commonwealth or withdraw from the Parliament of a State any powers previously possessed by a State. Such powers as those to which reference has been made, e.g. borrowing on the public credit of the Commonwealth, are powers which did not exist before the creation of the Commonwealth and therefore were never powers possessed by the States. Section 107 of the Constitution provides as follows:—"Every power of the Parliament of a Colony which has become or becomes a State, shall, unless it is by this Constitution exclusively vested in the Parliament of the Commonwealth or withdrawn from the Parliament of the State, continue as at the establishment of the Commonwealth, or as at the admission or establishment of the State, as the case may be." Section 51 (xxxvii.) does not provide that any power of the Parliament of a colony which becomes a State should become exclusively vested in the Commonwealth Parliament or be withdrawn from the Parliament of the State. It is s. 52, and not s. 51, which gives exclusive powers to the Commonwealth Parliament. Therefore the powers of the State Parliament are not diminished when an Act is passed to refer a matter under s. 51 (xxxvii.).
When a State Parliament acts under s. 51 (xxxvii.) by referring a matter to the Commonwealth Parliament it produces the result of adding to the paragraphs of s. 51 a further paragraph specifying the matter referred. Thus if the matter referred is price fixing and that matter is referred by all the State Parliaments s. 51 may, in relation to that matter, be read as follows:—"The Parliament shall, subject to this Constitution, have power to make laws for the peace, order and good government of the Commonwealth with respect to (xxxvii.) Matters referred to the Parliament of the Commonwealth" &c. (as in par. (xxxvii.)) "namely price fixing, being a matter referred hereunder by the Parliaments of all the States." Thus the reference of matters under s. 51 (xxxvii.) does not deprive the State Parliament of any power. It results in the creation of an additional power in the Commonwealth Parliament. If the Commonwealth Parliament exercises such a power, s. 109 of the Constitution may become applicable, with the result that if a law of the State with respect to a matter referred was inconsistent with a law of the Commonwealth, the Commonwealth law would prevail and the State law to the extent of the inconsistency would be invalid. But unless the Commonwealth Parliament exercises the power to legislate with respect to the matter referred, no effect whatever is produced in relation to the operation of State laws. In the present case the orders made under Commonwealth legislation fixing prices (namely National Security (Prices) Regulations made under the National Security Act 1939 as amended) were terminated by the exercise of a power conferred upon a Minister by those regulations as from 20th September 1948. The Queensland legislation came into operation on that day, which was the day of assent to the Act of 1948 and there is no Commonwealth law with which it is inconsistent.
I am accordingly of opinion that the State Parliament did not by passing The Commonwealth Powers Act of 1943 deprive itself of power to make laws with respect to matters which are by that Act referred to the Commonwealth Parliament.
The appeal should be dismissed.
McTiernan J.
In my opinion this appeal should be dismissed.
The grounds of the appeal raise the question whether the provisions of The Profiteering Prevention Act of 1948 under which the appellants were convicted are inconsistent with s. 92 of the Commonwealth Constitution. These provisions upon the true construction of their own terms apply to intra-State trade, and would apply to inter-State trade, if s. 92 is not an obstacle.
The evidence proves that the "offering for sale," which is the gist of the offence of which the appellants were convicted, had no relation to inter-State trade.
Section 2 of the Act subjects the Act to two rules of construction. One of the effects of s. 2 (1) is that every provision of the Act is to be read as if it were impliedly qualified by the words subject to s. 92 of the Commonwealth Constitution. The provisions of the State Act necessary to support the conviction are limited in their operation to intra-State trade, if they would deny to inter-State trade the freedom guaranteed by s. 92 (Vacuum Oil Co. Pty. Ltd. v. Queensland [No. 2] [1] ).
1. (1935) 51 C.L.R., at p. 687.
Section 2 (2) requires that any provision of the Act which extends beyond the limits of legislative power or exceeds any restriction on it, for example s. 92, should be construed to apply only to things within the scope of the provision with respect to which the Parliament has power to enact it. The result of the sub-section is that the provision is not to fail by reason of a presumption that the Parliament did not intend that the provision should have a partial operation if it could not validly have an operation as wide as its terms. It is therefore unnecessary to decide whether, if the provisions of the Act under which the appellants were convicted are given a literal construction, they strike further than s. 92 would allow. If they do so, the offering for sale, the subject of the charge, fell within the residual operation which sub-ss. (1) and (2) of s. 2 give to those provisions of the Act in relation to inter-State trade.
The grounds of the appeal also raise the question of the effect of The Commonwealth Powers Act of 1943 on the legislative power of Queensland. The question is whether the Queensland Parliament had power to pass The Profiteering Prevention Act of 1948 after it passed The Commonwealth Powers Act of 1943 and while that Act was in force. I assume but I do not decide that by this Act the Queensland Parliament duly referred the matters profiteering and prices, as described in s. 2, to the Commonwealth Parliament. The operation of the Act as a measure vesting legislative power in the Commonwealth depends upon s. 51 (xxxvii.) of the Commonwealth Constitution.
It is sought to meet the logical difficulty of saying that the Queensland Parliament retained these matters within its legislative power, although it had referred them to the Commonwealth Parliament, by placing upon the word "referred" in s. 51 (xxxvii.) and s. 2 of the Queensland Act the meaning "denominated." That may be a definition of the word but it does not seem to be a definition which completely expresses the meaning of "referred" in the present context. The Oxford Dictionary, vol. 8, says that the word "refer" may mean "To commit, submit, hand over (a question, cause or matter) to some special or ultimate authority for consideration, decision, execution" &c. I think that it is more probable that a verb selected from this definition would more correctly state the meaning of the word "referred" in s. 51 (xxxvii.) than the word "denominated." The question whether the sovereign rights of a State in respect of a matter which is duly referred, cease or are suspended during the period of the reference depends less on the meaning of the word "referred" than upon the intention manifested by s. 51 (xxxvii.) of the Constitution.
The effect of this provision is that a new power arises in the Commonwealth Parliament when a State Parliament refers a matter to it. It is a power to make laws for the peace, order and good government "of the Commonwealth." The power is subject to the restrictions imposed by the Constitution on legislative power and to the special conditions stated in s. 51 (xxxvii.). One special condition is that the operation of a law passed under the new power is confined to the referring State.
When The Commonwealth Powers Act came into operation, the Commonwealth Parliament then became vested with power, subject to the Constitution, to make laws for the peace, order and good government of the Commonwealth with respect to profiteering and prices and the other matters mentioned in the State Act, extending to Queensland. At the time the Queensland Parliament passed the Act, it had power to make laws with respect to profiteering and prices for the peace, order and good government of Queensland. This power was subject to any restrictions imposed by the Commonwealth Constitution upon State legislative power but not of course to restrictions thus imposed upon Commonwealth legislative power only. It was an exclusive power of the State in this respect namely that profiteering and prices are not matters expressly mentioned in s. 51 of the Constitution.
This power existed at the establishment of the Commonwealth. Section 107 of the Commonwealth Constitution preserves this power. The Queensland Parliament exerted the power when it passed The Profiteering Prevention Act. It is a power to make laws for the peace, order and good government of Queensland.
The Commonwealth Powers Act could not upon the terms of s. 51 (xxxvii.) cause any power to vest in the Commonwealth Parliament other than a power to make laws with respect to the referred matters for the peace, order and good government of the Commonwealth.
A power which is defined in these terms cannot be a State legislative power that has become vested in the Commonwealth. It is truly a Commonwealth power. It is subject to all the restrictions imposed by the Commonwealth Constitution upon the exercise of Commonwealth legislative power. It is a power concurrent with the power of the State to legislate with respect to the referred matters. It is not that power itself. Having regard to the terms of s. 51 (xxxvii.) and s. 107 it could not be that power.
The Commonwealth Powers Act 1943, if valid and effective according to its terms, could not operate as a transfer to the Commonwealth Parliament, or a suspension, of the legislative power of Queensland to pass The Profiteering Prevention Act of 1948. The objection to the conviction founded upon The Commonwealth Powers Act therefore fails.
Williams J.
I shall state briefly my reasons for agreeing that the appeal should be dismissed. There was, in my opinion, ample evidence to justify the magistrate holding that the appellants had offered the loaf of bread for sale at eightpence and therefore above the fixed price by their employee behind the counter with their authority offering the loaf for sale and selling it to Kelly at this price. The offer, the acceptance and the delivery of the bread all took place in the shop and therefore in Queensland, and there was no inter-State element whatever in the transaction. Section 2 (2) of The Profiteering Prevention Act of 1948 Q. expresses a clear intention on the part of the Queensland Parliament that the Act is to operate to the full extent to which it can operate consistently with the Constitution. Accordingly, the Act is intended to operate upon intra-State trade even if it infringes s. 92 of the Constitution in respect of trade and commerce among the States. I must not be taken to favour any assumption that the Act does this. But, assuming that it does, I have no doubt that the Act is operative with respect to intra-State trade.
There remains the question whether The Commonwealth Powers Act of 1943 Q. invalidates The Profiteering Prevention Act. Section 3 of the former Act provides the particular manner in which the Act may be repealed or amended. It was contended that the latter is an amendment of the former Act and that, the amendment not having been made in this manner, the latter Act is invalid. But The Profiteering Prevention Act does not amend The Commonwealth Powers Act. The Commonwealth Powers Act was passed to enable the Commonwealth Parliament to legislate on certain matters under s. 51, par. (xxxvii.) of the Constitution. The Profiteering Prevention Act does not attempt to repeal or amend this legislation. It leaves The Commonwealth Powers Act exactly as it was before and is merely legislation on the same subject as one of the matters, that is profiteering and prices, referred to the Commonwealth Parliament by The Commonwealth Powers Act.
The Profiteering Prevention Act could only be invalid, in the absence of inconsistent Commonwealth legislation within the meaning of s. 109 of the Constitution, of which there is none, if the effect of The Commonwealth Powers Act was to confer on the Commonwealth Parliament exclusive power to legislate for Queensland with respect to the referred matters.
The Commonwealth Powers Act purports to refer a number of matters to the Commonwealth Parliament for a term. The validity of such a reference was not argued because the parties and interveners were all interested in upholding the validity of the Act and on it I say nothing. Assuming that the Act is valid, the question is whether the Commonwealth Parliament acquires exclusive or concurrent powers of legislation over the matters referred. A more appropriate word than "referred" might perhaps have been chosen but it is significant that par. (xxxvii.) is included in s. 51 which confers concurrent and not exclusive legislative powers on the Commonwealth Parliament except in the case of certain powers which acquire exclusiveness from their subject matter and contents. There is no reason to suppose that the framers of the Constitution ever intended that legislation of the Commonwealth Parliament with respect to matters referred to it by a State Parliament should have a different operation in that State to its operation in a State which afterwards adopts the law. But it would seem to be clear that an adopting State would still retain all its previous powers of legislation and that the Commonwealth legislation adopted by the State would invalidate the legislation of that State only to the extent to which the two laws were inconsistent within the meaning of s. 109 of the Constitution. If the Commonwealth Parliament acquires an exclusive power of legislation for a State with respect to a matter referred to it by that State, the existing laws of the State on that matter might well become invalid because they no longer rested on any constitutional power, and they would at least become unalterable by the State during the reference whether the Commonwealth Parliament chose to legislate or not.
Section 106 of the Constitution provides that the Constitution of each State of the Commonwealth shall, subject to this Constitution, continue as at the establishment of the Commonwealth until altered in accordance with the Constitution of the State. If the reference of a matter to the Commonwealth Parliament under s. 51, par. (xxxvii.) of the Constitution effects an alteration in the Constitution of a State by depriving a State of power to legislate on that matter, it must do so by virtue of the words "subject to this Constitution" in s. 106, but the words of the paragraph appear to me to be no more than an authority for the Commonwealth Parliament to legislate on that matter and quite insufficient to effect such an alteration. Section 107 of the Constitution provides that every power of the Parliament of a State shall, unless it is by this Constitution exclusively vested in the Parliament of the Commonwealth or withdrawn from the Parliament of a State, continue as at the establishment of the Commonwealth. The Constitution does not state expressly anywhere that a referred matter is to be exclusively vested in the Commonwealth Parliament nor does it state expressly that such a matter is to be withdrawn from the Parliament of a State, and again the words of the paragraph appear to me to be quite insufficient to raise a necessary implication to this effect.
In the light of ss. 106 and 107 of the Constitution, and the considerations already mentioned, I am of opinion that the Commonwealth Parliament only acquires a concurrent power of legislation over matters referred to it by the Parliament of a State and that the Queensland Parliament had power to enact The Profiteering Prevention Act.
Webb J.
I have had the opportunity of reading the judgment prepared by the Chief Justice and for the reasons he gives I think the order nisi should be discharged.
As to the meaning of matters referred in s. 51 (xxxvii.): I do not think that it is intended to give a State Parliament power to refer matters irrevocably to the Commonwealth Parliament to be exercised by that Parliament exclusively. The consequence of that would be that a State Parliament could completely deprive itself of any authority for all time, although the Commonwealth Parliament might decline to legislate with respect to all or any of the matters referred. I do not think it was intended that a State Parliament could bind its successors to that extent. If I held that it was not intended that a State Parliament could bind its successors to any extent that would be tantamount to holding that the Queensland Commonwealth Powers Act of 1943, referring matters for five years, was beyond power. As to this there was no submission or argument. Mr. Hudson for the respondent said he was prepared to argue that this Act was invalid, but he was not required to do so to support the magistrate's judgment. I leave undecided the question whether the Act of 1943 is beyond power.
As to the question whether matters are referred to the Commonwealth Parliament exclusively: when referred they become subjects of legislation by the Commonwealth under s. 51, which contains the concurrent powers, but not only the concurrent powers. If it were intended to confer exclusive power on the Commonwealth I think matters referred would be brought within s. 52, which confers exclusive power on the Commonwealth Parliament. It is difficult to form a satisfactory conclusion based merely on the consequences of holding either that the matters are referred exclusively or that they are not so referred. But if they are held not to be exclusively referred s. 109 resolves any resulting conflict between Commonwealth and State legislation.
Fullagar J.
In this case I have had the advantage of reading the judgment of the Chief Justice. I am inclined to take a different view of what constituted the "offering for sale" of the bread by the appellants. The point, however, is of no importance, because I am clearly of opinion that there was plain evidence of the commission of an offence under the Act. At all other points I find myself in complete agreement with the judgment of the Chief Justice, and I have nothing to add. |
high_court_of_australia:/showbyHandle/1/11018 | decision | commonwealth | high_court_of_australia | text/html | null | Coffey v The Commonwealth [1969] HCA 22 | https://eresources.hcourt.gov.au/showbyHandle/1/11018 | 2024-09-13T22:52:38.297837+10:00 | High Court of Australia
Barwick C.J. Kitto, Taylor and Windeyer JJ.
Coffey v The Commonwealth
[1969] HCA 22
ORDER
Appeal dismissed with costs.
June 2
Barwick C.J.
The appellant in this case submitted that reg. 14 (1) of the Public Service Regulations is invalid on two grounds, as I understand counsel: one, that the regulation is inconsistent with s. 55 of the Public Service Act 1922-1966 in particular; secondly, that it goes beyond the authority intended to be given by s. 97, having regard to the provisions of s. 55.
As to the first ground: in my opinion, the short answer to the argument was given by Mr. Justice Owen in his judgment when he said [2] :
I think the short answer to these arguments is that reg. 14 (1) is not a provision imposing punishment on an officer who commits a breach of reg. 13. Its purpose is to enable a chief officer to require an officer who has, without authority, been absent from duty during a period when he should have been at work, to make up the time lost by such absence.
1. (1968) 118 C.L.R., at p. 351.
In my opinion, that accurately describes the operation of reg. 14 (1): it is not inconsistent with s. 55.
As to the second submission, in my opinion, the validity of the regulation is covered by the opening words of s. 97, if not indeed by pars. (k) and (m) of that section, having regard to the subject matter of the Act and the nature of the regulation under challenge.
In my opinion, the appeal should be dismissed.
Kitto J.
I agree.
Taylor J.
I agree.
Windeyer J.
I agree. |
high_court_of_australia:/showbyHandle/1/9958 | decision | commonwealth | high_court_of_australia | text/html | null | Hawkins v Minister for Lands [1949] HCA 21 | https://eresources.hcourt.gov.au/showbyHandle/1/9958 | 2024-09-13T22:52:49.476377+10:00 | High Court of Australia
Latham C.J. Dixon, McTiernan, Williams and Webb JJ.
Hawkins v Minister for Lands
[1949] HCA 21
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
July 1
Latham C.J.
The question which arises upon this appeal is whether the powers of the Minister for Lands to reserve Crown lands temporarily from sale under s. 29 of the Crown Lands Consolidation Act 1913, as amended, extend to land held under Crown lease granted under the Act so as to prevent the lessee from converting the lease into a conditional purchase which, if the conditions of the Act are satisfied, would entitle the lessee at a future date to a Crown grant in fee simple—s. 56. The price to be paid by the purchaser for a freehold title to the land is determined in accordance with s. 186, which contains provisions for determining the capital value of the land.
A Crown lease granted under the Act is a lease in perpetuity—s. 134. The form of a Crown lease is prescribed by regulations—see regulations in Government Gazette No. 154 of 2nd October 1936. The lease contains conditions with respect to residence, no assignment without consent of the Minister, destruction of vermin and vegetable pests, clearing prickly pear, fencing, no cutting of timber for sale except subject to the provisions of the Forestry Act 1916 and regulations thereunder, right of entry by authorized persons and a condition of forfeiture upon failure to pay the rent reserved or upon breach of conditions. Section 184 gives a right, subject to certain conditions (which are dependent upon the opinion of the Local Land Board), to convert a Crown lease into a conditional purchase, and s. 56 gives a right to a conditional purchaser, subject to conditions, to obtain a Crown grant in fee simple. It is only after these rights have been successfully exercised that the lessor becomes the owner of an estate in fee simple. It is therefore quite clear that the grant of a Crown lease is not a grant in fee simple.
The appellant E. W. Hawkins holds a Crown lease under the Act. On 10th January 1947, the Minister caused to be published in the Gazette a notification that certain lands, including the land of which the appellant is the Crown lessee, "shall be and are hereby temporarily reserved from sale generally," the proclamation being made under s. 29 of the Crown Lands Consolidation Act. On 12th November 1947 the appellant applied to the Local Land Board for conversion of his lease into a conditional purchase—s. 184. The Local Land Board confirmed the application, accepting a contention that the land was not subject to the provisions of s. 29 because it was, by virtue of s. 184, land "lawfully contracted to be granted in fee simple," which is excepted from "Crown lands" by the definition of that term in s. 5 of the Act. Upon reference by the Minister to the Land and Valuation Court (Sugerman J.) it was held that the application for conversion should be disallowed. Sugerman J. stated a case for the Supreme Court upon questions of law under s. 17 of the Land and Valuation Court Act 1921 and the Full Court of the Supreme Court, agreeing with Sugerman J., held that the reservation was effectual and that the Local Land Board acted wrongly in confirming the application for conversion of the Crown lease into a conditional purchase.
The decision of the question depends upon the true construction of ss. 29 and 188 of the Act and associated provisions.
Section 29 is in the following terms:—"The Minister may by notification in the Gazette reserve any Crown lands therein described from being sold or let upon lease or license in such particular manner as may be specified in such notification; and the lands shall thereupon be temporarily reserved from sale or lease or license accordingly, and, unless the contrary is expressly declared, shall not be reserved from sale or lease generally."
Section 30 (d) provides that any temporary reservation from sale or lease or licence made under the Crown Lands Consolidation Act may be revoked or modified. Section 188 is in the following terms:—"If a settlement lease or Crown lease comprises land which is reserved from sale such reserved land shall not be convertible into a conditional purchase unless and until such reservation shall have been revoked."
The respondent contends that the reservation from sale was lawfully made under s. 29 and that s. 188 makes it clear that that reservation from sale prevents the conversion of the Crown lease into a conditional purchase as long as the reservation remains unrevoked.
The appellant, on the other hand, contends first, that land the subject of a Crown lease is not Crown lands within the definition of that term contained in s. 5 of the Act. Section 5 provides that "unless the context necessarily requires a different meaning, the expression "Crown lands" means lands vested in His Majesty and not permanently dedicated to any public purpose or granted or lawfully contracted to be granted in fee simple under the Crown Lands Acts." The appellant contends that lands which are subject to a Crown lease are not Crown lands because (a) they are not lands vested in His Majesty, and (b) they are lands lawfully contracted to be granted in fee simple under the Acts. Secondly, the appellant contends that, even if this be not the case, Crown lands in s. 29 does not bear the meaning attributed to it in the definition section. This particular contention may, I think, at once be rejected. No reason has been adduced which would justify the attribution to the term "Crown lands" in this section of any other meaning than that specified in s. 5. Thirdly, the appellant contends that the appellant has a right under his Crown lease to convert into a conditional purchase and that s. 29 should not be held to deprive him of this right without most express words. Fourthly, it is argued for the appellant that s. 188, excluding from conversion into conditional purchase lands which are comprised in a Crown lease which are reserved from sale, should be interpreted as applying only to lands which had been reserved from sale before the grant of the Crown lease. Attention is also directed to s. 85 (4), which provides that the setting apart of land for, inter alia, Crown lease shall have the effect of revoking any reserves under the Crown Lands Act or the other Acts therein mentioned—Mining Acts and Forestry Acts.
The first contention of the appellant is that s. 29 does not apply to lands comprised in Crown leases because such lands are not vested in the Crown. Lands actually granted in fee simple and lands lawfully contracted to be granted in fee simple are excepted from the definition of Crown lands. It is contended that lands granted by way of Crown lease or otherwise are also excluded because, after a grant, they are no longer vested in the Crown. In my opinion this argument should not be accepted. The express and limited exception of lands contracted to be granted "in fee simple" would not be necessary if every grant of lands of any character under the Act removed the subject lands from the category of Crown lands. The definition does not provide that lands which are the subject matter of lease or licence shall also be excepted. Under a Crown lease, even though it is a perpetual lease, the Crown has become the landlord of the lessee, rent is payable to the Crown as landlord, and if the lessee does not perform the conditions of the lease the lease may be forfeited and then the Crown would have a complete title free from the lease. In my opinion it should not be held that lands subject to a Crown lease are not lands vested in the Crown.
It is next contended for the appellant that where land is held under a Crown lease it is land "lawfully contracted to be granted in fee simple" and for this reason is not within the definition of "Crown lands," and accordingly is not subject to the provisions of s. 29. The rights of a Crown lessee have been held to be contractual in character (Attorney-General of Victoria v. Ettershank [1] ; O'Keefe and McKenna v. Williams [2] ). But the lessee is a lessee and does not become a purchaser unless he makes an application for conversion into a conditional purchase which is confirmed by the Local Land Board. If such an application is made and is confirmed it will then be the case that the land is land lawfully contracted to be sold. But there is no contract to sell the land unless and until the application is confirmed. For these reasons, which are more fully developed in the reasons for judgment of Sugerman J. and their Honours in the Full Court, I am of opinion that the lands in question were not lands lawfully contracted to be sold. Accordingly, the land is "Crown lands."
1. (1875) L.R. 6 P.C. 354.
2. (1910) 11 C.L.R. 171.
The other arguments for the appellant depend upon the construction of ss. 29 and 188 in the context of the Act. Section 29 provides that when the Minister by notification reserves Crown lands from sale or letting upon lease or licence the lands shall thereupon be temporarily reserved accordingly. The word "thereupon" shows that a reservation made under this section operates immediately, if at all. Under this provision the Minister could not make a reservation to operate only from some specified future date. During its continuance the reservation prevents, as the case may be, sale, lease or licence of the land described in the notification. The word "thereupon" shows that the reservation can have no effect upon any past transactions. It is obvious, for example, that where land had been sold there could be no "reservation from sale" which would take effect upon the making of the reservation. Similarly a reservation could not avoid existing leases or licences. If there is a current lease no reservation from lease could be made under this section. But the words according to their natural construction permit in the case of land which is subject to a lease or licence a reservation from sale. The words of s. 29 are general. They apply to " any Crown lands." In the case of the land in question they permit the Minister to reserve those lands from sale, though not from lease.
This conclusion is in my opinion reinforced by s. 188, which is a very definite provision to the effect that if a Crown lease comprises land which is reserved from sale that land shall not be convertible into a conditional purchase unless and until the reservation has been revoked. This provision shows that land in a Crown lease may be subject to a reservation. It is contended that the words "which is reserved from sale" should be read as meaning "which has been reserved from sale before the grant of the Crown lease." The words in themselves do not bear this meaning. The words "is reserved" refer to a reservation existing at a particular time, and have no bearing upon the question as to when a reservation can be made. The question whether a Crown lease is convertible into a conditional purchase arises when application is made to the Local Land Board for such conversion under s. 184. It is at that time that the convertibility of the Crown lease has to be determined. If land in the lease is then reserved from sale the prohibition of s. 188 applies. The contention that the words should be given the suggested interpretation is, it is argued, supported by the fact that a reservation from sale of land in a Crown lease made after the grant of the lease, if it is valid, has the effect of depriving the lessee of the valuable right of conversion into a conditional purchase. But the Crown lease is granted under the Act and is subject to all the provisions of the Act. Section 6 provides that "Crown lands shall not be sold, leased or dealt with except under and subject to the provisions of this Act." Sections 29 and 188 are therefore provisions of the Act to which a Crown lease is subject if on a proper construction of their terms they are applicable in the case of any particular Crown lease.
The second part of s. 188 is as follows:—"A conversion into a conditional purchase shall not be allowed of land within a reserve for mining or mining purposes except with the approval of the Secretary for Mines, or of land within a State forest or timber reserve except with the approval of the Forestry Commission."
Section 85 (4) provides that when land is set apart for holdings, including holdings by way of lease, all reserves made under the Act itself or mining or forestry Acts shall be revoked. Thus when land is set apart for disposition under the Crown Lands Act it becomes free from any reservations made under the Acts mentioned. The second part of s. 188 therefore shows that a reservation may be made for mining or forestry purposes after land has been made available to be dealt with under the Act—with the necessary result of depriving the Crown lessee of some of his rights. There is a similar diminution of rights if a reservation from sale of land contained in a Crown lease is made after the grant of the lease. The fourth, fifth and sixth paragraphs of s. 134 also show that land in a Crown lease may be the subject of reservations for timber or mining purposes. Neither in these cases nor in the case of reservations made under s. 29 is there any provision requiring that the reservation should, in order to be effective, be made before the granting of the Crown lease. I am therefore of opinion that s. 29, according to its natural construction, authorized the notification of the reservation in the present case and that s. 188 prevents the conversion of the lease into a conditional purchase. For these reasons I am of opinion that the decision of the Full Court was right and that the appeal should be dismissed.
Dixon J.
The ultimate question in this appeal is whether the holder of a Crown lease in perpetuity of land in New South Wales may convert it into a conditional purchase notwithstanding that since the grant of the Crown lease the Minister for Lands has notified that the lands comprised in the lease are temporarily reserved from sale generally.
The question depends on the interpretation of more than one provision of the Crown Lands Consolidation Act 1913 as amended. Six separate questions of construction were submitted by the judge of the Land and Valuation Court to the Supreme Court. These are the subsidiary questions into which the ultimate question is resolved. The Supreme Court decided all six questions in favour of the Crown, holding that by reason of the reservation the Crown lease could not be converted into a conditional purchase. From this decision the holder of the Crown lease now appeals.
The conversion of a settlement lease and of a Crown lease to a conditional purchase is authorized by s. 184. But s. 188 provides that if a settlement lease or Crown lease comprises land which is reserved from sale such reserved land shall not be convertible into a conditional purchase unless and until such reservation shall have been revoked.
The basal question must be whether this provision contemplates a reservation made or attempted after the grant of the settlement lease or the Crown lease. There are various ways in which land may be reserved from sale. The forfeiture or surrender of a purchase lease or homestead selection operates as a reservation from further sale or lease until a notification to the contrary is gazetted: s. 206 (2). So does the expiration of the term of a lease: s. 228. A temporary reservation from sale may be made expressly by the Minister for any public purpose or for commonage or for a population area—and it is for him to say what is a public purpose: s. 28 and s. 5, definition of "public purpose."
But the reservation from sale in the present instance is one that the Minister purported to make under s. 29. The terms of that provision are as follows:—"The Minister may by notification in the Gazette reserve any Crown lands therein described from being sold or let upon lease or license in such particular manner as may be specified in such notification; and the lands shall thereupon be temporarily reserved from sale or lease or license accordingly, and, unless the contrary is expressly declared, shall not be reserved from sale or lease generally."
The reservation gazetted is expressed as a notification that the Crown lands therein described shall be and are thereby temporarily reserved from sale generally.
Does s. 29 authorize such a notification and does it authorize one in respect of land already the subject of a Crown lease in perpetuity? Perhaps the question is interdependent with the question whether s. 188 covers a reservation made after the grant of the Crown lease. There is, however, a preliminary difficulty in being sure that s. 29 means to confer positively any power of making a reservation generally. It appears to have been assumed without question that it does so. But such a reservation is referred to in the last words only of s. 29. It is expressed not as an affirmative grant of power but as a prohibition against reserving from sale or lease generally subject to an unless clause—"unless the contrary is expressly declared." At first sight that looks, not like the grant of a power but like a conditional prohibition against the exercise of some power the source of which is elsewhere. But the draftsmanship of this and many other provisions in the legislation is both clumsy and inartificial. It may be an indirect way of conferring a power expressly to declare a general reservation. As a prohibition its purpose or policy has not been revealed. No-one throughout the proceedings has supported the literal reading and, on the whole, I am not prepared to adopt it.
The application of s. 29 is denied on other grounds. First it is said that lands comprised in a Crown lease in perpetuity are no longer Crown lands. That depends on the definition of the expression in s. 5. Section 5 provides that unless the context necessarily requires a different meaning the expression "Crown lands" means lands vested in His Majesty and not permanently dedicated to any public purpose or granted or lawfully contracted to be granted in fee simple under the Crown Lands Acts. Of this definition the Privy Council spoke as follows:—"The interpretation section is one that has given rise to much of the argument, and no doubt it is open to the criticism that the legislature has occasionally throughout the Act used the defined expressions in a sense different from that provided by the section. But that section expressly guards the interpretation by declaring that the defined meaning is to be adopted "unless the context necessarily requires a different meaning," and their Lordships are bound to follow in that respect the mandate of the statute. The Act deals with Crown lands only, and one of its great objects was to bring all Crown lands within the provisions of one statute and under the control of the executive" (Tearle v. Edols [1] ). I think that it is impossible to exclude the operation of the definition from s. 29. But it is said for the lease-holder that the existence and the incidents of the Crown lease are inconsistent with the land falling within the definition of "Crown Lands." Because it is a Crown lease in perpetuity the land, it is claimed, is no longer vested in His Majesty within the meaning of the definition. No doubt the reversionary interest in the Crown is slight and it may be said to be technical. But a rent is reserved, there are special conditions, the interest is capable of surrender and, for non-payment of survey fees, of forfeiture. It is difficult to find any ground for giving to the word "vested" anything but its legal meaning. It can hardly be confined to "vested in possession." The reference in the exclusionary part of the definition to land granted in fee simple tends strongly against the view that after the grant of a limited interest in possession land is no longer "vested" in the Crown for the purposes of the definition. In my opinion land subject to a Crown lease in perpetuity may still be "vested in His Majesty." But it is argued for the holder of the Crown lease that by virtue of the grant of the lease the land has been "lawfully contracted to be granted in fee simple under the Crown Lands Acts" within the meaning of the definition. The foundation for this contention is the right annexed by s. 184 to a Crown lease to apply for conversion to a conditional purchase. It may be conceded that a conditional purchase itself involves a contract on the part of the Crown to grant a fee simple. But the statutory convertibility of a Crown lease to a conditional purchase does not itself amount to a contractual obligation on the part of the Crown to grant a fee simple. It is a right given by statute to the issue of another instrument having a contractual force with reference to the grant of a fee simple. That is all. It follows in my opinion that the land subject to the Crown lease formed Crown lands for the purpose of s. 29. But the question remains whether the power conferred by s. 29 is exercisable after the grant of a Crown lease has been made. It seems the better construction of the ambiguously expressed provision to treat the power of the Minister as enabling him to reserve land from sale, or to reserve it from leasing, or to reserve it from licensing, or to reserve it from all or any two of these forms of dealing. But if a lease has been granted a reservation subsequently made from leasing could not derogate from the existing lease. It could apply only after the expiration or sooner determination of the existing lease.
1. (1888) 13 App. Cas. 183, at p. 189.
In the same way a reservation from sale could only apply subject to existing leases and licenses, if any. If it were not for s. 188 it would follow that the reservation would be subject to the statutory right annexed to the Crown lease to apply for conversion to conditional purchase. On this view the solution of the matter would finally turn on the applicability of s. 188. But there is still the overriding contention that upon a proper understanding of s. 29 the power of reservation it contains cannot be exercisable after a Crown lease has been granted. In support of the contention it may be said that no public purpose can be fulfilled by reservation, that except by chance the land can never again come into the possession of the Crown or be open for any form of public enjoyment. Plainly a lease or licence is out of the question except in the extremely remote contingency of the destruction by surrender, forfeiture or lawful revocation of the Crown lease. Cogent as these considerations are in relation to the practical policy of the section, the difficulty is to escape from its actual words, once it is held, as I think it must be, that notwithstanding the Crown lease the land remains Crown lands.
The whole matter is therefore remitted to the construction of s. 188. Does this section apply to Crown leases or settlement leases granted before the making of the reservation?
The argument for the holder of the Crown lease is that it should not be construed so as to authorize or allow of an interference with rights otherwise vested in the leaseholder and that its language admits of, if it does not suggest, an interpretation which would limit the application of the section to cases where before the grant of the settlement lease or the Crown lease the land had been reserved from sale. As a matter of history the provision first appeared in s. 9 of the Crown Lands (Amendment) Act 1908 (No. 30). That Act made settlement leases convertible into conditional purchase. It was Act No. 27 of 1917 that made the provisions applicable also to Crown leases. In its original form what is now s. 29 was expressed a little differently. It ran—If the land comprised in a settlement lease has been reserved either wholly or in part from sale such reserved land shall not be convertible into a conditional purchase unless and until such reservation has been revoked. At first sight the expression "has been reserved" may be thought to support the view that the section was meant to apply only where the reservation was made before grant of the settlement lease. But I think that the words "has been reserved" do not properly mean more than has been reserved before conversion. In both forms of the provision the word "convertible" is relied on as describing a quality annexed to the interest granted by the lease and as therefore pointing to a characteristic which attaches from the beginning or not at all and therefore remains part of the rights granted.
I have felt not a little doubt whether s. 188 should not receive the restrictive construction contended for. But I have reached the conclusion that the considerations relied upon are insufficient to warrant the placing of any limitation upon the generality of the language in which s. 188 is expressed. As is pointed out by Jordan C.J., the rights of conversion conferred by the Crown lease are subject alike to ss. 29 and 188 and these express conditions controlling the operation of s. 184. The argument that vested rights should not be impaired throws no light on the extent of the conditions.
I am of opinion that the reservation was effective under s. 184 to prevent conversion.
It is perhaps better to state in terms of the questions submitted what is my decision upon the subsidiary questions. My opinion is—(a) that the land was "Crown Lands" within the meaning of the Crown Lands Consolidation Act 1913 at the time of the notification of the reservation from sale; (b) that the land was at the date of the application for conversion into Conditional Purchase—(i) vested in His Majesty and (ii) not granted or lawfully contracted to be granted in fee simple under the Crown Lands Acts; (c) that the land even if otherwise it were Crown Lands within the meaning of the Crown Lands Consolidation Act 1913 at the time of the notification of the reservation from sale, was at that time Crown Lands within the meaning of s. 29 of the said Act; (d) that independently of (a), (b) and (c) above, s. 29 of the Crown Lands Consolidation Act authorizes the Minister to reserve any Crown Lands which are for the time being held under a Crown Lease, being a perpetual lease, from being sold or let upon lease or licence; and (e) that the section authorizes the Minister to reserve Crown Lands from being sold in terms of the notification gazetted; (f) that the effect of ss. 29, 184 and 188 of the Crown Lands Consolidation Act is that a valid reservation by the Minister under s. 29 of the land comprised in a Crown Lease from sale generally made during the currency of the Crown Lease prevents the conversion of that Crown Lease into a Conditional Purchase.
I therefore think that the holder of a Crown lease in perpetuity of land in New South Wales may not convert it into a conditional purchase if since the grant of the Crown lease the Minister for Lands has notified that the lands comprised in the lease are temporarily reserved from sale generally.
The appeal should be dismissed with costs.
McTiernan J.
I am of the opinion that the appeal should be dismissed.
The result of the answers given to the questions in this case in the Supreme Court is that the appellant's Crown lease was not convertible into a conditional purchase, because, before he applied to convert it, the land the subject of the lease had been reserved from sale. I am of the opinion that this result is in accordance with the proper interpretation of the provisions of the Crown Lands Consolidation Act 1913 upon which the case depends. These sections are 5, which includes the definition of the expression "Crown lands," 29, 184 and 188.
The appellant relies upon the fact that the reservation from sale was made, after the Crown lease, which he applied to convert, was granted to him. It is true that the reservation of the land intercepted the appellant's right to apply to convert the land into a conditional purchase, but the reservation was lawfully made and there is nothing in the Act which could save that right. The terms of ss. 29 and 188 are too clear to permit of any implication of a provision which would retain the convertibility of a Crown lease which, like the appellant's, was granted before the land comprised in the lease had been reserved from sale.
The reservation from sale was made under s. 29. This section is expressed to apply to any Crown lands. The application to convert was founded upon s. 184. Section 188 provides that if a Crown lease comprises land which is reserved from sale such land shall not be convertible into a conditional purchase unless and until the reservation is revoked. There was no revocation of the reservation of the land in this case.
Section 188 is the last of a series of sections beginning with s. 184, which is headed "Conversion of Settlement or Crown leases." Section 188 no less than s. 184 is part of the code in the Act relating to the conversion of any Crown lease into a conditional purchase. Section 188 contains a general rule. It is expressed to apply to any application to convert a Crown lease into a conditional purchase. The condition of its operation is that the land comprised in the Crown lease has been reserved from sale before the holder applies to convert. While the reservation stands it would be contrary to the section to accept the application. The operation of the section is not limited to Crown leases granted after the land comprised in them respectively was reserved from sale. The case comes down to the question whether land comprised in a Crown lease can be lawfully reserved from sale under s. 29 after the grant of the lease.
But independently of the question created by the existence of the grant at the time the reservation was made, the appellant raises the question whether the land comprised in a Crown lease is Crown land. Section 29 applies in terms to "any Crown lands." The expression "Crown lands" is given a meaning by s. 5. This section says that the expression is to have that meaning throughout the Act unless the context necessarily requires that it should have a different meaning. It cannot be said that the context of s. 29 requires that the words "Crown lands" should bear in its context a meaning differing from the statutory meaning. The section is obviously intended to apply to any lands which are within the statutory meaning of "Crown lands." The land comprised in a Crown lease is within the terms of the definition. The statutory nature and incidents of a Crown lease are not sufficient to produce the result that when land is disposed of in that way the Crown is wholly divested of the land. Further, such a disposal of Crown lands is not one of the methods of dealing with such lands, mentioned in the statutory definition, which takes lands "vested in His Majesty" out of the category of Crown lands. In particular, s. 184, which gives to the holder of a Crown lease the right to apply to convert it into a conditional purchase, does not make a Crown lease a grant or a contract to grant the land in fee simple. The clear assumption upon which the legislature has proceeded is that land comprised in a Crown lease is Crown land as defined by the Act. Section 188 is enacted upon that assumption. If such land were not Crown land, it would not be subject to the power of reservation from sale given by s. 29, and s. 188 could have no practical purpose.
Section 29 is expressed to apply to "any Crown lands." There is nothing in the section to justify the exception, by necessary implication, of Crown lands comprised in a Crown lease. The power to reserve land from sale would not extend to the making of a reservation from sale, of land which was the subject of a sale: it is not a power to make a reservation which would be repugnant to any disposal of the land already made in accordance with the Act. But this consideration does not justify the view that land the subject of a Crown lease cannot be reserved from sale; a grant by way of Crown lease is not a sale. The reservation from sale defeats the holder's right to apply to convert the lease into a conditional purchase. But it is evident from the language of ss. 29 and 188 that the legislative intention is that the reservation of any Crown lands from sale made under the former section is to have that result.
Williams J.
The appellant is the holder of Crown lease 1943/1 under the provisions of the Crown Lands Consolidation Act 1913 N.S.W., Land District of Taree, in the State of New South Wales. The lease which is a lease in perpetuity comprises 2,063 acres and is situated in the parish of Ward, County of Hawes in that district. By notification published in the Government Gazette on 10th January 1947 the Minister for Lands notified that in pursuance of the provisions of s. 29 of that Act certain Crown lands (which included the land leased to the appellant) were temporarily reserved from sale generally. On 12th November 1947 the appellant applied to have the Crown lease converted into a conditional purchase. On 11th December 1947 the Local Land Board District of Taree confirmed the application. The Board was of opinion that despite the notification the lessee had the right to convert the Crown lease into a conditional purchase because upon confirmation of the lease the land became land lawfully contracted to be granted in fee simple and was not therefore Crown lands open to be reserved from sale under the provisions of s. 29 of the Act on 10th January 1947. On 14th January 1948 pursuant to s. 20 of the Act the Minister for Lands referred the decision of the Board to the Land and Valuation Court. That court upheld the reference and returned the application for conversion to the Board for disallowance. The appellant then requested that court pursuant to s. 17 of the Land and Valuation Court Act 1921 to state certain questions of law for decision of the Supreme Court.
These questions were "(a) Whether the subject land was "Crown Lands" within the meaning of the Crown Lands Consolidation Act 1913 at the time of the notification of the reservation from sale; (b) Whether the subject land was at the date of the application for conversion into Conditional Purchase—(i) vested in His Majesty; and (ii) Not granted or lawfully contracted to be granted in fee simple under the Crown Lands Acts; (c) Whether the subject land even if otherwise it were Crown Lands within the meaning of the Crown Lands Consolidation Act 1913 at the time of the notification of the reservation from sale, was at that time Crown Lands within the meaning of s. 29 of the said Act; (d) Whether independently of the answers to questions (a), (b) and (c) above, s. 29 of the Crown Lands Consolidation Act authorizes the Minister to reserve any Crown Lands which are for the time being sold or let upon lease or license; and (e) Whether the said section authorizes the Minister to reserve Crown Lands from being sold in terms of the notification mentioned in par. 3 of this case; (f) Whether the effect of ss. 29, 184 and 188 of the Crown Lands Consolidation Act is that a valid reservation by the Minister under s. 29 of the land comprised in a Crown Lease from sale generally made during the currency of that Crown Lease prevents the conversion of that Crown Lease into a Conditional Purchase." The Supreme Court ordered that all these questions should be answered in the affirmative.
The appellant has now appealed to this Court and claims that all these questions should have been answered in the negative. In my opinion the Supreme Court was right in answering questions (a), (b) and (e) in the affirmative but should have answered questions (c), (d) and (f) in the negative. My reasons for this conclusion may be shortly stated as follows. Section 6 of the Crown Lands Consolidation Act provides that Crown lands shall not be sold, leased, dedicated, reserved or dealt with except under and subject to the provisions of the Act. Section 5 defines Crown lands to mean lands vested in His Majesty and not permanently dedicated to any public purpose or granted or lawfully contracted to be granted in fee simple under the Crown Lands Acts. Section 184, so far as material, provides that upon application as prescribed the holder or the owner of any Crown lease which is not liable to forfeiture may convert such lease into a conditional purchase upon confirmation by the Local Land Board the conversion shall be deemed to have taken effect as from the date of application for conversion. On such confirmation the Crown land shall be deemed to have been surrendered to the Crown as from the date of application for conversion with such application for conversion a provisional deposit shall be paid at the rate of 1s. per acre of the area proposed to be converted into a conditional purchase as payment or part payment of a deposit to be made of five per centum of the capital value of the land. The cost of any necessary survey or sub-division and any balance of the deposit shall be paid by the applicant within one month after he has been called upon to do so; and upon default the application may be declared to have lapsed and any moneys paid therewith shall thereupon be forfeited. Section 29 of the Act is in the following terms: "The Minister may by notification in the Gazette reserve any Crown lands therein described from being sold or let upon lease or license in such particular manner as may be specified in such notification; and the lands shall thereupon be temporarily reserved from sale or lease or license accordingly, and, unless the contrary is expressly declared, shall not be reserved from sale or lease generally."
It was contended for the appellant that the notification of 10th January 1947 could not affect his land because on that date it was no longer Crown land either because it was not land vested in His Majesty or alternatively because it was, as the Local Land Board held, land lawfully contracted to be granted in fee simple under the Crown Lands Acts. But on that date the Crown was still the legal owner of the reversion in the land and it was still, in my opinion, land vested in His Majesty. Further it was not land lawfully contracted to be granted in fee simple because it was still land leased by the Crown to the appellant. Provided the lease had not become liable to forfeiture, the appellant, unless prevented by the notification of 10th January 1947, had the right to apply under s. 184 of the Act to have the lease converted into a conditional purchase and upon confirmation of the application by the Local Land Board the Crown lease would be deemed to have been surrendered from the date of the application and the applicant to be the holder of a conditional purchase but it would only be at this stage that the land could be lawfully said to be land contracted to be granted in fee simple.
It was contended for the respondent, and the contention was upheld in the courts below, that although land had been let on a Crown lease so that it could no longer be reserved from leasing under s. 29 and s. 184 conferred on the holder of the lease a statutory right to apply to have the lease converted into a conditional purchase the Minister could still reserve the land under s. 29 from being sold by an appropriate notification in the Gazette at any time prior to the holder of the Crown lease applying under s. 184 to have the lease converted into a conditional purchase. In dealing with this contention it is necessary to have regard to s. 188 as well as s. 29. Section 188, so far as material, is in the following terms: "If a settlement lease or Crown-lease comprises land which is reserved from sale such reserved land shall not be convertible into a conditional purchase unless and until such reservation shall have been revoked." The meaning of s. 29 is by no means clear. The words "in such particular manner as may be specified in such notification" appear to refer to the various manners in which land may be sold or let on lease or license under the Act and therefore to authorize the Minister temporarily to reserve any Crown lands from being sold or let on lease or license in such of those manners as may be specified in the notification. The section also appears to authorize the Minister to reserve any Crown land from sale or lease generally that is to say from any form of sale or lease provided it is expressly stated that the lands are reserved from sale (as in the present case) or from lease or from sale and lease generally (it is to be noted, though nothing turns upon it, that the word "license" is omitted from the second limb of the section).
It is a principle of construction that Parliament cannot be supposed to intend, in the absence of clear words showing such intention, that one man's property shall be confiscated for the benefit of others, or of the public, without any compensation being provided for him in respect of what is taken compulsorily from him (London and North Western Railway Co. v. Evans [1] ; Halsbury's Laws of England, 2nd ed., vol. 31, p. 504.) A reservation from sale under s. 29 reserves the land from sale temporarily but the section does not place any limitation upon the period for which the land may be so reserved so that the period is quite indefinite. In the present case the appellant upon becoming the holder of the Crown lease acquired an immediate legal right to apply under s. 184 to have the lease converted into a conditional purchase and to have this application confirmed provided his lease was not then liable to forfeiture. The imposition for an indefinite period of a restriction upon the exercise of this right could be a grave detriment to the appellant and an intention should not be imputed to the legislature to interfere with such a right without compensation. Section 23 and 34 provide two instances in the Act where holders of Crown land may be deprived of existing rights and in both these instances, as one might expect, the legislature has made its intention clear and provided compensation.
1. (1893) 1 Ch. 16, at p. 28.
Section 188 imposes an express restriction upon the right of the holder of a Crown lease to convert it into a conditional purchase. The expression "land which is reserved from sale" in that section appears naturally to refer to land which is so reserved at the date of the Crown lease. It is plainly intended to refer to such reservations and if it is intended also to include reservations after that date one would have expected the section to contain the words "or shall be" after the word "is." The words "shall not be convertible into a conditional purchase unless and until such reservation shall have been revoked" and particularly the word "convertible" instead of "converted" also appear naturally to refer to a reservation in existence at the date of the lease restricting the immediate right of conversion which would otherwise have arisen on the grant of the lease. It seems to me that the words of ss. 29 and 188 are reasonably capable of being construed so as to avoid interference with the right of the holder of a Crown lease of land which was not reserved from sale at the date of the lease to convert the lease into a conditional purchase and that the sections should be so construed. In my opinion s. 29 refers to reservations notified whilst the Crown lands in question are available for sale or for letting on lease or license because they are not at the date of the reservation sold or let on lease or license, or in other words are not the subject of any existing form of tenure authorized by the Act.
Section 30 of the Act which authorizes the Minister by notification in the Gazette to revoke or modify temporary reservations from sale or lease or license including reservations made under s. 29 contains a proviso that save as otherwise in the Act provided Crown lands temporarily reserved from sale shall not be sold before the expiration of sixty days after the reservation thereof shall have been revoked, and that the revocation of any reservation from lease or from license or from lease and license shall not take effect until the expiration of sixty days after the date of the publication in the Gazette of the notice of revocation. The purpose of the proviso appears to be to provide a period between the revocation of the restriction on the sale or leasing or licensing of Crown lands and their disposal by sale, lease or license, so that the revocation may become known and persons interested may have an opportunity of applying for the lands. In Minister for Lands v. Harrington [1] , Lord Hobhouse delivering the judgment of the Privy Council, said, with respect to this period of grace, that "their Lordships see no reason to doubt that in providing that land released from a temporary reserve shall not be sold for sixty days, the Legislature intended to say that the interest of the Crown should not be disposed of for pecuniary consideration in the ways which the reservation had precluded" [2] . But the public would not be interested where the lands were already the subject of a tenure such as a Crown lease which gave the holder the exclusive right to apply for a conditional purchase.
1. (1899) A.C. 408.
2. (1899) A.C., at p. 414.
For these reasons I would allow the appeal, set aside the order of the Supreme Court and answer questions (a), (b) and (e) in the affirmative and (c), (d) and (f) in the negative. The respondent should pay the costs of the appellant in the Supreme Court and in this Court.
Webb J.
Sugerman J., in his judgment in the Land and Valuation Court of New South Wales, said that before him no argument was directed to the question whether the first paragraph of s. 188 applied to a reservation made during the currency of a Crown Lease as distinct from one made prior to its commencement. He added that it might be that s. 29 would not, of its own force, have the effect of preventing conversion under s. 184 where the reservation was made during the currency of the lease; but that once the position was reached that there might be a valid reservation during the term of the lease the language of s. 188 seemed wide enough to have that effect. Earlier in his judgment he observed that s. 23 permitted the withdrawal of lands from existing leases and that s. 34 authorized the setting aside of stock routes through lands under lease; but he did not find it necessary to point out that under these two sections compensation was provided for such interference. A reservation under s. 29 of lands already comprised in a Crown lease would not prevent the lessee from using the land as before but it would postpone the time when, by purchasing it, he might add to the use to which he might put it. There is no reason that I can suggest which would warrant compensation under ss. 23 and 34 and not under s. 188 if s. 29 authorizes a reservation after the Crown lease has been granted. In view of the policy of the legislation to provide compensation when the legislation authorizes an interference with a lessee's rights which is not expressly authorized by the lease itself, if the section which is claimed to authorize such interference with or postponement of a lessee's rights is silent as to compensation, it should not, in my opinion, be held to authorize such interference or postponement, unless the Court is satisfied that the words relied upon to warrant such interference or postponement permit of no other conclusion. Further, as Mr. Badham submitted for the appellant, any denial of the right of conditional purchase is a derogation from the grant, and, although the legislature has the undoubted power to derogate from a grant or to authorize the Executive so to do, the statute should not be considered to have that effect unless the wording thereof is plain and unambiguous. Now I think that both s. 29 and s. 188 are ambiguous. As to s. 188 the words "land which is reserved from sale" may, in my opinion, be taken to refer only to lands so reserved at the time the lease is granted and, as to s. 29, I think it may be taken to refer only to Crown lands of which it can be predicated that they have been neither sold nor let, thus necessarily excluding the definition of Crown lands in s. 5.
I would allow the appeal. |
high_court_of_australia:/showbyHandle/1/9107 | decision | commonwealth | high_court_of_australia | text/html | null | General Motors-Holden's Pty Ltd v Moularas [1964] HCA 39 | https://eresources.hcourt.gov.au/showbyHandle/1/9107 | 2024-09-13T22:52:50.652753+10:00 | High Court of Australia
Barwick C.J. Taylor, Menzies, Windeyer and Owen JJ.
General Motors-Holden's Pty Ltd v Moularas
[1964] HCA 39
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
July 29
Barwick C.J.
This is an appeal from the Full Court of the Supreme Court of Victoria dismissing a motion for a new trial in an action in which a jury returned a verdict for the plaintiff in the sum of £19,797 14s. 0d. Judgment was entered upon this verdict for the sum of £19,751 5s. 4d., being the amount of the verdict less certain payments of workers' compensation which had been received by the plaintiff.
The cause of action was negligence on the part of the defendant, the plaintiff's employer, in having failed to provide him with adequate implements and with proper protective clothing, whilst working at a furnace of the defendant. The defendant, besides denying the negligence, pleaded the contributing negligence of the plaintiff.
The essential facts of the case were simple in the extreme. The plaintiff's tasks included the clearing of the mouth of an operating furnace containing molten metal for which purpose, by the defendant's concession, he needed for his safety a rake of some fifteen feet in length. Also, by the defendant's concession, he needed not merely gloves but gauntlets to protect his lower arms.
Admittedly, on the day of his injury the plaintiff was working at the furnace—and apparently had worked for the greater part of his shift—with a rake not more than eleven feet in length and was wearing at the time of the occurrence gloves but not gauntlets. The disputed area between the parties consisted, on the one hand, in the assertion by the defendant that at another furnace some sixty feet away from that at which the plaintiff was working there was a rake of adequate length, that the plaintiff knew that such a rake was likely to be there, that during his six months' employment with the defendant the plaintiff had on other occasions gone to that other furnace and procured such a rake for his use, that the plaintiff had not bothered on this occasion to look for another rake, that the defendant had provided the plaintiff with gauntlets and had exhibited notices directing their use by employees in the plaintiff's circumstances, and that by its foreman the defendant had on other occasions directed the plaintiff to use them when he was observed not to be doing so; and, on the other hand, in the plaintiff's denial that there was another rake available to him, in his assertion that he had looked around for another and longer rake unsuccessfully, that he had complained to the foreman on this day of the shortness of the rake without any replacement being forthcoming, and in the plaintiff's denial that gauntlets were at any time available to him, or that any notice about them as asserted by the defendant was brought to his attention or that he had ever been spoken to about not wearing them.
The plaintiff was burnt as a result of flame emitted from the mouth of the furnace which he was clearing with the aid of the short rake. The burns extended along and up his arm, higher, it seems, than the part of his forearm which gauntlets of the kind claimed by the defendant to be available to him would have covered had they been in use. The burns healed well but the plaintiff developed a condition of hysterical paralysis, which although temporarily responsive to treatment, ultimately rendered the plaintiff unemployable for a substantial period. His right hand and arm, right leg and right eye became progressively involved and apparently his sexual capacity was affected. He was in this condition at the date of the trial, having deteriorated to such a degree that, as the trial judge observed, he presented a pitiable spectacle. The medical evidence called for the plaintiff—none being called for the defendant—gave the plaintiff a less than even chance of full recovery but a more than even chance of partial recovery. But no medical evidence was given as to when either event might be expected, beyond the statement that there was a possibility of an early autogenous recovery and that treatment of a sophisticated kind might accelerate the event at least of partial recovery. No prognosis was offered of the degree of his employability in the event of either full or partial recovery, or of the nature of the work for which he would then be fitted. It was clear that recovery of the use of his right hand—he being a right-handed worker—was at best and in any event remote.
The plaintiff was a Greek who had migrated here in 1955 and still had very little English, giving his evidence at the trial through an interpreter. He was approximately thirty-eight years and nine months of age at the time of his injury and was a labourer capable of doing heavy work, an above average workman, of a happy disposition and a regular attendant at work. At the time of the injury he was in receipt of £22 per week, of which £19 odd represented his basic rate of pay and the balance overtime. An actuary was called who gave the present values of £1 per week payable to a man aged forty for life as £799, until he was seventy as £748; and until he was sixty-five as £703. These figures he derived from use of the mortality tables and compound interest at the rate of five per cent per annum. In cross examination the actuary admitted that his calculation did not take into account the contingencies of illness and unemployment but only the uncertainty of the date of death. He also admitted that he had used an average rate of interest, on the assumption that the actual rates would fluctuate above and below that rate throughout the periods he was covering in his calculation.
The grounds of the motion to the Full Court were that the trial judge had inadequately presented to the jury the facts of the case, specifically certain facts claimed to tell in favour of the defendant both as to the issue of negligence and as to the issue of contributory negligence, and had failed adequately to relate the facts of the case to the last mentioned issue. But the directions of the learned trial judge on the law to be applied by the jury were not attacked.
In addition, the defendant complained that in presenting the evidence of the actuary as to the present values of a sum of £1 per week for the various periods, and in referring to the plaintiff's earnings current at the time of the injury, his Honour had failed to call the jury's attention to the contingencies and hazards of life and of employment which the plaintiff might have had in any case to endure, contingencies and hazards not reflected in the actuary's computations; and that therefore his Honour's directions as to damages amounted to a misdirection. Finally, the defendant attacked the amount of the verdict itself as excessive.
The members of the Full Court in considered judgments, although not unanimous as to the adequacy of the summing up in relation to the actuary's evidence and to the need to consider the contingencies which might have affected the plaintiff's earnings in any event, were all of opinion that no substantial wrong or miscarriage of justice had occurred and that the damages were not excessive. Accordingly, having regard to the terms of O. LVIII, r. 6, the Full Court dismissed the appeal.
Before this Court the appellant repeated the submissions made to the Supreme Court, adding others which sufficiently appear from what follows.
I need take no time in discussion of the appellant's submissions so far as they seek a new trial of the issues of negligence and contributory negligence. Although the precise relationship of the facts to the issue of contributory negligence might have been more specifically drawn to the jury's attention, in my opinion the summing up as a whole brought sufficiently to their attention both issues and the facts which bore on their resolution. In my opinion there was no misdirection in respect of the issues of liability.
The appellant's submission before us, in addition to complaining that the trial judge had failed to call the attention of the jury to the fact that the actuary's figures ignored the ordinary contingencies of life such as sickness, unemployment or supervening accident, was that the learned judge had failed both in relation to the use of the actuary's figures and to the use of the plaintiff's current earnings, to remind the jury that when estimating general damages they should take into account the plaintiff's predisposition to hysterical reaction if they were prepared to accept the medical evidence on this point.
At the conclusion of the summing up counsel for the defendant submitted that his Honour had not and should have dealt in the summing up "with the proper method of dealing with the actuarial figures" which, as counsel pointed out, did not take into account "imponderables such as unemployment, sickness or other form of accident". Counsel submitted that these matters required the actuarial figures to be discounted.
Both the terms of that submission and what followed are highly significant. The submission related only to a qualification of the summing up in relation to the actuarial evidence, and the suggested qualification related only to what I might call the normal contingencies and hazards of life and did not relate to the abnormal contingencies which might flow from any pre-injury disposition of the plaintiff to hysterical reaction.
The trial judge, on hearing the defendant's submission, was clearly conscious of the fact that he had not given the jury any direction as to the need to consider contingencies and hazards of life which in any case might have reduced the plaintiff's earnings in the future. He asked counsel did he ask him to recall the jury and take up the matter of damages with them again. Counsel, who realized that he faced a dilemma—of either risking undue emphasis in the minds of the jury on the issue of damages or of forfeiting or risking the benefit of the deficiency in the summing up by not requiring the judge to amend his charge, opted to take that risk. In my view he chose not to ask the judge to correct the summing up in the aspects he had raised. In thus reciting the conduct of the trial I am far from criticizing the course counsel took. He was in the atmosphere of the trial and chose what may well have been the wiser course in the interest of his client. But his choice cannot be regarded as without consequence before the Full Court and before us on appeal from the Full Court.
It is quite plain that the trial judge did not, either in relation to the actuary's evidence or in relation to the use of the plaintiff's current earnings, call the jury's attention to the need to have in mind those contingencies of life to which all people in the plaintiff's situation are subject, and specifically to those to which the plaintiff might be peculiarly liable because of his pre-injury condition, if the jury chose to accept the medical evidence of the pre-existence of that condition.
His Honour followed the course of dealing with the facts, including the medical evidence, in a global manner, counsel no doubt having done so in addressing the jury. This led him to refrain from specifically relating the evidence as to the plaintiff's pre-existing disposition to hysterical reaction to the need to consider to what contingencies the plaintiff might have succumbed had there been no injury. But in dealing with the matter of the assessment of damages generally and very properly charging the jury not to be extravagant but to be fair to both parties, doing the best they could in weighing the uncertainties in the case, his Honour did call their attention to the evidence that the plaintiff was thought to have an hysterically predisposed personality, and that what had happened to him subsequent to the injury was a condition that might develop in other circumstances. I think in this case his Honour ought specifically to have alerted the jury to the way in which they were entitled to use this evidence when assessing damages. But I do not think that, having regard to what he did say, there was any misdirection. In addition, counsel, who had heard the summing up and who may have thought that the jury had had their attention sufficiently called to the significance of the plaintiff's alleged predisposition to hysterical reaction, made no request to his Honour to alter his summing up in this respect.
Dean J. and Gowans J. thought that the jury ought to have been told to have in mind the ordinary contingencies and hazards of life when using the actuary's figures. Gowans J. felt constrained to this conclusion because of the authorities to which he referred in his judgment, but particularly because of what was said by the Court of Common Pleas in Phillips v. London and South Western Railway Co. [1] .
1. (1879) 5 C.P.D. 280.
No doubt there are some directions to a jury which are so indispensable that they must be given in all cases, but as to other directions, the infinite variation of the facts of cases, and the varying consequences of the manner in which they are fought and the different ways in which a summing up may communicate the issues and the facts of a case to a jury make it, in my opinion, undesirable to make any universal and inflexible rule with respect to them. I do not read the authorities as setting up any such rule with respect to the direction to a jury that in assessing damages for future economic loss in respect of uncertain periods of time, account must be taken of the contingencies and hazards of life which might in any case have reduced the plaintiff's earnings had no injury taken place. But it ought to be given as of course, unless there are some special features in the case which make it clear that the jury are unlikely, having regard to what has taken place at the trial, including the terms of the summing up itself, to overlook the matter. The circumstance that these contingencies are not the subject of specific, or of any, evidence and that their existence is a matter of general knowledge rather requires that the direction be given than excuses the failure to do it. In general, the jury should be clearly told that in assessing future economic loss, they must have regard to such effect as they think the ordinary contingencies of life including, where appropriate, the possibility of his advancement, would have had on the plaintiff's earnings. Where actuarial computations are proffered in evidence it is most important that the jury are clearly told of the contingencies of which the actual computations take no account, and directed to make allowance in their use of these figures, if they use them at all, for the effect which they think these contingencies would have had in the plaintiff's case. Nothing of this kind was put to the jury in this case and there was nothing in its facts, or in its conduct, or in the summing up generally which, in my view, relieved the trial judge of the need to give such a direction to the jury. In my opinion the summing up was defective in this respect.
However, the defendant at the trial raised only the failure of the judge to call the jury's attention to the need, when considering the actuary's figures, to consider the contingencies of life. None of the other matters were raised in any form or at all during or at the conclusion of the summing up. As I have already indicated, counsel for the defendant did raise the first mentioned matter but deliberately declined to ask the trial judge to recall or redirect the jury on the point.
The Supreme Court in exercising its jurisdiction to grant a new trial is supervising its own procedures to ensure that no miscarriage of justice has occurred. In this it has of necessity a wide discretion which ought not to be reduced by any universal formulation of the occasions for its exercise. No rule has been made in Victoria requiring that, without the leave of the Court, new trials will not be granted for misdirection or non-direction where the point of criticism of the summing up has not been taken at the trial in such manner that the trial judge has an opportunity to remove the criticism by redirecting the jury before they consider their verdict. But the common law on this matter is quite clear. Without attempting an exhaustive statement, it is established that, generally speaking, a criticism of the summing up which is capable of being cured at the trial must be taken at the trial and the judge asked to correct it. If this is not done in a case where it ought to be done, a new trial on the basis of that criticism of the summing up will, in general, not be ordered. Again, the matter is not the subject of any hard and fast rule, because the court retains a general discretion and is able in a proper case in the interests of justice to relax the requirement.
But there are, in my opinion, no features in this case for not insisting on applying the general rule and refusing a new trial because no exception was taken to the summing up except as to one limited point and as to that point the judge was not asked to correct his summing up.
This is sufficient to dispose of the submissions other than that which asserts that the damages were excessive. I would wish to say, however, that I see no reason to disturb the finding of the Full Court of the Supreme Court that they were not satisfied that any substantial wrong or miscarriage resulted in this action. It may be conceded that if a jury are not told to take into account contingencies which may reduce the estimate of damages, they may possibly give a higher amount than they would have otherwise given. But to say that, therefore, the very failure to give the necessary direction is a wrong or miscarriage is, to my mind, to eliminate from the rule its most salutary feature, namely, that notwithstanding the error in the summing up, the court must be satisfied that there was a substantial wrong or miscarriage. Nor is this feature of the rule satisfied by a defendant raising the theoretical possibility that the jury may have been misled by the erroneous summing up. There must be something in the actual result which points to that possibility, and points to it as something more than a mere speculation.
It may also be conceded that a decision of the Court that the damages in a case are not excessive does not, in general, mean that there can have been no substantial wrong or miscarriage. But in some cases it would be exceedingly difficult to be satisfied that there has been such a wrong or miscarriage where the damages are found not to be excessive. This, to my mind, is such a case. I do not merely find the damages not excessive (and in this regard I am content with the judgment of Gowans J.), but I find nothing in the amount of the damages to lead me to think that this jury may have been misled by the errors of the summing up into failing to make allowance in estimating damages for matters of general knowledge and, in relation to the plaintiff's condition, of evidence.
In my opinion, the appeal should be dismissed.
Taylor J.
In my opinion this appeal should be dismissed and I find it necessary to advert only to the question whether the learned trial judge's charge to the jury was deficient on the issue of damages and whether, if so, a new trial should be ordered. On all other matters I am content to adopt the reasons given by Gowans J. in the Supreme Court.
The particular attack which was made upon his Honour's charge was that in directing the jury as to the manner in which they should approach the problem of assessing the appellant's future economic loss he neglected to tell them that they should take into consideration "imponderables such as unemployment, sickness or other forms of accident". The objection was taken at the conclusion of his Honour's charge that he had so neglected and it sufficiently appears that his Honour recognized that it would have been proper, in the circumstances of the case, to have given such a direction. But I agree with the Chief Justice that the discussion which then ensued and which is recorded in the transcript shows that counsel for the defendant at the trial elected to leave the matter where it stood and not have the jury recalled to hear a further direction on damages. No doubt he made this election having in mind that he had dealt with the matter in his address and that his Honour had observed towards the conclusion of his charge that counsel had addressed at length and submitted their arguments to the jury and that they should give such weight to those arguments as they thought they deserved.
In my view the charge to the jury was defective in the particular suggested. However, I do not wish to be taken as saying that it is imperative that in all cases and in all circumstances such a direction, which it is suggested should have been given, must be given. But having regard to the directions which were given in the present case it was, I think, necessary that the qualification which the omitted direction tends to introduce should have been explicitly brought to the notice of the jury. Nevertheless, I am firmly of the opinion that its omission in this case should not lead to a new trial. I have in mind the emphatic observations of Lord Halsbury in Nevill v. Fine Art & General Insurance Co. [1] in which the other noble Lords who sat in that case concurred and which have been followed in cases such as Seaton v. Burnand [1] ; Greenlands Ltd. v. Wilmshurst and The London Association for Protection of Trade [2] and Barber v. Pigden [3] . Some of these cases were referred to by Windeyer J. in Jones v. Dunkel [1] in a passage which has recently received the approval of the Judicial Committee in Jones v. Skelton [1] . It is true, no doubt, that a new trial may be ordered in spite of the fact that the relevant objection was not taken at the trial, but when a point of the description now raised is taken at the trial and then, to all intents and purposes, abandoned it is difficult to conceive what justification there could be for directing a new trial. It may be that some cases may arise where the interests of justice may require that there should be a new trial in such circumstances but in my view they would have to be of a very special character and that is not the case here. I observe in passing that in Balenzuela v. De Gail [2] and Bray v. Ford [3] , which were relied upon by the appellant, new trials were sought upon points which had been taken at the trial and it is not to be supposed that Lord Halsbury, who delivered the first speech in Bray v. Ford [3] , thought that his observations in that case provided the answer to the point which, in the following year, he discussed in Nevill's Case [4] .
1. [1897] A.C. 68, at p. 76.
2. [1900] A.C. 135, at p. 143.
3. [1913] 3 K.B. 507, at p. 563.
4. [1937] 1 K.B. 664.
5. (1959) 101 C.L.R. 298, at p. 315.
6. (1963) 37 A.L.J.R. 324, at p. 329.
7. (1959) 101 C.L.R. 226.
8. [1896] A.C. 44.
9. [1896] A.C. 44.
10. [1897] A.C. 68.
Menzies J.
The appellant, against whom a jury found a verdict for £19,797 14s. 0d. damages for negligence in an action against it by the respondent, an employee who was injured while at work, unsuccessfully appealed to the Full Court of the Supreme Court of Victoria seeking a new trial. This is an appeal from that refusal.
The appellant asserts misdirection on the part of the learned trial judge both on the question of liability and that of damages and also attacks the verdict as unreasonably high. Because I have no doubt that the decision of the Full Court was correct in so far as it held that the direction in relation to the appellant's negligence was unimpeachable and that the amount of the verdict was not so high as to be unreasonable, I shall say no more about these matters. I do, however, find it necessary to examine in some detail the criticisms that have been made on behalf of the appellant of the charge to the jury in relation both to contributory negligence and to damages.
The respondent is a labourer who came to Australia from Greece in 1955. He still has little English. When the accident with which this litigation is concerned happened he was about forty years of age. In 1960 he began to work for the appellant and part of his job was to feed swerf, as scraps of soft metal are called, into an electric furnace and to keep the lip of the furnace clear by periodically using what was called a rake to push accumulations of molten metal into the furnace. A rake with a handle about fifteen feet long was normally used for this purpose but on the occasion in question the respondent was using a rake with a handle only nine feet long. It was not in dispute that the handle of the rake which the respondent was using was so short as to be dangerous, for the operation necessitated pushing the rake about three feet into the furnace. The respondent was severely burnt when, while so engaged and about four feet from the furnace, flames shot out of the opening. The negligence alleged was the failure to provide a rake with a longer handle and long gauntlets to protect the respondent's arms. The contributory negligence alleged was failure to use a proper rake alleged to have been available, and gauntlets, with which, it was alleged, the respondent had been supplied. There was a sharp conflict of evidence between the respondent and the appellant's foreman. The former swore he had complained to the foreman about the rake available for his use and that his complaint had been disregarded and that, further, he had not been provided with gauntlets until after the accident. The foreman denied the complaints alleged, swore that a long-handled rake was readily available in the vicinity of the furnace and claimed that he had issued the respondent with gauntlets and told him to wear them at all times when pushing swerf into the furnace. The foreman said further that he had remonstrated with the respondent from time to time for failing to wear gauntlets and that he had explained to the respondent a notice in English posted in the vicinity of the furnace directing the use of gauntlets when pushing swerf into the furnace. It is apparent, therefore, that the allegations of negligence and contributory negligence both arose out of matters upon which the respondent and the foreman contradicted one another. In these circumstances it was quite natural and proper for the learned trial judge in charging the jury to deal but once with the facts upon which issues of negligence and contributory negligence both depended. However, his Honour did this when dealing with one of the questions put to the jury which related only to the issue of the appellant's negligence. His Honour had earlier directed the jury upon the law relating to contributory negligence and later, when coming to the application of that law to the facts while dealing with another question, his Honour did no more than say: "The question of contributory negligence, I have endeavoured to explain to you what that means too, that contributory negligence on the part of the plaintiff. I have told you that the onus of proving that is on the defendant and you have got to ask yourselves whether that has been shown. I do not propose to go into the details bearing on that, gentlemen. These matters have been canvassed before us in argument in the addresses by counsel for the defendant and counsel for the plaintiff, and if there is any part of the evidence which you think might bear upon that issue, then I will be only too glad to read it from the notes to you if you will let me know".
The appellant complains that the circumstances of the case required a direction which explained why particular findings open to the jury upon the evidence could lead to the conclusion that there had been contributory negligence and how it would affect the verdict—for example, a finding that gauntlets had been issued and that the plaintiff's neglect to wear them contributed to the accident. This was a case in which the application of the law might have not been simple but in all the circumstances I am not prepared to differ from the view of the Full Court that the issue of contributory negligence was sufficiently presented to the jury. The law was correctly stated and the jury could not have failed to understand that the issues of negligence and contributory negligence were separate, notwithstanding that their conclusion as to each would depend very much upon the view they took of the conflicting evidence of the respondent and the appellant's foreman.
This leaves for consideration the question of his Honour's direction about damages for loss of earning capacity.
It appeared that the respondent had, after recovering from his burns, started work again with the appellant but soon became completely incapacitated by reason of hysterical paralysis and hysterical anaesthesia. From the medical evidence called on behalf of the respondent himself the jury could and perhaps should have found that the respondent, before the accident, was a man disposed to hysterical disabilities. The burden of that evidence was that the accident had precipitated the type of reaction to which he was predisposed. At the time of the trial the respondent's condition was described by the learned trial judge to the jury as follows: "He presents a pitiful spectacle, a spectacle I suppose that must evoke the sympathy of us all". It is not my purpose to catalogue the many disabilities contributing to this result but, to take one of them, the respondent's arm was described by Dr. Springthorpe as virtually dead. In relation to it the doctor said: "Cannot move. Cannot feel. Cannot do anything". Dr. Springthorpe, however, gave the respondent a fifty/fifty chance of complete recovery. When asked about the prospects of less than a complete recovery, the doctor thought an improvement in his condition short of complete recovery was less probable. Part of the plaintiff's case was the evidence of an actuary that the present capital value of an annuity for a male aged forty at the rate of £1 a week on the basis of a five per cent return was for life £799; until age of seventy £748; and until age of sixty-five £703. His Honour's direction upon damages emphasized that the evidence was that the respondent had a reasonable chance (a fifty/fifty chance) of recovery. His Honour went on to say: "That means that he" (i.e. the respondent) "has not satisfied you that probably he will not, but there is the risk—and a very appreciable risk—that he will not recover, and for that risk that he will be compelled to go on submitting to these injuries, and all the disadvantages and disabilities that flow from them, he is entitled to be compensated but you do not approach it on the footing that you have been satisfied that he will never get better. The evidence does not justify such a conclusion. You have been told that he may get better very quickly, with a little bit of treatment. You have been told, on the other hand, that he may not, and it is a very difficult question, gentlemen". Then follows a passage which has been subjected to a good deal of criticism: "You have had the evidence of the actuary as to what the loss of one pound a week means over various periods, and that has been referred to in the addresses of counsel, but, of course, once you depart from those periods, those figures perhaps are not of very great assistance to you, but you will realize that he was, according to the evidence, earning, with overtime, something like £22 a week, and for the period for which he may be deprived of the capacity of earning his living, then he will be entitled to be compensated on that footing, bearing in mind that any sum that you award him for loss of future wages will be a lump sum now, instead of a sum spread over the period it would have taken him to earn it".
Neither in the passage just quoted nor in any other part of the direction did his Honour point out to the jury that if the accident for which the respondent was seeking damages had not happened, nevertheless other circumstances might have happened to prevent or hinder the respondent, a man predisposed to hysterical paralysis, from earning his living. The first question is whether, in the circumstances of this case, that omission amounts to a misdirection.
I agree with Dean and Gowans JJ. that it does because in the result the jury were not adequately instructed that, in considering loss of future earnings or of earning capacity, they should arrive at a figure which in their judgment represented the present value of wages which the plaintiff could have been expected to earn in the future had this accident not occurred, having regard inter alia to his own condition of health prior to the accident and the vicissitudes of life such as early death, sickness, accident and unemployment, the occurrence of which would affect the estimate. In the passage last quoted from the direction, the learned trial judge did refer to the evidence of the actuary which in this case is substantially a matter of arithmetic. His Honour did, I think, discourage the jury from applying that evidence but quite properly left it open to them to do so. The direction meant that, if the jury accepted one of the actuary's three periods as the respondent's probable working life, they could use the actuary's figures in reaching a figure without any warning that, if they did so, they might find it necessary to make adjustments to that figure for what are often called contingencies. In this way his Honour left it open to the jury to calculate the damages upon the actuary's figures without telling them that, should they do so, they could not simply do a multiplication sum without bringing other contingencies—favourable or unfavourable—into consideration. Now it may be said that, if the jury had chosen to work upon the actuary's figure of £703, it could be that they chose that figure in preference to one of the other higher figures because they thought that the respondent's abnormal susceptibility to the risk of incapacitating illness would confine his working life to the age of sixty-five years. Nevertheless, even if that were to be the case—and there were other possibilities that were not to be disregarded by the jury—the jury should have had present to their minds that they should also give consideration to other contingencies such as unemployment and sickness before the age of sixty-five as factors possibly reducing his future earnings. The authorities hereafter cited show, I think, that it is for the judge to ensure by an appropriate direction that the jury will have such considerations in mind. In the passage of the direction under discussion his Honour went on to point out that, if the jury were not to accept any of the actuary's three periods, his figures of £799, £748 and £703 would not be of assistance and went on to say "but you will realize that he" (i.e. the respondent) "was, according to the evidence, earning, with overtime, something like £22 a week, and for the period for which he may be deprived of the capacity of earning his living, then he will be entitled to be compensated on that footing". The words "for the period for which he may be deprived of the capacity of earning his living", which counsel for the respondent sought to read as meaning "for the period which you may think he is likely to be deprived of the capacity of earning his living", do, I think, in themselves constitute a misdirection, for the words his Honour here used, if taken literally left it open to the jury to say that, as the injured man's chance of recovery is only fifty/fifty, he may be deprived for life of the capacity of earning his living and he is therefore entitled to damages on the footing of £22 more or less per week for life. Furthermore, however, if the actuary's figures were to be put on one side, it was necessary for the judge to indicate to the jury that in that event they should consider whether, if the accident had not happened, other things might have occurred to prevent the injured man from working before death or old age would, in the ordinary course of events, put an end to his working life. It is not my purpose to attempt to lay down a rule of universal application but the rule generally applicable in such a case as this is, I have no doubt, that to be derived from the decision of the Court of Appeal in Phillips v. London and South Western Railway Co. [1] . That general rule is that when a jury has to assess damages for loss of earning power or future earnings resulting from an injury, they ought to be directed inter alia that they should in some way take into account the possibility that, independently of the injury, the occurrence of other contingencies to which the plaintiff was subject might have brought about some loss of earning capacity or earnings. Damages of this sort, whether regarded as for loss of earning capacity or as for loss of future earnings—and I do not enter into the kind of debate to be found in Street's Principles of the Law of Damages, pp. 44 et seq.—must, in the ordinary case, be calculated by reference to the loss of expected future earnings and it is necessary for the jury to be directed to take into account matters affecting that expectation in the particular case. There is, of course, no hard and fast rule determining how a jury must take these and other vicissitudes into account. It could, in such a case as this, be by making adjustments to a life annuity: see Phillips' Case [1] , per James L.J. [2] . It could be in choosing, as the term of the successful plaintiff's working life, a period which allows for susceptibility to harm peculiar to the particular man and making such minor adjustments as may be thought necessary for unemployment, temporary sickness and the like. The only point made here is that in some way or other the jury must, in the ordinary case, have their attention adequately directed to their task of fixing this element of damages by taking the present value of the plaintiff's loss of expected future earnings.
1. (1879) 5 C.P.D. 280.
2. (1879) 5 Q.B.D. 78.
3. (1879) 5 Q.B.D., at p. 84.
To establish what I have called "the general rule", I need do no more than cite three passages from the judgments of the Lords Justices in Phillips' Case as reported in [1] . Bramwell L.J. said: "I have put a case where a definite term may be fixed upon within which the party injured will recover; but suppose a case in which no definite term can be fixed: in that case the direction to the jury is that they must consider for themselves how long the plaintiff will be incapacitated from earning his livelihood or practising his profession, but that they must take into account the chance of his losing employment if he had not met with the accident" [1] . Brett L.J. said: "I have so far been speaking of the period between the time of the accident and the date of the trial. With regard to subsequent time, if no accident had happened, nevertheless many circumstances might have happened to prevent the plaintiff from earning his previous income; he may be disabled by illness, he is subject to the ordinary accidents and vicissitudes of life; and if all these circumstances of which no evidence can be given are looked at, it will be impossible to exactly estimate them; yet if the jury wholly pass them over they will go wrong, because these accidents and vicissitudes ought to be taken into account. It is true that the chances of life cannot be accurately calculated, but the judge must tell the jury to consider them in order that they may give a fair and reasonable compensation" [2] . Cotton L.J. said: "The plaintiff is not to receive an annuity for the rest of his life calculated on the amount of his income; it was possible that he might have been disabled by illness or other causes from continuing to earn it; after taking into account the chances affecting the income, the jury were to say what, in their opinion, was a fair compensation for the disability, whether permanent or temporary, under which the plaintiff came of practising his profession and earning the income which he previously enjoyed" [3] . Phillips' Case [4] was applied by the Full Court of the Supreme Court of Victoria in McDade v. Hoskins [5] and Ritchie v. The Victorian Railways Commissioner [6] . I am not disposed to regard Tonkin v. Jumbunna Coal Mine N.L. [7] as a departure from the rule adopted by the Supreme Court of Victoria in the earlier cases. The decision there, so it seems to me, was that the trial judge had by his direction fairly brought to the attention of the jury that they should remember that no man who lives by his hands or by work can be sure how long he will be able to earn anything at all, how long he will live, or how long he will be unaffected by those vicissitudes which are liable to affect any and every man. The decision, I think, turns upon the view that was taken of the particular charge under consideration and whether, as to that, it was right or wrong, is unimportant. I would add, however, that to the extent to which there is any inconsistency between Tonkin's Case [1] and the earlier cases I think the earlier cases are to be preferred and, in particular, I would say here, in anticipation of what I will elaborate later, that I do not see how the size of a verdict between the limits of what is not unreasonably low and what is not unreasonably high can help a court to decide whether or not a judge's direction upon the law as to damages has been sufficient.
1. (1879) 5 C.P.D. 280.
2. (1879) 5 C.P.D., at p. 287.
3. (1879) 5 C.P.D., at pp. 291, 292.
4. (1879) 5 C.P.D., at p. 293.
5. (1879) 5 Q.B.D. 78.
6. (1892) 18 V.L.R. 417.
7. (1899) 25 V.L.R. 272.
8. [1906] V.L.R. 41.
9. [1906] V.L.R. 41.
This case presented no special features to take it outside what I have described as the general rule. Indeed, the evidence that the respondent was predisposed to hysterical paralysis constituted a special consideration weighing heavily against the correctness of his Honour's departure from that rule. This was not merely a case for taking into account the ordinary vicissitudes of life; in addition there was evidence that the respondent was abnormally susceptible to incapacitating disability.
It does not follow, however, that the inevitable consequence of the non-direction, which left the direction given a misdirection, is an order for a new trial on the question of damages and it is necessary now to consider both the application of O. LVIII, r. 6, of the Rules of the Supreme Court of Victoria and the course that was taken at the trial with regard to the learned trial judge supplementing his original direction.
Dean and Gowans JJ., having found that there had been misdirection as to the assessment of damages, applied O. LVIII, r. 6, which provides, so far as is relevant, that a new trial shall not be granted on the ground of misdirection "unless in the opinion of the Full Court some substantial wrong or miscarriage has been thereby occasioned in the trial". It is perhaps unnecessary to say that this Court pays particular regard to the Full Court on matters involving the practice of the Supreme Court and would make an order different from that of the Full Court in a case involving the rule in question only when this Court is nevertheless satisfied that the order of the Full Court is wrong. When that happens this Court must, of course, make the order that ought to have been made in the first instance (Judiciary Act, ss. 36 and 37; Burston v. Melbourne and Metropolitan Tramways Board [1] ; Fairbairn v. Cummins [1] ). Furthermore, the Full Court has from time to time expounded O. LVIII, r. 6, and again great weight must be accorded here to the exposition so given.
1. (1948) 78 C.L.R. 143.
2. [1961] A.L.R. 205.
The leading Victorian case on the subject is unquestionably Holford v. Melbourne Tramway and Omnibus Co. Ltd. [2] , a decision of Madden C.J., a'Beckett and Cussen JJ. which has often been referred to with approval in the Supreme Court and in this Court—e.g. by Dixon C.J. in Balenzuela v. De Gail [3] . There Cussen J., in a judgment of great authority, said with regard to the rule under consideration: "But it is an error to think there never can be a wrong or miscarriage unless it can be shown that the jury were in fact influenced in giving their verdict by a misdirection. There is a wrong or miscarriage occasioned by a misdirection in law, or as to the application of evidence, if, as a final result of what has been said by the Judge, the jury retire to their room under a wrong impression in relation to these matters, and the result of the case is such as to show that they may have been influenced in their verdict by the misdirection. "Miscarriage" is a technical word, and includes this technical meaning. The plaintiff's counsel contended that the onus of showing the miscarriage is on the party asking for the new trial. I think this is clearly right, but I think that onus is satisfied when the facts appear to be as above set out, and that unless the party opposing the grant of the order for a new trial can point to some further fact, the conclusion that there was a miscarriage must be drawn" [4] . When Cussen J. said "and the result of the case is such as to show that they may have been influenced in their verdict by the misdirection", his Honour was not directing attention to considerations such as the size of the verdict in such a case as this although no doubt if, in the event, the verdict had happened to be not more than the lowest figure that a reasonable jury could properly have found, no new trial would be ordered because that result would show that the jury had not been influenced by the misdirection. It seems to me clear that the rule is not to be read as allowing a new trial to be ordered for misdirection or for improper rejection or admission of evidence only in a case where, had there been no such error, a new trial would have been ordered for some other reason, e.g. that the verdict was unreasonably large or small. Cussen J., in the passage under consideration, was saying that unless the result is consistent with a substantial miscarriage in the trial—that is, consistent with the jury having been misled by a misleading direction—a new trial will not be ordered. There is, of course, the highest authority against an appellate court applying the rule by undertaking to decide for itself whether or not a misdirection of law actually affected the assessment of damages: Bray v. Ford [1] and the passage in the judgment of Dixon C.J. in Balenzuela v. De Gail [1] where Bray v. Ford [1] is cited.
1. [1909] V.L.R. 497.
2. (1959) 101 C.L.R. 226.
3. [1909] V.L.R., at p. 526.
4. [1896] A.C. 44.
5. (1959) 101 C.L.R., at p. 236.
6. [1896] A.C. 44.
The question at this point is then whether the misdirection with regard to the assessment of damages occasioned a substantial miscarriage in the trial. I cannot escape from the conclusion that it did for it left the jury to assess damages for future loss of earnings or loss of earning power on a wrong basis prejudicial to the appellant and there is nothing to show that the jury were not misled. In Balenzuela v. De Gail [2] Dixon C.J. said: "The form in which the judicature rule is cast seems to indicate an intention that the court should not grant a new trial unless it reached a positive opinion, in other words unless it was persuaded that a substantial wrong or miscarriage had been occasioned by the error" [3] . In this case I am so persuaded. In coming to the opposite conclusion Dean J. said: "In the present case I cannot suppose that the omission of the learned judge to direct the attention of the jury to the necessity for considering possible events in the future really affected their ultimate assessment of damages. The actual amount awarded is not so high that it should be set aside as excessive and unreasonable. The matter omitted was not one to which any evidence was or could be directed. It was a matter which would be likely to occur to a jury when it was determining the probable period of the future employment of the plaintiff, even though not expressly referred to by the learned judge". Gowans J. said: "In the present case the nature of the misdirection or non-direction and the question of the damages awarded, must be weighed together to see if the jury has been misled" and his Honour then concluded that the award was not so high as to be outside the limits of what was reasonable. This led to his decision that the rule applied.
1. (1959) 101 C.L.R. 226.
2. (1959) 101 C.L.R., at p. 235.
It will be seen that each of the learned judges rests his decision that the rule forbade the ordering of a new trial in this case wholly or in part upon his conclusion that the damages awarded were not so high as to be outside the limits of what was reasonable. In this way the absence of an independent ground for a new trial has been made the criterion for determining that there should not be a new trial for misdirection. So understood, the rule would, in a case like the present, warrant an order for a new trial only in a case where the appellant was otherwise entitled to a new trial. With this I must, with respect, disagree. When there has been a misdirection of law that puts a party to the hazard of a verdict higher than if there had been no misdirection, the fact that a verdict not so high as to be unreasonable has been found would ordinarily be an immaterial consideration even if the question for the court of appeal were whether the misdirection had actually affected the verdict. If in a case a reasonable verdict would have been between £15,000 and £20,000, how could the return of a verdict either of £16,000 or £19,000 show whether or not a misdirection, the maximum result of which could not be ascertained, had influenced the verdict? The question for the court of appeal, however, is not whether the misdirection did affect the verdict; it is, as Cussen J. said in Holford's Case [1] , whether the jury may have been influenced in their verdict by the misdirection. If so and in the absence of anything else, the misdirection brought about a substantial miscarriage in the trial. The manner in which Cussen J. in Holford's Case [1] drew a distinction between misdirection of law and misdirection of fact illuminates the point under discussion. His Honour said: "There is a distinction, in my opinion, between a misdirection in the law relating to a material issue or relating to the application of evidence and a misdirection relating merely to facts. In the latter case there may be no substantial wrong or miscarriage, unless it appears affirmatively from the verdict or otherwise that the misdirection has led to injustice, which generally is the same in effect as saying that the verdict is against evidence. It is assumed in most cases that the jury, who have or ought to have heard the evidence, will probably correct any mistake of mere fact. But in matters of law and relevancy of evidence, the jury should be guided by the Judge, and as it is practically impossible to inquire into their deliberations, the cases show that a wrong or miscarriage has been done when the Judge finally allows them to retire with a wrong or imperfect guide, and that it is not necessary, in order to get a new trial, to show affirmatively that the verdict would have been the other way if the direction had not been given" [1] . The judgment of Cussen J. is in accord with Bray v. Ford [2] and is supported by the judgment of Dixon C.J. in Balenzuela v. De Gail [1] . It is true that in the lastmentioned case the Chief Justice's observations about the judicature rule were not necessary for the decision of that appeal but they were deliberately made with the citation of the relevant authorities. His Honour, after referring to the questions of onus of proof and to the possible existence of a distinction that a more substantial miscarriage is required under the judicature system than at common law to justify the granting of a new trial, said: "But whether it be the rule at common law or under the judicature system a much more important restraint must be observed upon the discretion of the court to refuse a new trial. The court, where the determination of questions of fact is not entrusted to it, cannot substitute its judgment for that of the jury in purporting to decide whether a substantial wrong or miscarriage has occurred" [1] . His Honour, after referring inter alia to a misdirection touching standards of liability wrongly exposing a party to the appreciable hazard of a verdict against him that otherwise might not have been found, said [2] : "But where the error is of law and is one of the foregoing description, it is not for the court to proceed to inquire into the facts of the case and form a conclusion as to what the jury would or should have done had the trial proceeded entirely in conformity with law and without any misdirection or misreception or erroneous rejection of evidence. That is what the decision of the House of Lords in Bray v. Ford [3] means. See per Lord Greene M.R. in Braddock v. Bevins [4] ". Here the misdirection resulting from the non-direction was not merely about the evidence which had been given nor as to matters of fact in issue at the trial. The misdirection was a misdirection of law because, by reason thereof, the jury were left to assess damages without the guidance of a complete and correct statement of the way in which the law required that damages should be assessed.
1. [1909] V.L.R. 497.
2. [1909] V.L.R. 497.
3. [1909] V.L.R., at p. 527.
4. [1896] A.C. 44.
5. (1959) 101 C.L.R., at pp. 235, 236.
6. (1959) 101 C.L.R., at p. 235.
7. (1959) 101 C.L.R., at p. 236.
8. [1896] A.C. 44.
9. [1948] 1 K.B. 580, at pp. 599, 600.
It follows, I think that although an appellate court can and should determine whether a misdirection upon a point of law may have affected the verdict of the jury, there is in the ordinary case no way for an appellate court to decide whether or not a misdirection did so and the rule does not invite an appellate court to attempt to decide this.
Accordingly, in this case in the absence of any further relevant consideration there was a substantial miscarriage in the trial occasioned by the misdirection in the law which exposed the appellant to a higher verdict than if the misdirection had not occurred and O. LVIII, r. 6, does not prevent the making of an order for a new trial upon the issue of damages.
In the judgments of other members of the Court, reference has been made to what occurred between counsel and the learned trial judge in the absence of the jury concerning the misdirection as to damages. The objection that was taken, as I read it, did not cover the whole ground of the misdirection and it was advisedly not pressed to the point of a request for further direction. As Cussen J. said in Holford's Case [1] : "The practice in Victoria, and I think England as well, has been uniform that an error in law in the direction of the Judge on a material issue may be taken advantage of on an application for a new trial, though no objection has been taken at the trial [1] ". Here, however, counsel deliberately and perhaps not unwisely chose that the jury should return their verdict without any further direction from the learned trial judge upon the question of damages and, in these circumstances, I agree with the other members of the Court for the reasons which they have given that this Court should not exercise the discretion which it has to order a new trial.
1. [1909] V.L.R. 497.
2. [1909] V.L.R., at p. 524.
In my opinion the appeal should be dismissed.
Windeyer J.
My view of this case accords generally with that of the Chief Justice. I wish only to state my opinion on some matters of general application that were discussed during the argument.
First, as to calculations of future economic loss put forward in cases of personal injury: These are ordinarily based primarily on a discounting of notional future periodic earnings at an assumed rate of interest—five or six per centum being usually taken. A question then arises, and I agree that a jury should be made aware of it, of the allowances to be made to relate such calculations to the probabilities of a particular case. They are necessarily made on certain assumptions, and their value must depend upon how far those assumptions are accepted as valid. Those assumptions are twofold. One is as to the period of time for which the plaintiff would, if he had not been injured, have earned or been capable of earning—that is to say the duration of working life of which he has been deprived by the accident. In a case of total incapacity that is often taken to be until the age of sixty or sixty-five. The other assumption is as to the rate of remuneration that, if he had not been injured, the plaintiff would for the assumed period have enjoyed. In most cases neither assumption necessarily fits the facts. Some allowances and qualifications are called for by what are now commonly referred to in this connexion as the contingencies of the future or the vicissitudes of life. What should be the extent and manner of that correction must depend upon the circumstances of the particular case, upon the jury's estimate, necessarily imprecise, of what, had he not been injured, would have been the lot of the plaintiff in future years. Is it likely that he would have continued to earn or been able uninterruptedly to earn throughout the assumed period? Might his earning capacity have been cut short within the period, or might it on the other hand have endured beyond it?
It is for the jury to consider these things. If the calculation put before them be an actuarial one, made by reference to average mortality experience, the possibility of the assumed period of working life being cut short by death is already allowed for to the extent of the average of the community; but probabilities peculiar to the individual plaintiff have not. If before the injury he in fact had some frailty or disease likely to result in early death or incapacity for work, some further allowance for that may seem to a jury proper. If, on the other hand, the calculation under consideration be not of an actuarial character but purely arithmetical, then it should be remembered that it makes no allowance at all for the possibility of death within the assumed period; and that is to be allowed for. Interruptions of the assumed earning period by sickness, unemployment or other causes must also be allowed for to the extent that seems reasonable in the particular case. But it is necessary to bear in mind that it is not interruptions of any kind of a notionally continuing employment that have to be allowed for, but only interruptions during which the plaintiff would have been unpaid or for which he would not have been entitled to compensation.
The assumed rate of wages or remuneration is usually that which the plaintiff was earning before he was injured. In some cases it may be reasonable to assume that it would have remained constant throughout the assumed period. In other cases the probability may be that he would have prospered or been promoted and earned at a higher rate. On the other hand the probability may be that, because of his age or other circumstances, his rate of remuneration would have declined. A jury, or a judge sitting without a jury to assess damages, cannot predict such contingencies and evaluate their effect with any precision or by reference to any formula. Provided they be borne in mind the consequences of doing so are much at large. I have said all this because, when it is said that in assessing damages regard must be had to the contingencies and vicissitudes of life, what is meant is not some idea of the chances of the future in the abstract or of the lot of mankind in general. It is the case of a particular person, the plaintiff, that has to be considered, having regard to what it was likely that the future would have had in store for him.
I agree that, in general, a trial judge in summing up the facts to a jury and instructing them in the way in which they should approach their task in a case of this sort should refer to these matters. But what he should say must vary with the particular case. It must much depend upon the course of the trial, including what counsel said in their addresses. Appropriate directions on matters of fact cannot be made into formulas of universal application, for the facts of cases vary. Sometimes a compressed statement may serve as a sufficient reminder to a jury of the bearing that the contingencies of the future may have upon their assessment. Sometimes more explanation may be desirable. Seldom, I would think, would any elaborate disquisition be required. Enough should be said, however, to direct their minds to these considerations, lest they should be carried away by mere abstract calculations. I agree that in this case the learned trial judge when summing up the case to the jury did not adequately put this aspect to them, although I find it hard to suppose that they had been left unaware of it by counsel.
It is important to bear in mind, however, that this means only that the jury were inadequately instructed on a matter of fact, not that they were misdirected on a matter of law. I have stated in other cases my view of the effect of this distinction in its relation to new trials. To avoid entering upon the topic here I merely refer to Jones v. Dunkel [1] ; Balenzuela v. De Gail [1] ; and Transport and General Insurance Co. Ltd. v. Edmondson [2] . An erroneous direction of law, if on a material matter and capable of affecting the result of a trial, will, generally speaking, be a ground for a new trial as of right. But a new trial is not necessarily ordered because of the way the trial judge has discussed the facts. There is then a wider discretion. The observations of this Court in Manning v. Bernard Manning & Co. Pty. Ltd. [3] are in point. We were pressed with what was said by Cussen J. in Holford v. Melbourne Tramway and Omnibus Co. Ltd. [4] . I fully appreciate the force of it in a case to which it is applicable. But it is not applicable to this case. Here there was no misdirection in point of law. If defects in a summing up on some matter of fact are to be made the ground of an application for a new trial, the matter should have been brought to the attention of the judge at the trial while there was an opportunity for him to correct the mistake or supply the omission, as the Privy Council recently recognized in Jones v. Skelton [1] . This is not an inflexible rule; for a common law court in banc has a wide discretion to order a new trial in an action tried by a jury when justice appears to require it. But it is a salutary rule which should ordinarily be observed. I can see no reason for departing from it in this case.
1. (1959) 101 C.L.R. 298, at pp. 313, 314.
2. (1959) 101 C.L.R. 226, at p. 244.
3. (1961) 106 C.L.R. 23, at pp. 31, 32.
4. (1960) 101 C.L.R. 345, at p. 351.
5. [1909] V.L.R. 497, at pp. 522-526.
6. (1963) 37 A.L.J.R. 324, at p. 329.
The Supreme Court of Victoria did not think this case was one for a new trial. That decision ought not, I think, be disturbed. I would therefore dismiss the appeal.
Owen J.
This is an appeal against an order of the Full Court of the Supreme Court dismissing a motion for the new trial of an action in which the jury had awarded the respondent £19,797 14s. 0d.
In 1961 the respondent was employed by the appellant as an unskilled labourer, his duties being to attend to an electric furnace in which steel scrap was melted. His work necessitated opening the furnace door from time to time and pushing back the material in the furnace to prevent it from obstructing the door. For this purpose he was provided with a metal "rake". On 8th March 1961 he was carrying out this work when a flame came out through the furnace door and his right hand and arm were burnt. The burns themselves were not of a serious nature but the incident produced a supervening incapacitating condition of "hysterical paralysis" which affected first his hand and arm and later his leg. By the date of the trial in May 1963 this condition had become worse and, on the medical evidence, it was open to the jury to conclude that it was probable that it would continue for a long time and perhaps for the rest of his life. At the time of the accident the respondent, a Greek who had come to Australia in 1955, was 38 years of age and was earning a net weekly wage of £22 2s. 6d. His claim against the appellant was based upon two allegations of negligence. First that the "rake" with which he had been supplied was not reasonably adapted for the purpose of clearing the opening into the furnace because it was too short and he had therefore to stand closer to the furnace than would have been necessary had a longer rake been provided. Next, that he was supplied with gloves which covered only his hands and wrists instead of gauntlets which would also have protected his forearms. That there was evidence upon which a finding of negligence on both these points could be made against the appellant was not questioned. Nor was it suggested that a finding of contributory negligence could not have been made since there was evidence that gauntlets were provided but that, on this occasion, he was not wearing them and that a longer "rake" was to his knowledge available for his use.
The new trial was sought upon a number of grounds. In the first place it was submitted that, although the learned trial judge had correctly directed the jury on the law relating to negligence and contributory negligence, he had failed to present adequately to them the evidence upon which the appellant relied in denial of the charge of negligence made against it and in support of the charge made by it that the respondent had been guilty of contributory negligence. In the Full Court, Gowans J. dealt in detail with the contentions put forward on behalf of the appellant on this part of the case. His Honour reached the conclusion that no ground had been shown for granting a new trial on these issues and Herring C.J. and Dean J. agreed with that conclusion and the reasons for it. In the course of his judgment his Honour quoted and applied a passage from the judgment of Dixon J. (as he then was) in Bugg v. Day [1] , which is much in point in the present case: "To grant a new trial in a civil case upon the ground that the charge to the jury did not fairly and adequately submit the case of one or other party to them is a course which the court may take where the court is satisfied that it would be a manifest injustice to leave the verdict standing. But it must be a very strong case and that is a description which certainly cannot be applied in the present instance" [1] . I think it unnecessary to say more than that I am of opinion that, for the reasons given by Gowans J. with which I agree, the case is not one in which it would be proper to order a new trial on the issue of liability. The evidence relating to the charges of negligence and contributory negligence was short, clear and simple. The trial lasted for some days and was conducted by experienced counsel on both sides who no doubt emphasized to the jury the evidence relating to liability on which each relied. There is no justification, in my opinion, for thinking that it would be a manifest injustice to leave standing the findings for the respondent on the issues of negligence and contributory negligence.
1. (1949) 79 C.L.R. 442.
2. (1949) 79 C.L.R., at p. 462.
It was further submitted that the learned trial judge, when summing up on the question of damages, failed to tell the jury that, in considering what amount they should include in their verdict for future loss of earning capacity due to the injury, they should take into account the contingencies and vicissitudes that might have affected the respondent's capacity to earn had the accident not occurred. These contingencies and vicissitudes might of course have operated either in his favour or against him. For example the possibility that, if he had not been injured, his pre-accident rate of earning might at some future date have increased would require to be taken into account along with the possibility of reduced earnings due to such matters as illness and the like or to periods of unemployment. The cases, of which Phillips v. London and South Western Railway Co. [1] is an example, show these are relevant matters to which the attention of the jury should be drawn by the judge presiding at a trial. Unfortunately no reference to them was made in the summing up in the present case, although parts of the cross-examination of a medical witness and of an actuary called for the respondent were clearly directed to the point and it is reasonable to assume that counsel for the appellant did not overlook them in his address to the jury. Their Honours in the Full Court rightly took the view that in this respect the summing up was defective. They were, however, not satisfied that, having regard to all the circumstances, the failure to give the direction had occasioned a "substantial wrong or miscarriage" within the meaning of O. LVIII, r. 6, which provides that "A new trial shall not be granted on the ground of misdirection or of the improper admission or rejection of evidence unless in the opinion of the Full Court some substantial wrong or miscarriage has been thereby occasioned in the trial, a new trial should not be granted". While I agree with their Honours that the summing up was defective in this respect, I felt some doubt whether it could properly be said that the appellant had failed to show that a substantial wrong or miscarriage was thereby occasioned. On reflection, however, I am not prepared to disagree with the view taken by the Full Court, and, in addition to the matters to which their Honours referred, I am influenced by the attitude adopted by counsel for the appellant at the close of the summing up. He drew the learned judge's attention to the fact that in dealing with the actuarial evidence he had failed to point out to the jury that it took no account of contingencies "such as unemployment, sickness or other forms of accident", prefacing his remarks by saying: "The final matter that gives me some concern and I confess I am not sure whether now is the right time to do it or that anything can be done". His Honour asked him: "Do you think it is a good thing if I take up this matter of damages again with them?" Counsel replied: "As I prefaced these remarks I am in a dilemma, Your Honour, as to whether you ought to do it now or not; but it is submitted it ought to have been done in the charge. That is why I feel at this stage it may be throwing the charge out of balance by adverting to those matters, but it may be hereafter someone will have a comment to make from on high that, "Well, you had your chance and you did not take it" ". His Honour said: "Yes. Well, you are asking me to do it" and counsel replied: "It is submitted those are the matters". It seems plain enough from what occurred that while counsel did not wish to be met, if there should later be an appeal, with the objection that he had not asked the judge to make good the omission in the summing up, he was fully aware, as would be anyone with experience of nisi prius work, of the real risk of prejudice to his client should the jury be called back to Court, after they had retired to consider their verdict, to hear some further direction from the judge on the subject of damages. It was no doubt for this good reason that, in answer to what was obviously an enquiry from the Bench whether he wanted to take that risk, he made the cryptic reply: "It is submitted that those are the matters". I have no doubt that, in the circumstances as they then appeared, counsel was acting in the best interests of his client. But it does not seem to me that he can now complain that a substantial wrong or miscarriage occurred when the fact is that he preferred, at that stage of the trial, that the omission in the summing up should not be rectified.
1. (1879) 5 C.P.D. 280.
Finally, it was submitted that the amount of damages awarded was excessive. Here again the relevant evidence is set out in considerable detail in the judgment of Gowans J. It is unnecessary to repeat it or to do more than express my agreement with him and the other members of the Full Court that the amount awarded, although undoubtedly high, did not exceed the limits of reason.
The appeal should be dismissed. |
high_court_of_australia:/showbyHandle/1/11662 | decision | commonwealth | high_court_of_australia | text/html | null | Liberato v The Queen [1985] HCA 66 | https://eresources.hcourt.gov.au/showbyHandle/1/11662 | 2024-09-13T22:52:51.592092+10:00 | High Court of Australia
Mason A.C.J. Wilson, Brennan, Deane and Dawson JJ.
Liberato v The Queen
[1985] HCA 66
ORDER
Applications for special leave to appeal refused.
Cur. adv. vult.
The following written judgments were delivered:—
Oct. 17
Mason A.C.J., Wilson and Dawson JJ.
Each of the four applicants was convicted, after a joint trial with a fifth accused, upon a count or counts of rape. Their appeals to the Court of Criminal Appeal in South Australia against conviction were dismissed and they now seek special leave to appeal to this Court.
There is no dispute that there were defects in the summing up given by the learned trial judge and that these defects were correctly identified by the Court of Criminal Appeal. That Court, however, reached the conclusion that there was no substantial miscarriage of justice within the meaning of the proviso to s. 353(1) of the Criminal Law Consolidation Act 1935 S.A. that would justify an order for retrial. It is this conclusion which is the subject of complaint in this application.
It is not suggested that the Court of Criminal Appeal fell into any error of law in its consideration of the summing up or that it failed to recognize any inaccuracy or insufficiency in the directions given. Nor is it suggested that the Court misconceived the principles governing the application of the proviso: see Mraz v. The Queen [1] ; Simic v. The Queen [2] .
1. (1955) 93 C.L.R. 493, at pp. 514-515.
2. (1980) 144 C.L.R. 319.
The real basis of the submission made to us is that the Court of Criminal Appeal in considering the application of the proviso ought to have taken a view of the evidence and of the overall effect of the charge to the jury which would have precluded it from concluding that no substantial miscarriage of justice had occurred. The Court reached its conclusion after an examination of the summing up as a whole and of all of the evidence given at the trial. There is nothing before us which would indicate that this material is incapable of supporting the view taken by the Court.
It has been repeatedly affirmed by this Court that it is not a court of criminal appeal and that it will not grant special leave to appeal in criminal cases unless some point of general importance is involved, which, if wrongly decided, might seriously interfere with the administration of criminal justice: see now Judiciary Act 1903 Cth, s. 35A. It would not be in accordance with that practice to grant special leave to appeal in this case where no question of law is involved and where this Court is merely being asked to substitute for the view taken by the Court of Criminal Appeal a different view of the evidence and of the effect of the summing up: cf. Reg. v. Howe [3] .
1. (1958) 100 C.L.R. 448, at p. 457.
Special leave should be refused.
Brennan J.
In January 1984 M.K., a woman aged twenty-three, who was visiting Australia from Germany, was crossing the Nullarbor Plain by bus on her way to Adelaide. The bus stopped at Eucla. In the hotel there, she met the applicant Rooney and other members of a group who were also making for Adelaide travelling in a car towing a trailer containing their motorcycles. She gave Rooney the telephone number of her aunt in Adelaide with whom she proposed to stay.
On 16 January, Rooney telephoned M.K. and later called for her on his motorcycle. They went to a suburban hotel where they met Rooney's friends: Liberato, Andrews and his girlfriend Valerie Neave, Egan, Sekulic and another couple who played no part in the events that were to follow. The party stayed at the hotel drinking until closing time about midnight. M.K. then accompanied Rooney as his pillion passenger to a house at Salisbury Downs, an Adelaide suburb, occupied by Andrews and Valerie Neave. The other men in the party were staying at that house that night. M.K. and some of the men stayed up all night, drinking beer and playing cards. Valerie Neave and Andrews went to bed in their bedroom but later in the night Andrews got up and rejoined the group who were still awake. Sekulic, who had one leg in plaster, went to sleep in another bedroom. M.K. was "drunk", as she admitted at the trial, but the degree of her intoxication does not clearly appear from her evidence. She had taken her shoes off and she was rubbing her bare feet on Liberato's leg and entwining her leg with his. The others saw this.
At about 5.00 a.m. Egan grabbed M.K. and pressed her to him, but she rejected his embrace. About 6.00 a.m. Egan seized her, carried her into the loungeroom and engaged in the first of eleven acts of sexual intercourse which founded the counts of rape charged against the respective accused. Section 48 of the Criminal Law Consolidation Act 1935 S.A. ("the Act") defines the crime of rape as follows:
18. A person who has sexual intercourse with another person without the consent of that other person—
(a) knowing that that other person does not consent to sexual intercourse with him; or
(b) being recklessly indifferent as to whether that other person consents to sexual intercourse with him,
shall be guilty of the felony of rape and liable to be imprisoned for life.
Sexual intercourse as defined by s. 5 of the Act includes oral or anal penetration by the male organ. The eleven counts in the information were numbered in the order of the acts of sexual intercourse as they occurred, namely: count 1 — Egan (vaginal); count 2 — Rooney (oral); count 3 — Andrews (vaginal); count 4 — Liberato (oral); count 5 — Rooney (vaginal); count 6 — Egan (anal); count 7 — Sekulic (vaginal); count 8 — Rooney (oral); count 9 — Egan (oral); count 10 — Egan (vaginal); and count 11 — Sekulic (vaginal).
The accused were tried before the Supreme Court of South Australia. The jury convicted each of the accused on the count or counts with which he was charged. On appeal, the Court of Criminal Appeal (Zelling, White and Mohr JJ.) dismissed the appeals of the present applicants but allowed Sekulic's appeal. Sekulic's appeal was allowed for reasons presently to be mentioned. Egan, Rooney, Andrews and Liberato now apply for special leave to appeal from the judgment of the Court of Criminal Appeal.
In a trial of several accused, charged separately with sundry counts of rape alleged to be committed by them individually, the task of a trial judge is indeed complex. The learned trial judge in the present case delivered a summing up covering over 100 pages of transcript. As the Court of Criminal Appeal found, it was not free from blemishes. White J., with whose judgment Zelling and Mohr JJ. agreed, listed the blemishes in a six point summary:
1. A number of incomplete or inadequate or confusing directions as to the use which the jury should make of evidence of partial intoxication: first, when considering whether each accused realized she might not be consenting; if he did, then secondly, whether partial intoxication explained how each accused came to press on with sexual intercourse.
2. A number of incomplete or confusing directions following the jury question as to "reckless indifference and assumed consent".
3. Too many separate directions over-emphasizing the importance of lies as evidence capable of amounting to corroboration — coupled with too few directions or inadequate directions that the lies might be explicable in terms of panic or fear of injustice — and coupled also with an erroneous direction that refusal to comment could impliedly be equated with lying.
1. Occasional misdirections undermining the principle that the onus of proof remained with the prosecution throughout, including (i) suggestions that an accused had to satisfy the jury about his belief or to sustain his belief and (ii) that an issue might be resolved by asking who is believed on that topic.
2. Speculation about an unproved conversation between Egan and Sekulic.
3. The effect of the above matters cumulatively on the jury's deliberations in those cases where the complainant's signals of non-consent were ambiguous.
Although the Court of Criminal Appeal held that there had been misdirections, they applied the proviso to s. 353(1) of the Act holding that the Crown had established that there was no substantial miscarriage of justice except in Sekulic's case. The question is whether that conclusion should be upheld.
It was necessary for the learned trial judge to direct the jury that the prosecution bore the onus of proving in relation to each count, (a) that M.K. had not consented to the relevant act of sexual intercourse, and (b) that the particular accused, when he committed the relevant act of sexual intercourse, had one of the guilty states of mind prescribed by s. 48. It was also necessary to direct the jury that they could not find those facts against an accused unless they were satisfied beyond reasonable doubt. The learned trial judge's directions on these issues were, for the most part, in essentially orthodox terms.
The chief evidence of lack of consent and the existence of a guilty state of mind came respectively from M.K. and the accused, each of whom gave evidence. Her evidence denied that she had consented to any act of intercourse, and she described events from which the jury could infer that the respective accused must have had a guilty state of mind. The accused each denied that he had either of the guilty states of mind — knowledge or reckless indifference — prescribed by s. 48 and their description of the events was such that the jury could infer that she might have been consenting to the several acts of sexual intercourse. There was no dispute that those acts had occurred. M.K. gave much of her evidence through an interpreter. She spent five days in the witness-box giving evidence in chief and being cross-examined and the jury thus had a substantial opportunity of assessing her credibility. But there were two events contained in M.K.'s story which might have been regarded by the jury as casting some doubt upon her complaint that the acts of sexual intercourse occurred without her consent. The first event relates to an act of oral intercourse by Rooney when her conduct seemed to be intended to excite Rooney. If that was her conduct in relation to count 2 (as White J. thought) it occurred during the act relating to count 1 at the beginning of the series of acts. However, it seems that she may have been referring to count 8. White J. described what she did — on one or other of these occasions — as "a puzzling, even extraordinary, course of conduct for a woman in her position". The second event relates to counts 7 and 11 when Sekulic had sexual intercourse with her. Sekulic had been wakened by Egan saying: "This is for you" when he brought M.K. into the bedroom naked. Sekulic had responded: "That is a nice present to wake up to." Then Sekulic, with his leg in plaster, lay on his back while she twice had intercourse with him. White J. said of the first occasion:
It was she who arranged this. She agreed that she had facilitated the intercourse and made movements as though she enjoyed it. She never at any stage signalled her non-consent to him.
White J. summarized her evidence relating to the second occasion — the last act of intercourse before M.K. left the house — as follows:
On her own story in examination in chief, she was acting at this time (in spite of her tiredness and all the previous sexual activity) as if she had lost her sexual inhibitions. She appeared by her actions to be not only consenting but enthusiastically enjoying what was happening. When cross-examined she repeated that she had said to Sekulic the words, "I am doing this because I like you".
Nonetheless the jury convicted Sekulic. The circumstances relating to counts 2 (or 8), 7 and 11 were such as to require the most anxious consideration of the credibility of M.K. and of the weight to be given to her evidence not only in respect of those counts but in respect of the other counts as well. In the circumstances, if she had consented to the acts of sexual intercourse charged in counts 2 (or 8), 7 and 11 — particularly count 11 — the cogency of her evidence that she had not consented to the acts involved in the other counts would be diminished. M.K.'s credibility and the weight to be accorded to her evidence as against the weight to be accorded to the accused's evidence were questions of central importance in the case. In those circumstances, it is difficult to satisfy the Court that a misdirection as to the onus and standard of proof, or as to the evidence which might corroborate the evidence of M.K., or as to the way in which the jury should weigh the competing bodies of evidence in reaching their verdict did not occasion a substantial miscarriage of justice.
It is necessary to examine the misdirections on the matters which White J. identified. His Honour's first point relates to incomplete, inadequate or confusing directions on partial intoxication, but those directions can be passed by. They related to the effect of intoxication on the state of mind of the accused. The second point relates to the "incomplete or confusing directions" given to the jury when they returned to the court three hours after they first retired. At that time, the foreman asked:
We would like your definition of rape again please, referring to the reckless indifference and assumed consent. There seems to be some confusion in the jury about that.
His Honour gave a further direction, but evidently misunderstood what the jury had in mind in seeking a direction on assumed consent. The following exchange then occurred:
His Honour: Certainly the word "assumed" was used. Mr. Foreman, I think it is proper to tell you that you don't assume consent at all. It is for the Crown to prove beyond reasonable doubt that at the particular time of the particular act of intercourse she was not consenting.
Mr. Peek: Your Honour, isn't it really this in a nutshell, simply this, if it is reasonably possible that any of the accused did in fact assume that she was consenting, then that accused must be acquitted. That is what it comes down to in my respectful submission. If the jury think it is reasonably possible, he assumed she was consenting, then obviously he does not have the mental element of rape and he must be acquitted.
His Honour: You have to give the benefit of any doubt to the accused ladies and gentlemen, and there may be occasions where a belief in the accused is something that you are satisfied about and if that gives rise to a doubt about the ingredients of the charge, then the accused must have the benefit of that doubt.
Mr. Borick: I agree with Mr. Peek's submissions.
His Honour: Do you think so Mr. Cuthbertson?
Mr. Cuthbertson [Crown Prosecutor]: I prefer your Honour to leave it on the basis of the definition you have given of reckless indifference, which is a realization that there was a very real risk that [M.K.] was not consenting. If that has been proved beyond reasonable doubt, then that element has been satisfied.
His Honour: I hope I made that plain to you that there is an alternative but by the same token if you have a doubt about either of those two states of mind, which is reasonable, then you are to resolve that in favour of the accused. There can't be any doubt about that either.
This was the last direction given by his Honour before the jury returned its verdict. Mr. Peek had sought a direction to acquit if the jury thought it "reasonably possible" that an accused had assumed M.K. was consenting, a state of mind inconsistent with a realization that she might not be consenting. His Honour did not give a direction in those terms. He directed the jury that an accused was entitled to be acquitted if the jury were "satisfied" — a term used in the summing up to mean satisfied beyond reasonable doubt — that an accused had an exculpatory belief, and "if that gives rise to a doubt" about the accused's guilt. The jury may have taken his Honour to be directing them that if it were possible that an accused believed that M.K. was consenting, they might acquit provided they were satisfied that he had that belief and provided such a belief gave rise to a doubt as to whether he knew that she was not consenting or was recklessly indifferent to whether she was consenting or not. Such a direction would be, at best, confusing. His Honour did not clarify the matter when he said as he sent the jury out again:
You have had the benefit of that submission from Mr. Peek and my attempts to explain to you the law and if there is anything further that you would ask we will wait upon you.
The effect which this direction may have had on the jury's comprehension of earlier orthodox directions as to onus and standard of proof is a matter of surmise.
The risk of the jury failing to understand the true onus and standard of proof was enhanced by the "occasional misdirections" referred to in the fourth point of the criticisms made by White J. During his summing up the learned trial judge, referring to a defence submission that M.K. had "got excited" told the jury:
It reflects the fact that in many ways this case boils down to who do you believe, and the result after asking that question is fairly predictable. However, again, that is for you to say.
A little later his Honour said:
You may well think that the attitudes are so far apart that you have to make a choice. Again, this is a matter for you. As Mr. Peek puts it to you, of course if you are unable to make a choice, then clearly you have not been satisfied beyond reasonable doubt and the accused must be acquitted.
A failure to distinguish between satisfaction beyond reasonable doubt and choosing between two contradictory stories again appears in a later passage of the summing up:
Mr. Borick did say to you that a verdict of not guilty did not mean that you rejected entirely what [M.K.] says as much as it may well mean that you are simply not satisfied beyond reasonable doubt as to the allegation. That may be so ladies and gentlemen. The case may well be one as I have put to you before, where the real question is who do you believe on the whole of the evidence, [M.K.] or the accused?
After the jury retired, counsel sought a redirection. The jury was brought back, and the relevant redirection was given in these terms:
you are the judges of the facts and it is for you to make up your minds about what you think about the evidence. In that context in the course of my submissions I recall saying to you this might well be a case about whom you might believe. That is a gross simplification in many ways and I am sure you will bear in mind what I have put to you about considering the evidence carefully and weighing it very carefully.
When a case turns on a conflict between the evidence of a prosecution witness and the evidence of a defence witness, it is commonplace for a judge to invite a jury to consider the question: who is to be believed? But it is essential to ensure, by suitable direction, that the answer to that question (which the jury would doubtless ask themselves in any event) if adverse to the defence, is not taken as concluding the issue whether the prosecution has proved beyond reasonable doubt the issues which it bears the onus of proving. The jury must be told that, even if they prefer the evidence for the prosecution, they should not convict unless they are satisfied beyond reasonable doubt of the truth of that evidence. The jury must be told that, even if they do not positively believe the evidence for the defence, they cannot find an issue against the accused contrary to that evidence if that evidence gives rise to a reasonable doubt as to that issue. His Honour did not make that clear to the jury, and the omission was hardly remedied by acknowledging that the question whom to believe is "a gross simplification".
The third point of the summary by White J. relates to directions given by the learned trial judge as to corroboration of M.K.'s evidence. Each of the accused except Liberato had falsely denied, when interviewed by the police, that acts of sexual intercourse had taken place. The learned trial judge told the jury frequently that these statements might be used as corroboration of M.K.'s evidence. The jury were directed that if they were satisfied that the lies had been told out of a consciousness of guilt of rape, the telling of the lies was corroborative of M.K.'s evidence. Such a direction was unexceptionable provided the jury were warned that, although the weight of the false denials was a matter for them, they should recognize the dangers of placing too much reliance on those denials which may have been made for reasons other than consciousness of guilt of rape: Reg. v. May [4] ; Lonergan v. The Queen [5] . The gravamen of the criticism here is that an insufficient warning was given. Although it was for the trial judge to rule whether the false denials in the circumstances could support such an inference of consciousness of guilt (Eade v. The King [6] ), it was for the jury to give the false denials the weight which they thought appropriate: Woon v. The Queen [7] . A sufficient warning against placing too much reliance on the false denials was not given, and that failure may have affected the weight which the jury would otherwise have given to the competing bodies of evidence.
1. [1962] Qd R. 456.
2. [1963] Tas. S.R. 158.
3. (1924) 34 C.L.R. 154, at p. 159.
4. (1964) 109 C.L.R. 529, at pp. 537,539.
The fifth point of criticism related to speculation by his Honour in several parts of the summing up as to what Egan might have said to Sekulic when or before he brought M.K. into Sekulic's bedroom. In fact M.K.'s evidence indicated that the only conversation between Egan and Sekulic was: "This is for you" and the reply: "That is a nice present to wake up to." The erroneous speculation may have diminished the weight which the jury might otherwise have placed on the evidence given by Egan and Sekulic. It was necessary for the Crown to show that the misdirections related to matters of such minor significance that they could not really affect the jury's findings or perhaps to show that, on the whole of the case, no reasonable jury properly directed could fail to accept the evidence of M.K. beyond reasonable doubt. To argue that, because the jury had a full opportunity to assess M.K.'s credibility and because they must have accepted her uncorroborated evidence in convicting Liberato (whose account of the events had remained consistent throughout), the misdirections had no effect on the verdicts is to circumvent the question which the misdirections raise. The question is not whether the jury could and did act on her evidence beyond reasonable doubt, but whether they would have done so if there had been no misdirections relating to the assessment of her credibility and on the approach which had to be taken to the resolution of conflicts between her evidence and the evidence of the accused.
The Court of Criminal Appeal estimated the strength of the prosecution case against each of the other accused by accepting the jury's assessment of M.K.'s credibility. The appeals raised the question whether the jury might not have made a different assessment if the misdirections had not occurred. The error in the court's reasons appears in what White J. said about the facts of the case:
[I]t is just to act upon the complainant's version of what happened, unless and until her accepted version can no longer be safely acted upon by reason of some misdirection which might fairly be said to have affected the jury's assessment of her credibility.
If the court acted on M.K.'s version of what happened in order to determine whether a misdirection might have affected the jury's assessment of her credibility as to what happened, it engaged in circular reasoning. That appears to be the course which it followed in allowing Sekulic's appeal. It was only because White J. thought that M.K.'s evidence against Sekulic "barely implicates him as having a guilty mind at all" that his Honour held that the cumulative effect of the misdirections required Sekulic's appeal against conviction on counts 7 and 11 to be allowed. If proper directions on the onus and standard of proof, the assessment of M.K.'s credibility and the resolution of conflicts in the evidence might have left the jury with a reasonable doubt about M.K.'s version of what happened, it could not be said that the misdirections identified by White J. occasioned no substantial miscarriage of justice. The accused may have lost a reasonable opportunity of acquittal: Mraz v. The Queen [8] . It was fundamental to the prosecution case that the jury should believe beyond reasonable doubt the truth of M.K.'s evidence on the issues of absence of consent and the existence of a guilty state of mind, as the learned trial judge correctly and emphatically directed them. But they were misdirected as to how they should decide those issues and those misdirections went to the heart of the case. The appeals should have been allowed.
1. (1955) 93 C.L.R. 493, at p. 514.
This Court, having heard full argument in the matter, reserved its decision on the application for special leave to appeal. As I have come to the conclusion that the Court of Criminal Appeal should not have allowed the convictions to stand, I would not refuse special leave to appeal. To do so would allow the convictions to stand contrary to the view I have formed. There is a further reason why, in my opinion, special leave should be granted. This case raises for consideration an important problem in the application of the proviso. In cases where an error of law affects the way in which a jury assesses the strength of the evidence tending to show the guilt of an accused person, a Court of Criminal Appeal cannot rely on the jury's assessment in considering the application of the proviso. If the jury's assessment were to be relied on for that purpose, errors affecting the making of that assessment would be virtually unappealable. Such errors are not covered by the proviso unless they affect only part of the inculpatory evidence and that part is so unimportant that the Court of Criminal Appeal is able to be satisfied that a reasonable jury, properly directed, would undoubtedly have convicted on the unaffected evidence. This is not such a case. It is appropriate to grant special leave to state what is the correct approach to the application of the proviso.
Special leave should be granted and the appeals allowed. I would order a retrial.
Deane J.
I agree with the judgment of Brennan J. and with the orders which he proposes.
It is common ground that, on three separate occasions in the course of his summing up, the learned trial judge effectively reversed the onus of proof by instructing the jury in terms of being "satisfied" of some particular aspect of the accuseds' or an accused's case. On one occasion, his Honour told the jury that they would "have to consider the role that [the particular accused] was playing immediately before each of the particular acts with which he stands charged when considering whether you are satisfied on the whole of the relevant evidence that at that particular time of that particular act of intercourse, it was reasonably possible that he did believe [the complainant] was consenting " (emphasis added). On another occasion, when dealing with the effect of statements made to the police which were relied upon as corroboration, his Honour said: "it is for you to say, ladies and gentlemen, but are you satisfied that [the particular accused] panicked when he spoke to the police " (Emphasis added.) These misdirections in relation to the case of a particular accused could readily have been applied by the jury, or some of them, to cases of the other accused.
Undoubtedly, the most important of the three directions effectively reversing the onus of proof was at the critical stage when the jury, having retired, returned to the court and requested further directions including directions on "reckless indifference and assumed consent". In the course of his short directions in answer to that request, his Honour said:
You have to give the benefit of any doubt to the accused ladies and gentlemen, and there may be occasions where a belief in the accused is something that you are satisfied about and if that gives rise to a doubt about the ingredients of the charge, then the accused must have the benefit of that doubt (emphasis added).
The direction that "there may be occasions where a belief in the accused is something that you are satisfied about" and the two previous directions about being "satisfied" of particular aspects of an accused's case were in a context where his Honour had, at an early stage of his summing up, informed the jury that references to their being "satisfied" about something should be understood in the sense of being satisfied beyond reasonable doubt.
The above misdirections about onus of proof must be considered against the background of a number of passages in the learned trial judge's summing up in which he carefully and correctly explained to them the requirements of the criminal onus and standard of proof. They must, however, also be considered against a background where, on a number of occasions, his Honour directed the jury in terms which indicated that the overall question for them essentially involved the making of a "choice" between prosecution and defence evidence: "in many ways this case boils down to who do you believe"; "You may well think that the attitudes are so far apart that you have to make a choice"; "The case may well be one as I have put to you before, where the real question is who do you believe on the whole of the evidence, [the complainant] or the accused?" Provided that they are accompanied by clear and unequivocal directions about the criminal onus and standard of proof, express or implied references in a summing up to a "choice" between particular witnesses are, no doubt, sometimes unavoidable and commonly unobjectionable. The main significance of the directions about having to make a "choice" lies, in the present cases, in their clear suggestion that the "real question" in the cases turned upon a mere "choice" between the evidence of the complainant and that of the accused and in the possible contribution of that suggestion to the overall effect of the misdirections about onus of proof. Their significance in that regard is underlined by the linking, in the passage which I have quoted in the preceding paragraph, of satisfaction of "a belief in the accused" with a failure to be satisfied beyond reasonable doubt of the ingredients of the charge. It was heightened, rather than reduced, by his Honour's further direction, after the completion of his summing up, that his previous statements to them that the case "might well be" one "about whom you might believe" was "a gross simplification in many ways and I am sure you will bear in mind what I have put to you about considering the evidence carefully and weighing it very carefully".
Overall, it appears to me that it is more probable than not that the learned trial judge's orthodox directions on the standard and effect of the onus of proof would have prevailed over the effect of the misdirections. It is, however, impossible to do more than speculate in that regard. There must remain a significant possibility that the members of the jury were, at the very least, confused about the nature and the operation of the criminal onus to the extent that they saw their task as essentially one of making a "choice" between the Crown evidence and the evidence called and statements made on behalf of the accused and as involving no more than a decision about whether or not, to adapt the words of the learned trial judge at one stage of his summing up, they should "believe" the complainant "on the whole of the evidence".
There can be no room for the application of the proviso to s. 353(1) of the Criminal Law Consolidation Act 1935 S.A. in an appeal where there is a significant possibility that, by reason of misdirection by the learned trial judge, a jury has convicted on the basis of a choice between the Crown and defence witnesses as distinct from being satisfied beyond reasonable doubt of the ingredients of the charge against the accused. If some members of a jury in a criminal trial have, by reason of misdirection, failed to comprehend that a finding of guilty cannot be based merely on a failure to believe the accused or on a choice between the Crown and defence witnesses, the accused has been denied a trial in accordance with law and, in the event of a conviction, there has been a fundamental miscarriage of justice. That being so, the Court of Criminal Appeal could not, in the present cases, properly have been satisfied for the purposes of the proviso that "no substantial miscarriage of justice" had "actually occurred". The reason is that a court of criminal appeal can only properly be so satisfied, in a case where there has been fundamental misdirection, if the circumstances are such that it is clear that there is no real possibility that justice has miscarried by reason of that misdirection: cf. Mraz v. The Queen [9] .
1. (1955) 93 C.L.R. 493, at p. 514.
It is true that, as the Court of Criminal Appeal pointed out, the members of the jury in the present case "obviously believed" the complainant. That is however, in my view, simply beside the point on the question of the effect of the misdirections about onus of proof and choice between witnesses. What would be in point on that question would be if it appeared that the members of the jury were satisfied not only that, as a matter of choice, they accepted the evidence of the complainant in preference to the evidence of the accused but that it was plain beyond reasonable doubt that the evidence of the complainant should be so accepted. It is, however, impossible to say that the members of the jury were so satisfied in the present cases unless one first assumes against the accused that the learned trial judge's misdirections did not have the result that some or all of the jury failed properly to appreciate the nature and function of the criminal onus and standard of proof.
There remains to be considered the question whether the cases are proper ones for the grant of special leave to appeal. In my view, they are. The merits have been fully argued. That argument has led me to the conclusion that the Court of Criminal Appeal incorrectly applied the proviso to s. 353(1). The effect of that conclusion is, in each case, that the applicant is presently serving a jail sentence pursuant to a conviction or convictions which should have been quashed by the Court of Criminal Appeal. With due respect to those who may see the matter differently, I find it difficult to imagine circumstances in which I would be persuaded that special leave to appeal should be refused notwithstanding that the case was one in which the Court had entertained full argument leading to such a conclusion. That is particularly so in the case of the present applications in that the application of the proviso by the Court of Criminal Appeal was effectively an exercise of original jurisdiction from which the only appeal is that which lies, by special leave, to this Court. |
high_court_of_australia:/showbyHandle/1/9334 | decision | commonwealth | high_court_of_australia | text/html | null | Luya Julius Pty Ltd v Shepherd [1955] HCA 47 | https://eresources.hcourt.gov.au/showbyHandle/1/9334 | 2024-09-13T22:52:55.663285+10:00 | High Court of Australia
Dixon C.J. Webb, Fullagar, Kitto and Taylor JJ.
Luya Julius Pty Ltd v Shepherd
[1955] HCA 47
ORDER
Appeal allowed with costs. Order that the judgment of the Supreme Court of Queensland (Matthews J.) be discharged, and in lieu thereof order that there be judgment for the defendants in the action with costs.
Cur. adv. vult.
The Court delivered the following written judgment:—
Aug. 23
Dixon C.J., Webb, Fullagar, Kitto and Taylor JJ.
This is an appeal from a judgment of the Supreme Court of Queensland (Matthews J.). The judgment was given in an action in which the respondent Shepherd was plaintiff and the two appellants were defendants. The plaintiff was injured in a collision which occurred in the city of Brisbane on the morning of 23rd June 1952, between a motor cycle ridden by him and a motor truck owned by the appellant company and driven by the other appellant. By their pleading the defendants denied negligence and alleged contributory negligence, but at the trial negligence was admitted, the allegation of contributory negligence was abandoned, and the sole defence on which the defendants relied was based on cl. 24 of the schedule to The Workers' Compensation Acts 1916 to 1952 Q.. It was alleged that the injuries suffered by the plaintiff were injuries for which compensation was payable under The Workers' Compensation Acts, that the plaintiff had applied for and recovered compensation under the provisions of that Act, and that he was thereby precluded from recovering damages from the defendants. To this plea the plaintiff replied that he was at all material times an infant, and that it was not for his benefit that he should receive workers' compensation instead of damages.
The plaintiff was at all material times a worker within the meaning of the Act, being employed as a shop assistant by Calile Malouf Pty. Ltd., of Stanley Street, South Brisbane. Since the accident occurred when he was travelling to his work, he was entitled to compensation under s. 9 of the Act. He claimed compensation and was paid by way of compensation between 24th June 1952 and 24th February 1953 weekly sums totalling £161 7s. 9d. The writ in the action was issued on 18th July 1953. The plaintiff was in fact at all material times an infant, and the action was commenced by his father as his next friend. He reached the age of twenty-one years on 25th August 1954, shortly before the action came on for trial.
Section 15 of The Workers' Compensation Acts 1916 to 1952 provides that the provisions set forth in the schedule to the Act shall be applicable to the business of State accident insurance and to proceedings for and consequent upon the recovery of compensation under the Act. There is a provision for amendment of the schedule by the Governor in Council by Order in Council published in the Gazette , but we were informed that no material amendment had been made. Clause 24 of the schedule is in the following terms:—"Recovery of damages from stranger When the injury for which compensation is payable by the Insurance Commissioner under this Act was caused under circumstances creating also a legal liability in some other person to pay damages in respect thereof—(i.) The worker may both take proceedings against that person to recover damages and may apply for compensation under this Act, but is not entitled to recover both damages and compensation; and (ii.) If the worker has recovered compensation under this Act, the Insurance Commissioner shall be entitled to be indemnified by the person so liable to pay damages as aforesaid, and all questions as to the right to and amount of any such indemnity shall in default of agreement be settled by action or, if the parties consent, by an industrial magistrate under this Act."
In Smith v. Commonwealth Oil Refineries Ltd. [1] , it was held by this Court (Latham C.J. and Rich, Starke and Dixon JJ.) that actual receipt by a worker of any sum by way of compensation constituted a "recovery" of compensation within the meaning of cl. 24 of the schedule, and that after such recovery an action for damages at common law could not be maintained by the worker against a person other than the employer. It was further held that a worker who had received compensation could not, by repaying the amount received, restore himself to the position of one who had not recovered compensation. Both points had in fact been decided in the same way by the Court of Appeal on a corresponding provision in the English legislation: see Attorney-General v. Arthur Ryan Automobiles Ltd. [1] and Huckle v. London County Council [2] .
1. (1938) 60 C.L.R. 141.
2. (1938) 2 K.B. 16.
3. (1910) 26 T.L.R. 580; (1910) 27 T.L.R. 112.
In each of the above cases the worker was at all material times an adult. In Farmer & Co. Ltd. v. Griffiths [3] , the worker was an infant, and a majority of two Justices of this Court (Evatt and McTiernan JJ., Dixon J. dissenting) held, affirming a majority decision of the Full Court of New South Wales (Griffiths v. Farmer & Co. Ltd. [4] , that the receipt by an infant worker of compensation did not debar him from proceeding at common law against a third party unless it was established that it was for his benefit that he should receive compensation rather than recover damages from the third party. This case arose under s. 64 of the Workers' Compensation Act 1926-1938 N.S.W., but that section was in terms identical with the provision of the Queensland Act which had been in question in Smith v. Commonwealth Oil Refineries Ltd. [5] and is in question in this case. The question of the position of an infant worker arose again in this Court in Cain v. Malone [6] . That case arose under a different section of the Act of New South Wales, but it was conceded by the appellant that he could not succeed unless Farmer & Co. Ltd. v. Griffiths [3] were overruled. A Court consisting of five Justices (Latham C.J. and Rich, Starke, McTiernan and Williams JJ.) was invited to overrule Farmer & Co. Ltd. v. Griffiths [3] . The Court unanimously declined to overrule that case, although Starke J. expressed his agreement with the dissenting opinion of Dixon J. [7] . In the present case Matthews J., although he also would have agreed with the view of Dixon J., regarded the matter as covered by Farmer & Co. Ltd. v. Griffiths [3] and himself, of course, as bound by the decision in that case.
1. (1940) 63 C.L.R. 603.
2. (1940) 40 S.R. (N.S.W.) 296; 57 W.N. 96.
3. (1938) 60 C.L.R. 141.
4. (1942) 66 C.L.R. 10.
5. (1940) 63 C.L.R. 603.
6. (1940) 63 C.L.R. 603.
7. (1942) 66 C.L.R., at p. 17.
8. (1940) 63 C.L.R. 603.
Mr. Lucas, who appeared for the appellant, did not invite us to overrule Farmer & Co. Ltd. v. Griffiths [3] . He argued, however, that, although cl. 24 of the schedule to the Queensland Act was in terms identical with s. 64 of the New South Wales Act, yet there were such differences between the New South Wales Act and the Queensland Act as to make the decision in that case inapplicable to the present case. He referred in particular to s. 9 of the Queensland Act and to cl. 20 of the schedule. Section 9 provides that every worker who is injured by accident in certain circumstances "shall receive out of the State Accident Insurance Fund compensation in accordance with this Act, and except as in this Act is otherwise provided such payment shall be in lieu of any and all rights of action whatsoever " This does not preclude the making of a claim for damages at common law against a third party, but, read with cl. 24 of the schedule, it clearly means that an actual payment of compensation is an answer to any such claim. Clause 20 of the schedule provides that "when payment of any moneys under the Act is made to any person under twenty-one years of age, whether such person claims as a worker, dependant, or legal personal representative, the receipt of such person therefor shall be a good and valid discharge in law; and such person (notwithstanding minority) may agree with the Insurance Commissioner upon the amount of compensation payable."
1. (1940) 63 C.L.R. 603.
Mr. Lucas's argument necessitates an attempt to determine the ratio decidendi of Farmer & Co. Ltd. v. Griffiths [1] . Under s. 29 (1) of the English Act of 1925 an "option" between two remedies was expressly given to the worker, and it is understandable that it should be held that what would amount to a binding exercise of an option or election in the case of an adult should be held not to amount to such an exercise in the case of an infant—whether the option or election be given by statute or contract or will or otherwise: cf. Stephens v. Dudbridge Ironworks Co. [2] ; Murray v. Schwachman Ltd. [3] ; and Stimpson v. Standard Telephones & Cables Ltd. [4] . The question arising in such a case is not a question of construction, and such a view does not attribute different meanings to the word "option" according as the optionee is an adult or an infant. But, although Stimpson's Case [4] seems to have been regarded as supporting the decision in Farmer & Co. Ltd. v. Griffiths [1] , the latter case is not put, and could not, in our opinion, be put on the basis that the infant was called upon to exercise an option or make an election. What s. 64 of the New South Wales Act, as interpreted in Smith's Case [5] , said was simply that an actual receipt of compensation should have a certain effect in law.
1. (1940) 63 C.L.R. 603.
2. (1904) 2 K.B. 225.
3. (1938) 1 K.B. 130.
4. (1940) 1 K.B. 342.
5. (1940) 1 K.B. 342.
6. (1940) 63 C.L.R. 603.
7. (1938) 60 C.L.R. 141.
Whatever may be thought of the decision in Farmer & Co. Ltd. v. Griffiths [1] , it rests fundamentally, we think, on the proposition that an infant could not give a valid discharge from an obligation to the benefit of which he was entitled. McTiernan J. put it that, unless it was shown to be for his benefit, the infant was not "capable of performing the act of recovering compensation and thereby discharging his right to damages". [1] His Honour speaks again of the incapacity of the "infant worker to perform the act of recovering compensation" [2] within the meaning of s. 64. Evatt J. [3] agreed with the judgment of McTiernan J. Again, in Cain v. Malone [4] , Rich J., adopting the words of counsel for the appellants, stated the question in the case as being whether "for the purpose of s. 63, any de facto receipt by an infant of money paid to him by way of workers' compensation is a binding receipt" [5] so as to carry the consequences prescribed by the section. Moreover it was in relation to this very question of capacity to give a discharge that Dixon J. considered the view of the majority in Farmer & Co. Ltd. v. Griffiths [6] to be erroneous. He said: "Now it is not true that an infant can give a good discharge for no payment made to him there is no such general rule in respect of liabilities contractual in their origin" [7] .
1. (1940) 63 C.L.R. 603.
2. (1940) 63 C.L.R., at p. 616.
3. (1940) 63 C.L.R., at p. 617.
4. (1940) 63 C.L.R., at p. 614.
5. (1942) 66 C.L.R. 10.
6. (1942) 66 C.L.R., at p. 15.
7. (1940) 63 C.L.R. 603.
8. (1940) 63 C.L.R., at p. 608.
As soon as it is seen that the decisions in Farmer & Co. Ltd. v. Griffiths [6] and Cain v. Malone [4] are based on a supposed incapacity of an infant to give a binding receipt for moneys paid to him by way of workers' compensation, it becomes plain, we think, that those decisions can have no application to cases arising under The Workers' Compensation Act 1916 to 1952 Q.. For, whatever might have been the true position at common law, that Act expressly confers upon an infant the capacity which was denied in those cases. Clause 20 of the schedule says that the receipt of an infant for any moneys paid to him under the Act shall be a good and valid discharge in law. He may, moreover, make a binding contract with the Insurance Commissioner with regard to the amount of compensation payable. It would be inconsistent with cl. 20 to say that an infant is "incapable of performing the act of recovering compensation" within the meaning of cl. 24. Clause 20 makes him capable of receiving compensation and of giving a valid receipt and discharge therefor. In these respects he is expressly placed in the same position as a person of full age: he has the same capacity as a person of full age. His receipt carries the consequences prescribed by s. 9, and no reason can, consistently with cl. 20, exist for saying that the decision in Smith v. Commonwealth Oil Refineries Ltd. [8] , is not applicable to him.
1. (1940) 63 C.L.R. 603.
2. (1942) 66 C.L.R. 10.
3. (1938) 60 C.L.R. 141.
For these reasons this appeal should, in our opinion, succeed. The appeal should be allowed with costs, the judgment of the Supreme Court discharged, and in lieu thereof there should be judgment for the defendants in the action with costs. |
high_court_of_australia:/showbyHandle/1/10970 | decision | commonwealth | high_court_of_australia | text/html | null | Bray v Commissioner of Taxation (Cth) [1968] HCA 56 | https://eresources.hcourt.gov.au/showbyHandle/1/10970 | 2024-09-13T22:52:59.073058+10:00 | High Court of Australia
Owen J.
Bray v Commissioner of Taxation (Cth)
[1968] HCA 56
ORDER
Appeal allowed with costs. Assessment remitted to the Commissioner so that he may amend the assessment accordingly.
Cur. adv. vult.
Sept. 6
Owen J. delivered the following written judgment:—
The appellants are the executors of the will of Thomas Henry Bray who died on 20th September 1964. On 3rd May 1960 the deceased lent £88,000 to T. H. Bray Pty. Limited, a company the shareholders in which consisted in the main of relatives of the deceased. The agreement pursuant to which the loan was made was in the following terms:
This Agreement made this third day of May, One thousand nine hundred and sixty between: Thomas Henry Bray of Forbes in the State of New South Wales (hereinafter called "the Lender") of the one part and: T. H. Bray Pty. Limited a company duly incorporated under the laws of the said State (hereinafter called "the Borrower") of the other part Whereas the Lender at the request of the Borrower has agreed to lend to the Borrower on the terms and conditions hereinafter set out the principal sum of Eighty eight thousand pounds the receipt whereof is hereby acknowledged and whereas the Borrower has agreed to repay the said principal sum to the Lender on the terms and conditions hereinafter set out now it is hereby agreed as follows:
(1) The said principal sum or so much thereof as for the time being remains owing by the Borrower to the Lender is hereinafter called "the loan debt".
(2) The Loan debt shall be paid in full by the Borrower to the Lender upon the expiration of ninety (90) days written notice given by the Lender under his own hand to the Borrower requiring the Borrower to pay in full the amount of the said loan debt.
(3) If the Lender by assignment made in accordance with s. 12 of the Conveyancing Act, 1919-1954 of the State of New South Wales should assign the said loan debt to any person then the assignee shall be entitled to obtain payment in full of the said loan debt in the same manner as the Lender could have obtained payment thereof in pursuance of clause 2 hereof.
(4) Subject to clauses 2 and 3 hereof the Borrower shall pay to the Lender or his assignee in reduction of the said loan debt annual instalments of not less than two thousand two hundred pounds (£2200.0.0) the first of such annual payments to be paid on the thirty first day of December 1961 and subject to clauses 2 and 3 hereof each subsequent annual payment is to be paid at the end of each succeeding year ending on the thirty first day of December.
(5) If default be made in payment of the first or any subsequent annual payment payable in pursuance of clause 4 hereof for a period of more than sixty (60) days after the date hereinbefore fixed for the payment of any such annual payment then simple interest at the rate of five per centum (5%) per annum shall be payable on the loan debt in respect of the period during which such default continues.
(6) Should the Borrower having been required to pay the loan debt pursuant to either clause 2 or clause 3 hereof fail so to do then simple interest at the rate of five per centum (5%) per annum shall be payable on the amount of the loan debt outstanding at the date when the Lender or his assignee shall have given written notice to the Borrower in pursuance of clauses 2 or 3 hereof and shall be payable in respect of the period commencing on the date of the expiration of the aforesaid written notice and ending on the date when the loan debt is paid in full to the Lender or his assignee.
(7) Subject to the foregoing provisions of this agreement the Borrower shall have the right to repay the loan debt in full at any time or to anticipate the payment of any one or more of the aforesaid annual payments and for the purposes of the foregoing provisions of this agreement the payment in anticipation of any such annual instalment shall be treated as the payment of that instalment on the date fixed for the payment thereof by clause 4 hereof.
(8) If requested in writing by the Lender or by an assignee to whom or to which the loan debt has been assigned in accordance with the foregoing provisions hereof the Borrower shall execute a floating charge over its undertaking and property for the amount of the loan debt.
The deceased died without having given a notice in writing under cl. 2 requiring the company to pay in full the amount of the debt nor had he made any assignment of the debt under cl. 3. Between the date of the agreement and the date of the deceased's death three annual instalments of £2,200 each had been made by the company in reduction of the loan debt.
In assessing the estate duty payable on the estate of the deceased, the Commissioner included as one of the assets of the estate the full amount of the debt, namely £81,400, remaining to be paid. The executors claim, however, that the value of the debt, as at the date of the deceased's death, was £24,938. This claim is based upon the submission that the obligation imposed on the company by cl. 2 of the agreement was conditional upon a written notice "under his own hand" being first given by the deceased; that the right to give such a notice was personal to the deceased; and that, having died without exercising that right, it cannot be exercised by his executors. In these circumstances, it was submitted, the value of the asset as at the date of the deceased's death was much less than the total of the instalments remaining to be paid. If the executors' contention is accepted the parties are in agreement that that value is the dollar equivalent of £24,938.
Counsel for the appellants naturally placed great reliance upon the words "made under his own hand" in cl. 2. The use of that phrase made it plain, he submitted, that it was the intention of the parties to the agreement that the right to call upon the company to pay the debt in full was to be exercisable only by the deceased in his lifetime unless he should assign the debt under cl. 3, in which case a notice might be given by the assignee "under his own hand".
The question is one as to the proper construction of the agreement and I think the appellants' submission should prevail. The obligation which the agreement imposes upon the company is to repay the debt by annual instalments over a period of years "subject to" cll. 2 and 3. Clause 2 gave the deceased the right to elect, if he thought fit to do so, to require the borrower to repay the whole debt in full by giving it a notice in writing "under his own hand", that is to say "under the lender's own hand". This right of the lender was, in my opinion, a personal right and it came to an end with his death. Thereafter the only obligation owed by the company was to pay the debt by instalments. The executors can, of course, enforce the payment of those instalments as and when the times for payment arrive but have no right to take the course for which cl. 2 provides.
I would therefore allow the appeal and remit the matter to the Commissioner so that he may amend the assessment accordingly. |
high_court_of_australia:/showbyHandle/1/8853 | decision | commonwealth | high_court_of_australia | text/html | null | Caterson v Commissioner for Railways (NSW) [1973] HCA 12 | https://eresources.hcourt.gov.au/showbyHandle/1/8853 | 2024-09-13T22:53:02.337888+10:00 | High Court of Australia
Barwick C.J. McTiernan, Menzies, Gibbs and Stephen JJ.
Caterson v Commissioner for Railways (NSW)
[1973] HCA 12
ORDER
Appeal allowed with costs. Judgment of the Supreme Court of New South Wales Court of Appeal Division set aside and in lieu thereof order that the appeal to that Court be dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
May 10
Barwick C.J.
My brother Gibbs in his reasons for judgment, which I have had the advantage of reading, sets out the facts relevant to the decision of this appeal. I have no need to repeat or to add to what he has written. I agree with what he has said and with the conclusion to which he comes. However, I wish to add brief remarks on my own account.
The Supreme Court reached its conclusion in this case because, as I understand its reasons, it held the view that the respondent would only be liable to the plaintiff in the circumstances of the case if it could be held that it was likely that a person, not intending to travel on the train and in no physical danger if remaining on it, would attempt to leave it if the train, not having allowed adequate time for such a person to disembark whilst it was stationary, moved off without due warning. Likelihood in this connexion appears to have been equated by the Supreme Court to probability in the sense that the event was more likely than not to happen or occur.
No doubt in the decisions concerned with liability in tort, various expressions have been used by distinguished judges in speaking of the necessary relationship between what has occurred in the particular case and the foreseeability of that event which had to be predicated of the person sought to be made liable for the consequences of the occurrence. Some of these expressions are referred to in the speeches in C. Czarnikow Ltd. v. Koufos [1] . I have no present need to list them all with references to the decisions in which they have been used: but they include "likely", "seriously possible", "of real risk", "of real danger", "not unlikely" or "liable". Suffice it to say that doubtless the expression used in particular cases served well enough to encompass its user's meaning in relation to the facts of the case before him. At times, because of the quality of those facts, an expression has been used which was enough to produce liability in respect of them, though in truth lesser facts and a less stringent criterion would have also produced liability. Consequently, unless expressions used in reasons for judgment are designed accurately to formulate a general principle or proposition, care must be taken not to erect a particular expression into a formula or an essential part of a formula.
1. [1969] 1 A.C. 350.
In my opinion, liability in tort will be possible if the event which has occurred and the damage therefrom which the claimant has suffered were both foreseeable by the person sought to be made liable and of such a kind as he ought to have realised were not unlikely to occur, subject only to the exception constituted by the decision in Bolton v. Stone [1] . Of the various possible descriptions of the event and damage I prefer "not unlikely to occur" because on the one hand it denies the proposition that the event or damage should be apprehended as more likely than not to occur or to be suffered and on the other hand, by its negative form, it excludes possibilities which are theoretical and unreal in all the circumstances: it accommodates the idea of a real risk or danger though in relation to some situations it may possibly be more embracing than either of those terms.
1. [1951] A.C. 850.
As a concise formulation of the liability in tort, I would respectfully adopt the language of Lord Reid in C. Czarnikow Ltd. v. Koufos [2] when he says: "The modern rule of tort is the defendant will be liable for any type of damage which is reasonably foreseeable as liable to happen even in the most unusual case, unless the risk is so small that a reasonable man would in the whole circumstances feel justified in neglecting it", if by "liable to happen" is meant, as I apprehend Lord Reid intended it to mean, "not unlikely to happen". That formulation, if extended to include the act or event causing damage, would, in my respectful opinion, be equally valid.
1. [1969] 1 A.C., at pp. 385-386.
In my opinion, the categories of occupier and invitee and occupier and licensee are quite inappropriate for the resolution of the present case. Liability must be placed on a general duty of care arising out of the circumstances that the defendant had the management of the train; that the appellant was properly upon it; that he was of a class of persons of whose presence on the train the respondent must be taken to have been aware; and that such persons would require adequate time to leave the train whilst it was stationary.
Failure to give adequate time, particularly if the train moved off without adequate warning, was in my opinion a breach of the duty of care for the safety of such persons which arose out of the circumstances. The question of how human beings placed in a situation of emergency will act is very much a question of fact: where a jury forms part of the tribunal of fact, it is a fact preeminently suitable for its decision. Thus, the question whether persons placed as the appellant found himself in this case were not unlikely to attempt to disembark from the train during its initial period of movement was a matter for the jury. I have no doubt that it was entitled in this case to conclude that it was not unlikely that the appellant, under threat of being carried by the train against his wish for some sixty miles, would attempt to disembark so soon as he became aware of the train's motion and before it gained a speed at which disembarkation with safety was evidently quite impossible. Further, it was entitled to conclude that the respondent ought to have foreseen that it was not unlikely that a person, placed as was the appellant, would so attempt to leave the train.
I would allow the appeal.
McTiernan J.
The declaration filed by the plaintiff in this action alleges that the damage for which he claims compensation was caused by negligence in the driving, control and management of the train. The defendant filed a plea of not guilty and a plea of contributory negligence.
The plaintiff gave evidence and called witnesses. The defendant called a number of witnesses. At the close of the evidence a submission was made to the judge on behalf of the defendant, that there was no reasonable evidence of negligence and the judge ought not leave the case to the jury. The judge did not act on the submission. The jury returned a verdict in favour of the plaintiff and awarded damages to him. The defendant appealed. The Court of Appeal decided that on the evidence of the way in which the accident happened, the defendant could not be held guilty of negligence resulting in the accident.
It appeared that when a train arrived at the railway station at Casino, the plaintiff went on to the train with a man, who intended to travel by train, to help him to put his luggage on the train, and having done this the plaintiff proceeded towards the doorway in order to get off the train. When the plaintiff reached the doorway he realised the train was in motion. The plaintiff decided to get off the train. It was because of the way in which he did this that the Court of Appeal decided that the duty of care owed by the defendant to him did not apply. In order to get off the train the plaintiff caught hold of a vertical bar at the side of the doorway and jumped onto the platform. He ran with the train for some yards. Failing to steady himself, he fell between the platform and the train and sustained serious personal injury. With respect, I think that the Court of Appeal took an unduly adverse view of what the plaintiff meant by saying that he "jumped" out of the train. It was within the province of the jury to make a finding on the whole of the plaintiff's account of how he got out of the train. It was open to the jury to find that he did something less extreme than literally to leap from the doorway onto the platform.
The plaintiff was lawfully on the train. The plaintiff's case was that the defendant knew that persons not travelling came onto the train when it stopped at the railway station and the defendant was under a legal duty of care to them which included giving them a reasonable opportunity to alight from the train while it was stationary. On the evidence it was open to the jury to find that the defendant put the train in motion in breach of that duty of care. The jury could reasonably find on the evidence that the train was moving slowly when the plaintiff jumped out of the doorway, holding onto the vertical bar to support himself. It ought reasonably to have been in the contemplation of the defendant's employee concerned with starting the train that if a reasonable opportunity was not given to visitors on the train, one or more of them would be likely to alight from it as soon as it was put in motion and this would be a dangerous thing to do.
Lord Atkin said in Donoghue v. Stevenson [1] : "You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law is my neighbour? The answer seems to be—persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question." This principle applies to this case. The plaintiff, as a visitor on the train, was "neighbour" to the defendant while on the train. He did not cease to be "neighbour" immediately the train was put in motion. I would accept as good law this statement: "it is not necessary to show that the particular accident which has happened was foreseeable, any more than it is necessary to show that the particular damage was foreseeable; it is enough that if it was reasonable in a general way to foresee the kind of thing that occurred": Salmond on the Law of Torts, 15th ed. (1969), p. 291. I think this statement of principle applies to the act of the plaintiff described as "jumping" from the train.
1. [1932] A.C. 562, at p. 580.
It was a question of fact for the jury to decide whether the provision of a chain to pull in order to stop the train was a sufficient precaution to fulfil the defendant's duty of care. Apparently the jury decided it was not. The issue of contributory negligence, as well as the issue of negligence, was left to the jury. Their general verdict shows that they found in favour of the plaintiff on both issues. In my opinion, there is not ground for disturbing the jury's finding on either issue.
I would allow the appeal.
Menzies J.
This is an appeal from a decision of the Court of Appeal of the Supreme Court of New South Wales setting aside a verdict and judgment in favour of the appellant against the respondent in an action for damages for negligence.
The jury could, upon the evidence, have found:
(1) that the plaintiff entered a train standing at the platform at Casino to stow in his compartment the luggage of a passenger friend who was boarding the train;
(2) that the train started to move without giving the plaintiff time, without waste of time, to do what he had to do and leave the train;
(3) that the train started to move without any warning audible to the plaintiff inside the carriage;
(4) that, on reaching the doorway to alight upon the platform, the plaintiff found the train already in motion and either stepped or jumped out holding a hand-bar on the outside of the carriage;
(5) that the plaintiff's attempt to alight was unsuccessful and he fell between the train and the platform sustaining the injuries for which he sued;
(6) that at the time the plaintiff attempted to leave the train, it was still travelling slowly but was gathering speed.
It appears to me that, upon such evidence, the jury could properly return a verdict for the plaintiff, finding negligence and not finding contributory negligence, unless the respondent was entitled to disregard as a small risk not calling for precautionary measures the possibility that a person lawfully upon a train and being carried away from a station upon which he wanted and had good reason to alight, would run the risk of trying to leave the train when he found that it was moving off and gathering speed, even though it was common knowledge that there was a stop cord that could have been pulled to stop the train.
I have had the advantage of reading the judgment of Gibbs J. in which the problems to which the appeal gives rise are fully discussed and for the reasons which he gives, I have reached the conclusion that the risk that what did happen here would happen in such circumstances was not so small that a reasonable person would be justified in disregarding it.
Consequently, I agree that the appeal should be allowed.
Gibbs J.
This is an appeal from a judgment of the Court of Appeal Division of the Supreme Court of New South Wales. An action was brought in that Court by the appellant against the respondent, the Commissioner for Railways, for damages for personal injuries sustained by the appellant by reason of the negligence of the respondent. The action was tried by a judge sitting with a jury, and a verdict was entered for the appellant. The Court of Appeal ordered that the verdict be set aside and that in lieu thereof a verdict be entered for the respondent.
At the trial there was a conflict of testimony on some points but the jury was entitled to accept the following version of the facts. The appellant, who lived at Bangalow, had driven to Casino, forty miles away, and had been accompanied by his son, aged fourteen, and a friend, Mr. Mackie, who wished to catch the Brisbane-Sydney express train which was due to arrive at Casino at 7.44 p.m. and to depart at 7.51 p.m. on the day in question. The train arrived on time or a minute or two early. Because its length was greater than that of the platform at Casino it made two stops; passengers intending to travel in sleeping compartments were allowed to enter their carriages at the first stop and the train was then moved forward to allow the other passengers to get aboard. The train stopped twice as long in the first position as in the second. When the train stopped on the second occasion the appellant and Mr. Mackie happened to be standing almost opposite to the door of the carriage in which Mr. Mackie was to travel. Although there was no suggestion that Mr. Mackie, who was aged about sixty-seven, was incapable of carrying his own suitcase, the appellant, who was ten years younger, carried it into the carriage for him. He placed the case on the rack, shook hands with Mr. Mackie and without wasting time commenced to walk out of the carriage. When he got to the door he noticed that the train had started to move. There was some evidence that it had commenced to move at the appointed time, 7.51 p.m., but the jury was not bound to accept that evidence. The appellant did not look at his watch, or at the station clock, to check the time before he entered the carriage or while he was within it. At least two other persons who had entered the carriage to assist their relatives with their luggage were still on board when the train began to move. Neither they, nor the appellant, had heard any warning that the train was about to depart. The next station at which the train would have stopped in the ordinary course of events was about eighty miles away. The appellant thought of his son on the platform, forty miles from home, and "instinctively", as he said, and without giving any thought to the risk involved, tried to get onto the platform by jumping out of the carriage and running with the train while holding a bar placed near to the door of the carriage. At the time when the appellant got to the door of the carriage the train, to use his words, "was not travelling too fast", although its speed was too great for him simply to step out of the carriage. It appears from the evidence of another witness, Miss Stuckey, that the train had just started to move off but it had gathered speed fairly quickly. It did not occur to the appellant to attempt to find a communication cord which, if pulled, would stop the train. There was no direct evidence that there was a cord in the carriage but there was evidence from which it might have been inferred that there was such a cord. On this material the jury was entitled to conclude that the train did not stop long enough on the second occasion to allow the appellant to enter the train, go to Mr. Mackie's seat, deposit the luggage and then leave the carriage. Further, the jury was entitled to find that no warning which could be heard within the carriage was given before the train began to move from the station.
The question that then falls for decision is whether it was open to the jury in these circumstances to find that the respondent had been guilty of negligence which caused the appellant's injuries. There can, I think, be no doubt that the jury could properly have held that the respondent should have foreseen that some people other than passengers would board the train while it was halted at the station and would seek to alight from it before it resumed its journey. It is common knowledge that passengers who board an express train are often accompanied by other persons who assist them to carry on their luggage or find their seats, and if a passenger is a young child or is old and infirm it is highly likely that he will need to be helped in this way. I did not understand this to be disputed by the respondent. Further, it was not contested that it was foreseeable that if such a person, finding himself on the train when it started to move off, tried to get back on to the platform, he would be likely to suffer injury. However, the Court of Appeal took the view that it could not be foreseen that any act or omission of the respondent in relation to the operation of the train would be likely to cause injury to a person who jumped from the train while it was in motion unless he did so to protect himself from the danger of some physical injury that might be caused to him if he remained on the train. Their Honours thought that it was not foreseeable that a man would do anything so dangerous as to jump from a moving train except to protect himself from a danger on the train itself and that the appellant's act of jumping was not a likely result of any earlier act or omission of the respondent. Therefore it was held that there was no duty of care on the part of the respondent related to the injury suffered by the appellant. Alternatively it was said that if a relevant duty of care be assumed there was no breach thereof which caused the appellant's injuries. [1]
1. [1970] 3 N.S.W.R. 388.
With great respect, I am unable to agree that no reasonable jury could find that it was foreseeable that a person other than a passenger, who had found himself on an express train which started to move off without warning, might jump from it, even though he was in no danger by remaining on the train. It would of course be a very considerable inconvenience for anyone to be carried against his will to another town eighty miles away and in some cases the person on the train would have an additional strong reason to wish to avoid being so carried, as for example, if he had left a helpless child on the platform or a sick wife at home. A jury could in my opinion reasonably consider that a person on an express train faced with such a possibility might attempt to leave the train, particularly if it had not yet picked up speed. It is true that the safer course in such a situation would be to pull the communication cord, if one were provided, but people do not always choose the safer course and it was foreseeable that a person wishing to get off the train might try to jump off it while it was moving, because he thought that the speed of the train enabled him to do so without risk of injury, or because he wished to avoid the embarrassment of pulling the communication cord and for that reason was prepared to take a chance of injury, or simply because in the heat of the moment it seemed to him the only thing to do. In the circumstances of the present case it was open to the jury to find that the respondent could have foreseen that there would be on board the train after it had stopped at Casino persons who intended to leave it before its departure and that those persons would be exposed to the risk of injury if the train started to move without adequate warning and after so short a stop as not to give them a reasonable opportunity to alight.
I am prepared to assume that the carriage was provided with a communication cord and that many persons in the predicament in which the appellant found himself would have used the cord to stop the train. Notwithstanding these assumptions the jury might properly consider that there was a real risk that if the train began to move while persons who were not passengers were still aboard it, one of these persons would try to leave the train and in so doing would suffer injury. Moreover, if someone did jump out of the train and fell between it and the platform the consequences would be likely to be serious. In Overseas Tankship (U.K.) Ltd. v. Miller Steamship Co. Pty. Ltd. [2] , Lord Reid, after discussing the decision in Bolton v. Stone [1] , and saying that the House of Lords there held that "the risk was so small that in the circumstances a reasonable man would have been justified in disregarding it and taking no steps to eliminate it", went on to say:
But it does not follow that, no matter what the circumstances may be, it is justifiable to neglect a risk of such a small magnitude. A reasonable man would only neglect such a risk if he had some valid reason for doing so, e.g., that it would involve considerable expense to eliminate the risk. He would weigh the risk against the difficulty of eliminating it In their Lordships' judgment Bolton v. Stone [1] did not alter the general principle that a person must be regarded as negligent if he does not take steps to eliminate a risk which he knows or ought to know is a real risk and not a mere possibility which would never influence the mind of a reasonable man. What that decision did was to recognize and give effect to the qualification that it is justifiable not to take steps to eliminate a real risk if it is small and if the circumstances are such that a reasonable man, careful of the safety of his neighbour, would think it right to neglect it.
In the present case the jury, once it had decided that there was a real risk of injury if the train commenced to move without proper warning or after too short a stop, had to consider what difficulty, expense and disadvantage there would have been in taking steps to eliminate the risk (see also Morris v. West Hartlepool Steam Navigation Co. Ltd. [2] and Schiller v. Council of the Shire of Mulgrave [3] ). No doubt there would have been some disadvantage in allowing the train to stop a little longer at the station, but it was for the jury to weigh that disadvantage against the risk. Similarly it was for the jury to consider whether there would have been any difficulty, expense or disadvantage in providing a means of warning persons who were within the carriages of the intention to start the train. There was no evidence that the provision of an adequate warning system would have been impracticable on the ground of expense or otherwise. On the whole the jury was entitled to take the view that a reasonable man weighing the risk against the difficulties of eliminating it would have taken one or other or both of the possible precautions that might have averted the risk. It was therefore open to the jury to find that the respondent owed a duty of care to the appellant and had committed a breach of that duty.
1. [1967] 1 A.C. 617, at pp. 642-643.
2. [1951] A.C. 850.
3. [1951] A.C. 850.
4. [1956] A.C. 552, at pp. 574-575.
5. (1972) 46 A.L.J.R. 650, at p. 657; 129 C.L.R. 116.
The next question for consideration is whether the jury was entitled to find that the negligence of the respondent had caused the appellant's injuries. On behalf of the respondent it was submitted that the voluntary act of the appellant in jumping from the train broke the chain of causation between the respondent's negligent acts and omissions and the appellant's injuries. It is no answer to this submission to say that the appellant's act was foreseeable: Chapman v. Hearse [1] and McKew v. Holland & Hannen & Cubitts (Scotland) Ltd. [2] . In the latter case Lord Reid said [3] that "it is often easy to foresee unreasonable conduct or some other novus actus interveniens as being quite likely. But that does not mean that the defender must pay for damage caused by the novus actus". On the other hand, the intervention of the voluntary action of the appellant did not in itself necessarily have the result that his injuries were not caused by the respondent's negligence. In Summers v. Salford Corporation [4] , Lord Wright said that
if a plaintiff suffers damage by the defendant's default, the damage may be directly due to that default and recoverable even though the accident and damage would not have happened but for some action of the plaintiff, so long as his action was in the ordinary course of things and, at least generally speaking, was not blameworthy.
The effect of the intervening action of a third party was recently discussed in Dorset Yacht Co. Ltd. v. Home Office [5] , and in the course of that discussion Lord Reid cited the following passage from Haynes v. Harwood [6] :
If what is relied upon as novus actus interveniens is the very kind of thing which is likely to happen if the want of care which is alleged takes place, the principle embodied in the maxim is no defence. The whole question is whether or not the accident can be said to be "the natural and probable result" of the breach of duty.
It is unnecessary to go beyond these propositions for the purposes of the present case. The jury was entitled to consider that the appellant's action of jumping from the carriage was "in the ordinary course of things" and "the very kind of thing" likely to happen as a result of the respondent's negligence. For reasons which I am about to give, the jury could also have taken the view that the appellant's conduct was not unreasonable, and that the appellant's injuries were caused by the respondent's negligence.
1. (1961) 106 C.L.R. 112, at p. 122.
2. [1969] 3 All E.R. 1621, at p. 1623.
3. [1969] 3 All E.R., at p. 1623.
4. [1943] A.C. 283, at p. 296.
5. [1970] A.C. 1004, at pp. 1027-1030.
6. [1935] 1 K.B. 146, at p. 156.
At the present stage of these proceedings the questions of causation and contributory negligence run together. If the appellant's action in jumping from the train was not unreasonable it could not be said in the circumstances that that action, rather than the respondent's negligence, was the cause of the injuries. If, on the other hand, the appellant by jumping from the train failed to take reasonable care for his own safety he could not recover from the respondent damages in respect of his injuries because at the relevant time contributory negligence was still a complete defence in New South Wales. There may have been open at the trial two questions on the issue of contributory negligence which having regard to the verdict of the jury cannot now be raised by the respondent with any hope of success. These questions were whether the appellant was negligent in failing to keep a close eye on the time when he entered and remained within the carriage and whether, having decided to jump, he took less than reasonable care in executing that decision. It was clearly open to the jury to negative these suggestions and they may now be put aside. The question remains whether the appellant by the very act of jumping from the train failed to take reasonable care for his own safety, and thus acted unreasonably.
No doubt on the evidence it was open to the jury to find that the appellant did not take reasonable care for his own safety and that his injuries were caused by his own want of care. It was submitted by the appellant that it was not open to the jury to take any other view. It was said that the principle which is sometimes referred to as the doctrine of alternative danger, and of which Jones v. Boyce [1] is an early example, has no application unless the plaintiff has been placed by the defendant's negligence in a position in which he has to choose between two dangers; it will never be reasonable, so it was said, to take a risk of injury merely to avoid an inconvenience, however great. I cannot agree with that submission which seems to me inconsistent with the decisions in Robson v. North Eastern Railway Co. [2] (see especially [3] ) and Sayers v. Harlow Urban District Council [4] . Where a plaintiff has by reason of the negligence of the defendant been so placed that he can only escape from inconvenience by taking a risk, the question whether his action in taking the risk is unreasonable is to be answered by weighing the degree of inconvenience to which he will be subjected against the risk that he takes in order to try to escape from it—cf. per Lord Evershed M.R. in Sayers v. Harlow Urban District Council [5] .
1. (1816) 1 Stark. 493 [171 E.R. 540].
2. (1875) L.R. 10 Q.B. 271.
3. (1875) L.R. 10 Q.B., at p. 275.
4. [1958] 1 W.L.R. 623.
5. [1958] 1 W.L.R., at p. 626.
No one could doubt that it would be negligent to jump from a train travelling at full speed simply to avoid the inconvenience of being carried on to another station. On the other hand, a person who wished to avoid being carried on to a distant station might not unreasonably jump out from a train which was travelling very slowly. The question at what speed the train was travelling was therefore in the present case a critical one. Having regard to the evidence to which I have referred it seems to me that the jury was entitled to conclude that the train had not attained any great speed when the appellant jumped from it. The jury then had to weigh the inconvenience which the appellant would suffer if he remained on the train against the risk of leaving a train which was moving at the speed at which they considered that it was travelling. They also had to consider the question whether the appellant failed to take reasonable care for his own safety by leaving the train instead of pulling the communication cord, assuming one to have been provided. In this connexion they could have considered the appellant's evidence that he jumped instinctively and could have concluded that in the stress of the moment it was not to be expected that he would think of the possibility that the carriage would be provided with a communication cord or, alternatively, that it was not necessarily unreasonable for him to endeavour to leave the train immediately rather than to spend time looking for a communication cord, for if there had proved to be no cord the lapse of time would have increased the hazard of leaving the train, which was gaining speed. Bearing all the circumstances in mind I find it impossible to conclude that the jury was bound to find that the appellant's injuries were caused or contributed to by any negligence on his own part.
The power of the Supreme Court of New South Wales to enter a verdict contrary to that of a jury, in case where contributory negligence was in issue, was considered in Williams v. Smith [1] . I need not here discuss the principles there laid down. It is enough to say that for the reasons I have given, I consider that there was evidence on which the jury could reasonably find for the appellant, and that the respondent was not as a matter of law entitled to a verdict. Moreover, I consider that the verdict was not against the evidence and the weight of evidence, or unreasonable, and that a new trial, if asked for, should have been refused.
1. (1960) 103 C.L.R. 539.
I would allow the appeal.
Stephen J.
I have read the reasons for judgment of the Chief Justice and of my brother Gibbs and agree both with their conclusions and with their reasons for those conclusions. I would allow this appeal. |
high_court_of_australia:/showbyHandle/1/10992 | decision | commonwealth | high_court_of_australia | text/html | null | CJ Burland Pty Ltd v Metropolitan Meat Industry Board [1968] HCA 77 | https://eresources.hcourt.gov.au/showbyHandle/1/10992 | 2024-09-13T22:53:04.424854+10:00 | High Court of Australia
Barwick C.J. Kitto, Taylor, Menzies, Windeyer and Owen JJ.
CJ Burland Pty Ltd v Metropolitan Meat Industry Board
[1968] HCA 77
ORDER
In each case, appeal allowed with costs. Order that the decretal orders of the Supreme Court of New South Wales, in so far as the same order that the suits be dismissed with costs, be set aside and in lieu thereof declare that by-law No. 11 of the by-laws relating to the public abattoir and the meat hall at Homebush Bay and the public saleyards at Flemington and Homebush Bay, published in the Government Gazette No. 1 of 8th January 1965, as amended by amendments to the said by-law published in the Government Gazette No. 41 of 12th March 1965, and the Government Gazette No. 43 of 29th April 1966, is ultra vires the respondent and is null and void. In each case, order that the respondent pay the appellant's cost of suit.
Cur. adv. vult.
The following written judgments were delivered:—
Dec. 6
Barwick C.J. and Menzies J.
These two appeals raise exactly the same question of law and were, by consent, heard together.
It seems that for many years the public abattoir at Homebush has been run on the basis that part only of the revenue required by the Meat Industry Board, constituted under the Meat Industry Act, 1915-1965 N.S.W. to run the abattoir and other facilities, should be provided by dues, rates, fees and charges imposed under or by virtue of s. 15 of the Act and that further necessary revenue should be obtained by taking from the owners of animals slaughtered at the abattoir some parts of the animal so slaughtered—either without payment or at an arbitrary price—and selling the parts so taken. As an indication of the money involved in this practice we were told that the value of parts of animals taken from the appellant, C. J. Burland Pty. Limited, is in the order of $26,000 a year.
The taking of parts has been and is authorized by by-laws which have been modified from time to time. In 1925 the relevant by-law then in force, viz. by-law 24, was unsuccessfully challenged: Jones v. Metropolitan Meat Industry Board [1] . There the High Court upheld a decision of Harvey C.J. in Eq. [2] that the by-law which provided for some parts of animals, the property of owners using the abattoir to slaughter their own stock, should become the property of the Board, either without payment or, as to some items, upon payment of prices fixed by the Board, or as to fat removed from carcasses, at the current market rates, was within power. In the Supreme Court, and perhaps in the High Court, the by-law was treated as validly relating to offal only and it was accordingly upheld as an exercise of the by-law-making power for the management and control of the abattoir and for the regulating and controlling of the use of the same conferred by s. 30 of the Meat Industry Act. Harvey C.J. in Eq. said:
In my opinion the Board has the full power to say what portion of the offal can, consistently with the hygienic dressing of meat, be properly segregated so as to be identified as the property of the owner of the beast from which it comes. It is also within its power to determine what parts of the offal consistently with the hygienic dressing of the meat shall be removed by the owner and what shall not.
It is within its power to say what parts of the offal shall be paid for and what shall not by reason of the difficulty or expense of identification.
The only possible exception which in my opinion could be taken to this by-law is to those portions of it which provide for payment to the owner of a price fixed by the Board. I do not think that the leaning which the law has against the confiscation of the property of the subject without compensation applies to those circumstances. If it did the Board could not deprive the owner of the blood of the animals; yet it is, I think, clear that the abattoirs could not be used if the owners had that right. The method in which the offal should be dealt with must, I think, be left in the absolute discretion of the Board under its by-laws in order that the principal object of the Act viz., the hygienic dressing of meat may be secured [3] .
1. (1925) 25 S.R. (N.S.W.), at p. 559.
In the High Court Knox C.J., Isaacs and Rich JJ.—Higgins and Starke JJ. dissenting—while saying that the judgment of Harvey C.J. in Eq. was right and should be affirmed, did, we think, go further than did that learned judge. Thus Isaacs J. in a judgment accepted by Knox C.J. and Rich J. said [1] :
When by-law No. 24 is read, there is nothing in it which as owner of the abattoir the Board could not stipulate as part of its "management and control"—very comprehensive words—and as "regulating and controlling the use" of it, and as regulating the conduct of persons who voluntarily come there to slaughter cattle. It may be the terms are severe; at first sight they might seem harsh; some persons might even think them unduly stringent, having regard to facilities for removing and dealing with offal. But that is nothing to the point. As a bare matter of law, and strict construction, they are within the literal terms of the power contained in the first paragraph of s. 30 (1). The provision for fixing the Board's monthly "current market-rate" does not detract from this, because on the face of the by-law that is so much to the good of the person concerned. If the Board can, within the literal terms of the power, refuse to allow the meat and fat and stomachs "taken" by the Board to be removed at all, the fact of allowing a stated price is not a vitiating factor.
1. (1925) 37 C.L.R. 252.
2. (1925) 25 S.R. (N.S.W.) 553.
3. (1925) 25 S.R. (N.S.W.), at p. 559.
4. (1925) 37 C.L.R., at p. 260.
This statement was relied upon before this Court in this case to support a contention that a by-law authorizing the Board to take any part of an animal slaughtered at the public abattoir would be within power.
In 1934 the Board's method of conducting the abattoirs changed radically. From that time onward the Board itself slaughtered all animals tendered to it for that purpose by their owners. After slaughter, in accordance with by-law 11, the Board delivered to the owner the carcase, skin, tongue, kidneys, heart and liver.
Thus, by-law 11 operates in a different setting to that in which the former by-law 24 did. Furthermore, it goes much further than the former by-law. For instance, it authorizes the Board to take without payment from bovine cattle—
(a) all fat removed from the carcase;
(b) all the heads, feet and tail-tips;
(c) all casings including weasands, bungs, middles, runners and bladders;
(d) all meat or offal other than that previously specified (i.e. that which the Board is required to deliver to the owner).
The present challenge was heard by Street J. and although the learned judge considered that by-law 11 was substantially different from the by-law upheld in Jones' Case [2] he thought that he was constrained by the reasoning of the earlier decision of this Court, if not the actual decision to uphold by-law 11.
1. (1925) 25 S.R. (N.S.W.) 553; (1925) 37 C.L.R. 252.
Notwithstanding Jones' Case [1] we consider that the Meat Industry Act does not warrant the course which the Board is now following by virtue of by-law 11. We read s. 15 of the Act as containing the Board's full power to obtain payment for the use of its property and for its services. The power conferred by s. 30 (1), pars. (6) and (6A) of the Act to make by-laws fixing, levying and collecting rents, fees and charges is a provision ancillary to s. 15. It is to be observed that s. 15 (3) requires "All fees or sums of money received by the Board or its officers under the provisions of this Act shall go to form a fund" to be expended as therein provided, and is not apt to cover payments in kind or amounts received by the sale of parts of animals taken by the Board from owners under the authority of by-laws. We do not think that the Act contemplates that the Board should be remunerated in kind for the use of its property or for service rendered by it. Section 15 clearly enough refers to money payments. Furthermore, despite Jones' Case [1] , we do not regard by-law 11 as regulating or controlling the use of the public abattoir. If by-law 24, as it stood, was to be justified as relating only to the taking of offal—as to which the Board had the special power conferred by s. 14 (8) of the Act—by-law 11 cannot be so justified because, in terms, it relates to meat as well as to offal. The more comprehensive by-law is more difficult to justify, on grounds of hygiene and practicability, as being for the management and control of the abattoir. In our opinion by-law 11 is not a by-law for regulating and controlling the use of the public abattoir or for regulating the conduct of persons using the same.
1. (1925) 25 S.R. (N.S.W.) 553; (1925) 37 C.L.R. 252.
2. (1925) 25 S.R. (N.S.W.) 553; (1925) 37 C.L.R. 252.
Since Jones' Case [1] , however, s. 30 (1) of the Act has been amended to authorize the making of by-laws prescribing the terms and conditions upon which public abattoirs may be used and it was argued that by-law 11 could now be supported as a prescription of such terms and conditions. We did not accept this argument. By-law 11 deals with the power of the Board at the public abattoir, not with the terms and conditions upon which the abattoir may be used. Of course it is not to be denied that owners of animals who send them to the public abattoir to be slaughtered by the Board at fixed charges—as is now the practice—do, in one sense, use the abbattoir, but to our mind the terms and conditions to be prescribed are those to be observed by users other than the Board itself and a provision such, for instance, as all the heads, feet and tail-tips of animals slaughtered by the Board at the abattoir shall become the property of the Board for which no payment shall be made to the owner is not a term or condition upon which the owner "uses" the abattoir. Furthermore, as we have already said, the terms of s. 15 of the Act itself relating to charges etc. tend against construing s. 30 (1) as authorizing exactions in kind by force of by-laws as part of what owners have to pay for the use of the Board's property and for its services.
1. (1925) 25 S.R. (N.S.W.) 553; (1925) 37 C.L.R. 252.
Because the by-law now under challenge is substantially different and operates in a different setting from by-law 24 as it stood and operated when Jones' Case [1] was decided it is not necessary here to do more than decide that, despite the decision in Jones' Case [1] , by-law 11 is ultra vires because it is not authorized by s. 30 (1) of the Act.
1. (1925) 25 S.R. (N.S.W.) 553; (1925) 37 C.L.R. 252.
2. (1925) 25 S.R. (N.S.W.) 553; (1925) 37 C.L.R. 252.
We would therefore allow the appeals.
Kitto J.
This case in my opinion is to be distinguished from the case of Jones v. Metropolitan Meat Industry Board [2] for two main reasons. In the first place, neither the evidence in the case nor general knowledge suggests that because of any practical difficulty or any consideration of public health or hygiene the expropriation partakes of the character of that management and control of an abattoir which is the subject of the express by-law-making power in s. 30 (1) (1). Secondly, s. 20A of the Meat Industry Act, 1915-1965 N.S.W., a section proclaimed ten years after the Jones' Case [2] , giving the Board the exclusive right at a public abattoir of slaughtering cattle and dressing carcases for human consumption, couples the grant of this monopoly with a power to charge such fees for slaughtering and dressing as may be prescribed by by-laws. This power exists side by side with the power given to the Board by s. 15 (1) to demand, collect and receive in respect of any services performed by it such dues, rates, fees and charges as may be reasonable or as may be prescribed by by-laws, and also with the power given to the Board by s. 30 (1) (6) to make by-laws providing for fixing, levying and collecting "rents, fees and charges in connection with any public abattoir".
1. (1925) 37 C.L.R. 252.
2. (1925) 37 C.L.R. 252.
The first of these grounds of distinction, in my opinion, makes directly applicable the firmly established rule of law that a statute will not be read as authorizing the expropriation of a subject's goods without payment unless an intention to do so be clearly expressed. As was held in Newcastle Breweries Ltd. v. The King [3] , this rule applies a fortiori to the construction of a statute delegating legislative powers.
1. [1920] 1 K.B. 854.
The second distinction directs attention to the plain implication of the Act as it now stands, namely that the Board, being empowered to fix its remuneration for the services it renders and to do so in terms of money payments, is not intended to have power to take to itself the additional right of exacting tribute in kind. Analogy in case law is hardly necessary, for the principle expressio unius est exclusio alterius plainly applies and produces this result; but a near enough analogy may be found, if it be wanted, in Kirk v. Nowill and Butler [1] , where the King's Bench held that a corporation empowered to make by-laws and impose fines for breaches of their provisions was held to have no power to make a by-law providing for forfeitures of property for such breaches. The two reasons were relied upon: the absence in the relevant statute of any express authorization of provisions for forfeitures, and the exclusion, necessarily implied by the express provision for fines, of a power to provide for forfeitures.
1. (1786) 1 T.R. 118 [99 E.R. 1006].
It is said on behalf of the Board that the by-law which is here challenged intends the meat which it expropriates to be a recompense to the Board, not for the slaughtering and dressing (and any other services) for which fees are authorized, but for some "use" which the meat-owner has of the abattoir when his animals are slaughtered there by the Board, and that the general power under s. 30 (1) (1) to make by-laws providing for "the management and control of all public abattoirs and for regulating and controlling the use of the same, and prescribing the terms and conditions upon which the same may be used " supports a by-law confiscating some of the meat as recompense for that additional "use". The contention overlooks the fact that the by-law selects the slaughtering of the animals, not any "use" of the abattoir apart from the slaughtering, as the event which attracts the operation of its provisions; and therefore if the confiscation of part of the meat has the character of recompense for anything it is recompense for the slaughtering. Indeed the attempt to relate the by-law to some other "use" of the abattoir by the meat-owner I find too artificial to be entertained. Only the Board "uses" the abattoir under the present system—it was the butcher who used it under the system which was under consideration in the Jones' Case [2] ; the Board uses it to do the slaughtering and dressing, and if the meat-owner pays the prescribed fees for those services he pays for all the "use" of the abattoir that in any reasonable use of language he can be said to have.
1. (1925) 37 C.L.R. 252.
I agree that the appeals should be allowed.
Taylor J.
By-law 11 (a), made by the respondent Board pursuant to the provisions of the Meat Industry Act, 1915-1965 N.S.W., is in the following terms:
In the case of bovine cattle, excepting calves, slaughtered at the public abattoir:—
(i) The Board shall deliver to the owner the carcase, hide (unsalted), tongue, tail, skirt, kidneys, heart and liver, also the caul and kidney fat.
(ii) All other fat removed from the carcase shall become the property of the Board, for which no payment shall be made.
(iii) The Board shall deliver to the owner such quantities of tripes, brains, and cheek meats as are required, upon payment of the cost of removal, collection, preparation, and delivery.
(iv) All the heads, feet, and tail-tips shall become the property of the Board, for which no payment shall be made.
(v) The Board shall deliver such casings as are required, consisting of weasands, bungs, middles, runners, and bladders, to the lessee of the casing cleaning unit at the public abattoir nominated by the owner, upon payment by him of the cost of removal, collection, preparation, and delivery. No person shall remove any casings from the public abattoir prior to such casings being treated in a manner satisfactory to the Board.
(vi) All meat or offal other than that herein specified shall become the property of the Board, for which no payment shall be made.
It will be seen that the by-law purports to divest from an owner a number of parts of all bovine cattle brought to the metropolitan abattoirs for slaughter and to vest these parts in the Board without payment.
By-law 11 (b) (c) and (d) contain not dissimilar provisions relating respectively to calves, pigs and sheep and lambs and need not be set out. It is said that legal justification for promulgation of the by-law is to be found in s. 30 (1) (1) and (6) of the Act. These provisions authorize the Board to make by-laws not inconsistent with the Act
(1) providing for the management and control of all public abattoirs, public sale-yards, and public meat markets, and all other places and buildings vested in or acquired by it; and for regulating and controlling the use of the same, and prescribing the terms and conditions upon which the same may be used, and for regulating the conduct of all persons using the same or resorting thereto, or slaughtering, buying, selling, or dealing therein;
and
(6) providing for fixing, levying and collecting rents, fees, and charges for the use of or in connection with any public abattoir, public sale-yards, or public meat market.
Were it not for the decision of the majority of this Court in Jones v. Metropolitan Meat Industry Board [1] I would have thought it sufficient merely to say that neither of these statutory provisions conferred authority upon the Board to make the by-law. However, in Jones' Case [2] Harvey C.J. in Eq. in the Supreme Court, upheld an earlier by-law which authorized the Board to retain certain specified portions of offal on payment of prices fixed by the Board and, further authorized the Board to retain other portions without payment. He did so because he was of the opinion that
" the Board has the full power to say what portion of the offal can, consistently with the hygienic dressing of meat, be properly segregated so as to be identified as the property of the owner of the beast from which it comes" [3] and "It is also within its power to determine what parts of the offal consistently with the hygienic dressing of the meat shall be removed by the owner and what shall not" [3] .
This being so, the by-law was upheld as a provision for the "management and control" of public abattoirs and "for regulating and controlling the use of the same". In this Court the majority may perhaps be regarded as having taken a somewhat broader view of the extent of a power to make laws providing for the "management and control" of abattoirs but it is beyond question that in reaching their decision problems of hygiene were present to their Honours' minds.
1. (1925) 37 C.L.R. 252.
2. (1925) 25 S.R. (N.S.W.) 553.
3. (1925) 25 S.R. (N.S.W.), at p. 559.
4. (1925) 25 S.R. (N.S.W.), at p. 559.
In the present case the operation of the by-law is much more extensive than that under consideration in Jones' Case [4] and it appears that, in its present form, it operates to vest in the Board without payment products of very considerable commercial value. Further, no serious attempt is, or can now be, made to justify its provisions on grounds of hygiene. This being so it is clearly not justifiable as a provision for the management and control of the abattoirs. Nor is it justifiable as a provision "prescribing the terms and conditions upon which the same may be used" for, in view of the provisions of s. 30 (1) (1), I do not regard this head of power as authorizing the prescription of remuneration to be paid by those using the services provided by the abattoirs. Nor can it be regarded as a provision authorizing the expropriation of property. Finally, I add that it is impossible to characterize the by-law as one providing for "fixing, levying and collecting rents, fees, and charges for the use of or in connection with any public abattoir". In my view the appeal should be allowed.
1. (1925) 25 S.R. (N.S.W.) 553; (1925) 37 C.L.R. 252.
Windeyer J.
I have had the advantage of reading the judgments prepared by my brothers Menzies and Owen. I agree with their Honours' conclusions. By-law 11 should, I think, be held to be invalid. I say this notwithstanding what was said by a majority of this Court in Jones v. Metropolitan Meat Industry Board [1] in speaking of a by-law which was in somewhat similar terms but operated in different circumstances. That case was followed by the Supreme Court of New Zealand in Smith v. Blenheim Borough Council [2] . The judgments there are instructive, but of course only persuasive for us. And they appear to have turned partly on the fact, also regarded as significant in Jones' Case [1] , that, because of the way in which the work of slaughtering was done, it was
impossible to keep each butcher's offal separate impossible to return to each his own, and, apart from the Health Department's Regulations, no individual butcher could succeed in an action to recover his own offal [3] .
In the present case it is not said that the taking by the Meat Industry Board of the portions of carcases in dispute was necessary in the interests of health or that their delivery to the appellant, the owner of the slaughtered beasts, was impracticable.
1. (1925) 37 C.L.R. 252.
2. [1928] N.Z.L.R. 536.
3. (1925) 37 C.L.R. 252.
4. [1928] N.Z.L.R., at p. 555.
Section 30 (1) of the Act provides for the making of by-laws for "the management and control" of public abattoirs, and for "regulating and controlling the use of the same, and prescribing the terms and conditions upon which the same may be used". I appreciate that these are wide words. "Management" especially is a wide word. But it must be read in its context: see e.g. Clements v. Bull [4] . Section 30 (1) (6) provides for the imposition, by by-law, of "rents, fees, and charges" for the use of the abattoir. This means monetary payments. It does not authorize the compulsory taking of property. Section 30 (1) is not to be read as enabling the Board to take compulsorily the property of a user of the abattoir as a "term and condition" of its use. The phrase "terms and conditions upon which the same may be used" refers, it seems to me, to such matters as the times, manner and method of permitted use, not of the consideration for which use will be permitted.
1. (1953) 88 C.L.R. 572.
I would allow the appeals.
Owen J.
Each of these appeals raises the question of the validity of by-law 11 purporting to be made pursuant to the provisions of the Meat Industry Act, 1915-1965 N.S.W..
Under the Act the Metropolitan Meat Industry Board (the Board) is empowered to conduct and does in fact conduct a public abattoir at Homebush to which cattle, calves, pigs, sheep and lambs are brought by their owners to be slaughtered. In each of the present cases the plaintiff company carries on business as a wholesale butcher in the metropolitan abattoir area, an area which is defined by s. 6 of the Act to be the County of Cumberland, and all its beasts are slaughtered for it by the Board at the Homebush abattoir which is the only slaughtering establishment in the area which is available to it. It appears that in the earlier stages of its activities the Board did not itself do the work of slaughtering at the abattoir. What it did was to make the abattoir premises and its facilities available to those who wished to slaughter their own beasts there. In more recent times, however, the Board has itself carried out the work of slaughtering and processing the carcases for wholesale butchers who bring their beasts to the abattoir.
Section 13 of the Act imposes upon the Board the duty of managing and maintaining all public abattoirs and of doing all such things as may be expedient and in accordance with the Act to prevent diseased or unwholesome meat from passing into consumption in the metropolitan abattoir area. Section 14 (1) enables it to establish, maintain and conduct abattoirs and, by s. 14 (8) it may make such arrangements as it thinks fit with regard to the purchase, collection and disposal of offal or other matter, apply any manufacturing process thereto, convert it into a merchantable article and sell it. Section 15 empowers it to demand and collect "such dues, rates, fees, and charges as may be reasonable or as may be prescribed by by-laws" for the use of any of its property and for any services performed by it. Section 30 (1) (1) and (6) provide that:
(1) The Board may make by-laws not inconsistent with this Act—
(1) providing for the management and control of all public abattoirs and for regulating and controlling the use of the same, and prescribing the terms and conditions upon which the same may be used, and for regulating the conduct of all persons using the same or resorting thereto, or slaughtering, buying, selling, or dealing therein;
(6) providing for fixing, levying and collecting rents, fees, and charges for the use of or in connection with any public abattoir
By-law 11 (a) is in these terms:
(a) In the case of bovine cattle, excepting calves, slaughtered at the public abattoir:—
(i) The Board shall deliver to the owner the carcase, hide (unsalted), tongue, tail, skirt, kidneys, heart, and liver.
(ii) All fat removed from the carcase shall become the property of the Board, for which no payment shall be made.
(iii) The Board shall deliver to the owner such quantities of brains, and cheek meats as are required, upon payment of the cost of removal, collection, preparation, and delivery.
(iv) All the heads, feet, and tail-tips shall become the property of the Board, for which no payment shall be made.
(v) All casings, including weasands, bungs, middles, runners and bladders shall become the property of the Board, for which no payment shall be made. No person shall remove any casings from the public abattoir prior to such casings being treated in a manner satisfactory to the Board.
(vi) All meat or offal other than that herein specified shall become the property of the Board, for which no payment shall be made.
I have italicized those parts of the by-law which purport to vest in the Board without payment property belonging to the owner of the slaughtered beast. By-law 11 (b) deals with calves, by-law 11 (c) with pigs and by-law 11 (d) with sheep and lambs and each paragraph follows the lines of par. (a) in providing that certain parts of the slaughtered beast "shall become the property of the Board, for which no payment shall be made". The evidence shows that many of these parts such as fat, tripes, sweetbreads and casings have a market value, which in the case of beasts slaughtered for the plaintiff C.J. Burland Pty. Limited is said to total some $26,000 per annum.
The attack upon the validity of the by-law was based upon the fact that it purports to deprive those who bring their beasts to the abattoir to be slaughtered by the Board of their property in parts of the slaughtered beast and vest that property in the Board without compensation and, so it is said, the Act contains no provision enabling such a by-law to be validity made. For the respondent Board, however, it was submitted that by-law 11 is a valid exercise of power. It was said that justification could be found for it in ss. 15 and 30 (1) (6) to which I have referred earlier and which enable the Board to demand, collect and receive dues, rates, fees and charges for the use of the abattoir and for services performed by it and to make by-laws accordingly. But that argument cannot, in my opinion, be sustained. The dues, rates, fees and charges of which those sections speak plainly refer only to monetary charges to be met by payment in cash and not in kind. It was also submitted that the by-law was supportable as being one "providing for the management and control" of the abattoir and "for regulating and controlling the use of the same, and prescribing the terms and conditions upon which the same may be used" within the meaning of s. 30 (1) (1). In support of this submission reliance was placed upon the decision of the majority of this Court (Knox C.J., Isaacs and Rich JJ., Higgins and Starke JJ. dissenting) in Jones v. Metropolitan Meat Industry Board [1] upholding the validity of a by-law (No. 24) which was a predecessor of the present by-law 11. The by-law there in question was made at a time when slaughtering at the abattoir was not done by the Board but by the wholesale butchers who brought their beasts there and used the Board's premises and facilities. It was headed "Disposal of Offal" and went on to provide, in the case of cattle, that:
No offal shall be removed from the abattoir premises except as permitted by this By-law.
The Board will take all sets of heads and feet, also tail-tips, and will pay for the same at a price to be fixed by the Board.
The Board will permit the owner to take and remove from the Abattoir all tongues, tails, and hearts, also livers, cheeks, palates, and scrag meat, sufficient for butchers' retail trade requirements, if desired.
The Board will take all kidney-fat which has been removed from any carcase, caul, rough fat, and gut-fat (except such caul-fat as the Board is satisfied the owner has sold for butchers' retail trade requirements, or to margarine manufacturers for the purposes of conversion into oleo-margarine), and pay for same at the current market rate, to be fixed by the Board immediately before the end of each month, such price to hold good during the month then ensuing.
All stomachs intended for the production of tripes shall be cleaned and cooked in the Board's tripery by or for the owner. Steam and water and the necessary conveniences will be supplied at a charge of 6d. per tripe. All stomachs not treated for production of tripes shall become the property of the Board without payment for same.
The Board will take all other offal without payment for same.
I have italicized those parts of the by-law which purport to have vested in the Board without payment property belonging to the owner of the slaughtered beast and a comparison of this by-law with by-law 11 shows that by-law 11 covers a field far wider than that to which by-law 24 extended. The provisions of by-law 24 which dealt with sheep, pigs and calves followed similar lines to those which dealt with cattle.
1. (1925) 37 C.L.R. 252.
Unlike the present cases, it appears from the report of Jones' Case [1] in the Supreme Court that evidence had been given in that case to the effect that the methods then used by butchers who carried out slaughtering operations at the abattoir were such that in some cases it was impossible and in others difficult for the owner of a slaughtered beast to identify the offal which came from that beast and that, in these circumstances, it was necessary, as a matter of hygiene and to prevent congestion, that the Board should dispose of the offal without delay. As it seems to me, it was in the light of these facts that Harvey C.J. in Eq. who heard the case in the Supreme Court upheld the validity of the by-law. His Honour said [2] :
In my opinion the Board has the full power to say what portion of the offal can, consistently with the hygienic dressing of meat, be properly segregated so as to be identified as the property of the owner of the beast from which it comes. It is also within its power to determine what parts of the offal consistently with the hygienic dressing of the meat shall be removed by the owner and what shall not.
It is within its power to say what parts of the offal shall be paid for and what shall not by reason of the difficulty or expense of identification.
1. (1925) 25 S.R. (N.S.W.) 553.
2. (1925) 25 S.R. (N.S.W.), at p. 559.
In this Court Isaacs J., with whose reasons Knox C.J. and Rich J. agreed, was of opinion that the by-law was within power as being one for the "management and control" of the abattoir and for "regulating and controlling the use of the same, and prescribing the terms and conditions upon which the same may be used". But Higgins J., with whom Starke J. agreed, could find nothing in the Act which would authorize the making of a by-law the effect of which was to confiscate without payment the property of persons slaughtering their beasts at the abattoir.
From what I have said it will be seen that by-law 11 goes much further in the way of the expropriation of property without compensation than did by-law 24 and that the earlier practice by which the owners of beasts did their own slaughtering at the abattoir has been abandoned. Nor have we before us any evidence of the kind which appears to have been given in Jones' Case [1] and which may, perhaps, have played some part in the decision of the majority in the High Court. It may be thought that, having regard to differences which I have mentioned between the materials which were before the Court in Jones' Case [1] and those which are now before us, the decision in the former case should be distinguished. But I myself feel—as did Street J. from whom these appeals are brought—that what was said by Isaacs J. [2] under the head of "prima facie authority", would, if applied to the present cases, result in the conclusion that by-law 11 is within the power to make by-laws providing for the management and control of the abattoir and the regulation and control of the abattoir and the regulation and control of its use. But with great respect to Isaacs J. and to those who agreed with him, I am unable to accept that view.
1. (1925) 37 C.L.R. 252.
2. (1925) 37 C.L.R. 252.
3. (1925) 37 C.L.R. at p. 260.
In London and North Western Railway Co. v. Evans [3] , Bowen L.J. said:
the legislature cannot fairly be supposed to intend, in the absence of clear words showing such intention, that one man's property shall be confiscated for the benefit of others, or of the public, without any compensation being provided for him in respect of what is taken compulsorily from him. Parliament can, of course, override or disregard this ordinary principle if it sees fit to do so, but it is not likely that it will be found disregarding it, without plain expressions of such a purpose.
1. [1893] 1 Ch. 16, at p. 28.
I can find no such purpose expressed or necessarily to be implied anywhere in the Act. Indeed it seems to me that s. 14 (8) provides a strong indication that the legislature did not have any such purpose in mind.
I would allow the appeals. |
high_court_of_australia:/showbyHandle/1/8928 | decision | commonwealth | high_court_of_australia | text/html | null | Hookham v The Queen [1994] HCA 52 | https://eresources.hcourt.gov.au/showbyHandle/1/8928 | 2024-09-13T22:53:07.459082+10:00 | High Court of Australia
Brennan, Deane, Dawson, Toohey and Gaudron JJ.
Hookham v The Queen
[1994] HCA 52
ORDER
Appeal dismissed.
Cur. adv. vult.
The following written judgments were delivered:—
Nov. 9
Brennan J.
The question in this case is whether, pursuant to s. 21B(1) of the Crimes Act 1914 Cth, a court may order an offender convicted of a taxation offence pursuant to s. 8Y(1) of the Taxation Administration Act 1953 Cth to make reparation to the Commonwealth in respect of a loss suffered by the Commonwealth by reason of the offence. In my opinion, the terms of s. 21B(1) dictate an affirmative answer. Section 21B(1) reads as follows:
Where:
(a) a person is convicted of an offence against a law of the Commonwealth; or
(b) an order is made under section 19B in relation to a federal offence committed by a person;
the court may, in addition to the penalty, if any, imposed upon the person, order the offender:
(c) to make reparation to the Commonwealth or to a public authority under the Commonwealth, by way of money payment or otherwise, in respect of any loss suffered, or any expense incurred, by the Commonwealth or the authority, as the case may be, by reason of the offence; or
(d) to make reparation to any person, by way of money payment or otherwise, in respect of any loss suffered by the person as a direct result of the offence.
The offence by reason of which the Commonwealth suffers a reparable loss must be the federal offence for which the offender is convicted or in respect of which an order is made under s. 19B. However, s. 19B is immaterial to this case. The conviction for a particular federal offence is one of the conditions on which the power to order the offender to make reparation arises. The other is that the offence be the reason for the loss. It is therefore necessary to identify the offence for which the offender is convicted.
In this case, the appellant was convicted pursuant to s. 8Y(1) of the Taxation Administration Act of nine taxation offences committed by the Markham Boat Company Pty Ltd ("the corporation") in the management of which he had been concerned or taken part. Section 8Y reads:
(1) Where a corporation does or omits to do an act or thing the doing or omission of which constitutes a taxation offence, a person (by whatever name called and whether or not the person is an officer of the corporation) who is concerned in, or takes part in, the management of the corporation shall be deemed to have committed the taxation offence and is punishable accordingly.
(2) In a prosecution of a person for a taxation offence by virtue of subsection (1), it is a defence if the person proves that the person:
(a) did not aid, abet, counsel or procure the act or omission of the corporation concerned; and
(b) was not in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the act or omission of the corporation.
(3) For the purposes of subsection (1), an officer of a corporation shall be presumed, unless the contrary is proved, to be concerned in, and to take part in, the management of the corporation.
(4) In this section, "officer", in relation to a corporation, means:
(a) a director or secretary of the corporation;
As the appellant did not prove the matters mentioned in pars (a) and (b) of s. 8Y(2), he was convicted of the taxation offences constituted by the relevant acts or omissions of the corporation. The corporation, being a group employer, had omitted to pay to the Commissioner of Taxation the amounts of deductions made from the salary and wages of employees in nine of the months between May 1989 and March 1990, contrary to the provisions of s. 221F(5)(a) and (14) of the Income Tax Assessment Act 1936 Cth. That was the gravamen of the offences of which the appellant was convicted and, by reason of those offences, the Commonwealth lost the amounts of the deductions which should have been paid but were not paid. Thus the conditions upon which the power to order the appellant to make reparation depended were satisfied.
The appellant's argument that s. 8Y(1) deems an offender to have committed an offence for a purpose other than the making of a reparation order misses the point. Once s. 8Y(1) deems an offender to have committed an offence, its work is done so far as it affects the power conferred by s. 21B(1). Section 8Y(1) is relevant to the power conferred by s. 21B(1) in that it identifies the corporation's offence as the offence for which the offender is liable to be convicted.
Section 8Y(1), like s. 5(1) of the Crimes Act [1] , identifies the parties to a single offence. Although those provisions "deem" a party to have committed an offence, the liability to conviction thus imposed is not a fiction created for the purpose of punishment only. Section 21B(1) is not concerned with the purpose for which an offender is deemed liable to conviction. Nor is it concerned with the legislative facilitation of proof of guilt of a federal offence. It is concerned merely with the fact of conviction on which the power conferred by s. 21B(1) depends. Convictions which follow from application of s. 8Y(1) or s. 5(1) are nonetheless convictions and may enliven the power conferred by s. 21B(1).
1. The difference between them lies in a differing onus of proof.
That is not to say that a court, exercising its discretion under s. 21B(1), will not inquire into the circumstances which have exposed the offender to liability to conviction. It is one thing to hold that a court has power to make a reparation order; it is another to determine how that power should be exercised. The question reserved for determination in a case stated by a District Court judge for the opinion of the Court of Criminal Appeal was whether the judge had jurisdiction (which I take to mean power) to order the appellant, who stood convicted of nine taxation offences, to pay reparation. The answer to that question is yes, as the Court of Criminal Appeal held. The appeal to this Court must therefore be dismissed.
The respondent, by a notice of contention, seeks to canvass an observation by Priestley J.A. as to the propriety of the judge having regard to the "personal circumstances and means of an offender" in exercising the s. 21B(1) discretion. That is not a question which arises under the stated case, nor is it appropriate to deal with such a question except on appeal in a concrete case when a challenge is made to the relevance of a factor that has affected the exercise of the judge's discretion. The respondent must be content with the observation that the scope and purpose of the law containing the power determine the boundaries of relevance.
The appeal should be dismissed.
Deane, Dawson and Gaudron JJ.
The Markham Boat Company Pty Ltd, of which the appellant was a director, failed to pay group tax deductions (i.e., P.A.Y.E. deductions in respect of its employees) to the Commissioner of Taxation as required by s. 221F(5)(a) of the Income Tax Assessment Act 1936 Cth. It thereby committed nine distinct offences under s. 221F(14) and (5)(a) of that Act. Each of those offences was a "taxation offence" within the definition contained in s. 8A(1) of the Taxation Administration Act 1953 Cth. Section 8Y of the Taxation Administration Act provides, as far as is relevant:
(1) Where a corporation does or omits to do an act or thing the doing or omission of which constitutes a taxation offence, a person (by whatever name called and whether or not the person is an officer of the corporation) who is concerned in, or takes part in, the management of the corporation shall be deemed to have committed the taxation offence and is punishable accordingly.
(2) In a prosecution of a person for a taxation offence by virtue of subsection (1), it is a defence if the person proves that the person —
(a) did not aid, abet, counsel or procure the act or omission of the corporation concerned; and
(b) was not in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the act or omission of the corporation.
The appellant pleaded guilty in the Maitland Local Court to nine counts of failing to pay group tax deductions to the Commissioner, having been charged with those offences as "a person who was concerned in, or took part in, the management of a corporation, namely the Markham Boat Company Pty Ltd " which had "omitted to do an act the omission of which constituted an offence against paragraph 221F(5)(a) of the Income Tax Assessment Act ".
Section 21B of the Crimes Act 1914 Cth provides, as far as is relevant:
(1) Where:
(a) a person is convicted of an offence against a law of the Commonwealth;
the court may, in addition to the penalty, if any, imposed upon the person, order the offender:
(c) to make reparation to the Commonwealth or to a public authority under the Commonwealth, by way of money payment or otherwise, in respect of any loss suffered, or any expense incurred, by the Commonwealth or the authority, as the case may be, by reason of the offence.
The appellant was convicted and fined $1,000 in respect of each of the offences to which he pleaded guilty and was ordered to pay reparation in the sum of $198,224.43. He appealed to the District Court where the judge stated a question of law for the determination of the Court of Criminal Appeal as follows: "Upon the true construction of section 21B of the Crimes Act 1914 and section 8Y of the Taxation Administration Act 1953, do I have jurisdiction to order the appellant to pay reparation?" The Court of Criminal Appeal answered the question in the affirmative and the appellant now appeals by special leave to this Court. He contends that he is deemed by s. 8Y of the Taxation Administration Act to have committed the offences only for the purpose of punishment and not for any other purpose, in particular, not for the purpose of s. 21B of the Crimes Act. He supports this contention by reference to the words "shall be deemed to have committed the taxation offence and is punishable accordingly" in s. 8Y(1).
The appellant's argument misconceives the function of s. 8Y. That function is to reverse the onus of proof which would otherwise rest upon the prosecution of proving that a defendant who is concerned in, or takes part in, the management of a corporation is a participant in a taxation offence by reason that he or she aided, abetted, counselled, procured or was knowingly concerned in, or party to, its commission. Apart from the reversal of the onus of proof, it is to the same effect as s. 5(1) of the Crimes Act which provides:
Any person who aids, abets, counsels, or procures, or by act or omission is in any way directly or indirectly knowingly concerned in, or party to, the commission of any offence against any law of the Commonwealth, whether passed before or after the commencement of this Act, shall be deemed to have committed that offence and shall be punishable accordingly.
That provision, extended to persons knowingly concerned in the commission of offences, merely reflects the position at common law, namely, that a person who intentionally assists in the commission of an offence or encourages its commission may be convicted as a party to it. That is to say, there may be parties to the one offence, other than the actual perpetrator, with varying degrees of participation, each of whom commits the offence. The "deeming" provisions in both s. 5(1) of the Crimes Act and s. 8Y of the Taxation Administration Act do not create a situation in which one person is to be regarded as having committed another person's offence. Rather, they require persons with the specified complicity in an offence to be regarded as parties to that offence [2] .
1. See Lee v Mallan , [1949] S.A.S.R 17; Mallan v Lee (1949), 80 C.L.R. 198.
Section 8Y, in providing that the person is "punishable accordingly", is not providing for punishment for an offence which was really committed by the corporation and is only "deemed" to have been committed by that person; it is providing for punishment for an offence to which that person is deemed to be a party because of his or her complicity in it. The offences of which the appellant was convicted under s. 8Y were the same offences as those committed by the corporation and he therefore fell within the words of s. 21B of the Crimes Act making him liable to an order for reparation.
The appellant also submits that the Commonwealth has not suffered a loss by reason of the offences committed by him. That submission is again based upon the misconception that the offences committed by the appellant were a fiction, being only "deemed" to have occurred. But, as we have endeavoured to explain, the offences were actual offences to which the appellant was deemed to be a party. There is, therefore, no basis upon which to draw a distinction between the offences committed by the appellant and the offences committed by the corporation. The appellant goes on to submit that there was no loss suffered by the Commonwealth by reason of those offences because the Commonwealth was not deprived of anything in the nature of property. But a loss need not involve the transfer from the Commonwealth to someone else of a proprietary interest. The Commonwealth suffered a loss by being deprived of money which it would have been paid had it not been for the commission of the offences in question [3] . There is no reason why that should not be regarded as being a reparable loss.
1. See Murphy v H.F. Trading Co. Pty Ltd (1973), 47 A.L.J.R. 198, at p. 200.
For these reasons the District Court judge had jurisdiction (or more accurately, power) to order reparation and the question reserved for the consideration of the Court of Criminal Appeal was correctly answered in the affirmative.
The respondent filed a notice of contention dealing with the extent of the discretion conferred by s. 21B(1) upon a trial judge to order reparation. In particular, the respondent contends that the discretion does not extend to taking into account the offender's personal circumstances and means to meet any order. That, however, is not a question which arose upon the case stated by the District Court judge and is not a question before us. It is, however, appropriate to point out that, in a context where the Parliament has not expressly identified the considerations to be taken into account in making an order for reparation under s. 21B, a trial judge would be excluded from taking account of an offender's personal circumstances and means only if, and to the extent that, "the subject matter and the scope and purpose" of the relevant statutory provisions enable it to be said that those particular considerations were "definitely extraneous to any objects the legislature could have had in view" [4] .
1. Reg. v Australian Broadcasting Tribunal; Ex parte 2HD Pty Ltd (1979), 144 C.L.R. 45, at p. 49.
We would dismiss the appeal.
Toohey J.
This matter came before the Court of Criminal Appeal of New South Wales by way of case stated.
The appellant was convicted, on his plea of guilty, of nine offences against s. 221F(14) of the Income Tax Assessment Act 1936 Cth ("the Assessment Act"). Section 221F(14) provides that a person shall not contravene sub-s. (5) by virtue of par. (a) of that sub-section. At the relevant time s. 221F(5)(a) required a group employer, in respect of income tax deductions made by the employer from the salary or wages of employees, to pay to the Commissioner of Taxation, not later than the seventh day of the month next succeeding a month in which the employer has made deductions, the amount of the deductions so made.
Section 8Y of the Taxation Administration Act 1953 Cth ("the Administration Act") provides in part:
(1) Where a corporation does or omits to do an act or thing the doing or omission of which constitutes a taxation offence, a person (by whatever name called and whether or not the person is an officer of the corporation) who is concerned in, or takes part in, the management of the corporation shall be deemed to have committed the taxation offence and is punishable accordingly.
(2) In a prosecution of a person for a taxation offence by virtue of subsection (1), it is a defence if the person proves that the person —
(a) did not aid, abet, counsel or procure the act or omission of the corporation concerned; and
(b) was not in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the act or omission of the corporation.
The charges on which the appellant was convicted alleged that he was a person who was concerned in, or took part in, the management of the Markham Boat Company Pty Ltd which as a group employer omitted to pay deductions from the salary and wages of employees as required by the Assessment Act. The appellant was a director of the corporation.
The appellant lodged notices of appeal against his convictions. A judge of the District Court of New South Wales dismissed each of the appeals. A question then arose as to the power of the judge to accede to an application by the Crown that, in addition to the imposition of a penalty, the appellant be ordered in each case to make reparation to the Commonwealth pursuant to s. 21B of the Crimes Act 1914 Cth. Section 21B provides that where a person is convicted of an offence against a law of the Commonwealth, the court may, in addition to the penalty, if any, imposed upon the person, order the offender:
(c) to make reparation to the Commonwealth by way of money payment or otherwise, in respect of any loss suffered, or any expense incurred, by the Commonwealth by reason of the offence.
His Honour held that, in the circumstances of each case, he had no power to order reparation by the appellant. At the request of the Crown he stated a case for determination by the Court of Criminal Appeal which included the following question of law: "Upon the true construction of section 21B of the Crimes Act 1914 and section 8Y of the Taxation Administration Act 1953, do I have jurisdiction to order the appellant to pay reparation?" The Court of Criminal Appeal (Priestley J.A., Wood J. and Sully J.) answered the question "Yes". From that answer the appellant appeals to this Court.
Although the question posed speaks of the jurisdiction of the judge of the District Court, it is clear that it is the powers of the Court that are in issue. Jurisdiction is the authority which a court has to decide matters litigated before it; in the exercise of that jurisdiction a court has certain powers, whether express, implied or inherent [5] . Strictly speaking, the issue is whether s. 21B(c) applied to the appellant in the circumstances. The appellant's contention was that s. 8Y(1) of the Administration Act made him "punishable", that is, liable to a penalty but not to an order for reparation.
1. Harris v Caladine (1991), 172 C.L.R. 84, at p. 136.
In the present case the Markham Boat Company Pty Ltd, in failing to pay deductions to the Commissioner, omitted to do something in circumstances where that omission constituted a taxation offence [6] . By reason of s. 8Y(1), a person who is concerned in, or takes part in, the management of the corporation is deemed to have committed the offence and to be punishable accordingly. Section 8Y(2) provides a defence to a prosecution under sub-s. (1) if the defendant proves the matters mentioned therein. The appellant did not prove those matters. The effect of a deeming provision such as s. 8Y(1) is that the person concerned is deemed to have committed the offence which the corporation itself committed [7] .
1. "Taxation offence" is defined in s. 8A(1) of the Administration Act.
2. Parker v Churchill (1986), 9 F.C.R. 334, at pp. 346-347.
Section 5 of the Crimes Act provides that any person:
who aids, abets, counsels, or procures, or by an act or omission is in any way directly or indirectly knowingly concerned in, or party to, the commission of an offence against any law of the Commonwealth shall be deemed to have committed that offence and shall be punishable accordingly.
The essential difference between s. 5 and s. 8Y is that the former casts the onus of proving involvement on the Crown whereas the latter, through s. 8Y(2), offers the person charged a defence in certain circumstances. It is relevant to refer to s. 5 because the authorities make it clear that a person convicted by the operation of that section is convicted as a principal participating in an offence [8] . Likewise, a person convicted of an offence against the Companies (Western Australia) Code by reason of the deeming provision in s. 38(1) of the Companies and Securities (Interpretation and Miscellaneous Provisions) (Western Australia) Code is convicted as a principal [9] . The point of this discussion is to emphasize that the appellant, though caught by a deeming provision, was convicted as a principal participating in the offence committed by the Markham Boat Company Pty Ltd
1. Walsh v Sainsbury (1925), 36 C.L.R. 464, at p. 477; Mallan v Lee (1949), 80 C.L.R. 198, at pp. 215-216; R. v Crossley (1948), 48 S.R. (N.S.W.) 494, at p. 495.
2. Hamilton v Whitehead (1988), 166 C.L.R. 121.
It follows that the appellant is a person convicted of an offence against a law of the Commonwealth within the language of s. 21B of the Crimes Act. He is therefore liable, in addition to the penalty prescribed by that law, to a reparation order "in respect of any loss suffered by the Commonwealth by reason of the offence".
The appellant argued that the Commonwealth had not suffered any loss by reason of his offence. Rather, the Commonwealth had suffered loss by reason of the omissions of the corporation. The effect of the deeming provision in s. 8Y(1), it was said, is to create a statutory fiction, namely, that the appellant committed each offence but that the provision does not deem the appellant to have omitted to do something which the corporation omitted to do or deem there to have been a loss suffered by reason of the appellant's offence when the loss was suffered by reason of the offence committed by the corporation.
However, the answer to this argument is that the appellant stands convicted of an offence against s. 221F(14) of the Assessment Act and therefore stands convicted of a contravention of s. 221F(5)(a), that is, of omitting to pay the deductions to the Commissioner. He stands convicted of an offence against a law of the Commonwealth and he is therefore an offender to whom s. 21B applies. He is also liable to make reparation because the loss suffered by the Commonwealth was suffered by reason of the offence of which he was convicted, namely, a failure to pay deductions to the Commissioner.
In Murphy v H.F. Trading Co. Pty Ltd [10] Gibbs J. said that, in the absence of argument, he was not prepared to hold that a customs agent who was convicted of offences under the Customs Act 1901 Cth was also liable to make reparation under s. 21B of the Crimes Act. But the relevant section of the Customs Act only deemed the agent to be the owner of the goods in question and to be personally liable for any penalties recoverable under the Customs Act as if he were principal. The case is clearly distinguishable from the present one where the appellant is deemed to have committed the offence as a principal.
1. (1973) 47 A.L.J.R. 198, at p. 201.
The words "punishable accordingly" in s. 8Y(1) are in no sense words of limitation, confining the deemed offender to the penalty provisions only of the Assessment Act. The same expression is used to make clear that a person convicted by the operation of s. 8Y(1) or s. 5 is convicted as a principal so that provisions applicable to the actual offender are applicable to that person [11] . This also seems to have been the view taken by the Full Court of the Supreme Court of Western Australia in Vlahov v Federal Commissioner of Taxation [12] .
1. Mallan v Lee (1949), 80 C.L.R., at pp. 211-212.
2. (1993) 26 A.T.R. 49.
The appeal must therefore be dismissed. The respondent filed a notice of contention which arose in the following way. In the course of answering the question asked of the Court of Appeal, Priestley J.A., with whom Wood and Sully JJ. agreed, found the decision in Vlahov "doubly useful". The first respect was that already adverted to. The second respect in which his Honour found the decision useful was a statement by White J. [13] , with whose judgment Franklyn and Ipp JJ. agreed, that:
I am of the opinion that the court has a discretion whether or not to make a reparation order. That discretion is, of course, to be exercised judicially. In the exercise of that discretion, the court may have regard to the personal circumstances and means of the offender.
The respondent accepted that the court has a discretion whether or not to order reparation but it wished to challenge the proposition that the personal circumstances and means of an offender were relevant considerations in the exercise of that discretion. In effect, the respondent sought to confine relevant considerations to those going to culpability.
1. ibid., at p. 55.
There is a difficulty in dealing with the notice of contention because it does not fall within any answer to the question asked in the case stated. Nor is it a matter that admits of an answer in the abstract. In particular, personal circumstances is a term of wide import and, conceivably, could intrude into matters of culpability. In the circumstances the Court should not deal with the notice of contention, other than to draw attention to the following passage from the judgment of Mason J. in Minister for Aboriginal Affairs v Peko-Wallsend Ltd. [14] :
In the context of judicial review on the ground of taking into account irrelevant considerations, this Court has held that, where a statute confers a discretion which in its terms is unconfined, the factors that may be taken into account in the exercise of the discretion are similarly unconfined, except in so far as there may be found in the subject matter, scope and purpose of the statute some implied limitation on the factors to which the decision-maker may legitimately have regard.
1. (1986) 162 C.L.R. 24, at p. 40.
The appeal should be dismissed. |
high_court_of_australia:/showbyHandle/1/10586 | decision | commonwealth | high_court_of_australia | text/html | null | Fawcett v BHP By-Products Pty Ltd [1960] HCA 59 | https://eresources.hcourt.gov.au/showbyHandle/1/10586 | 2024-09-13T22:53:08.430650+10:00 | High Court of Australia
Dixon C.J. McTiernan, Kitto, Menzies and Windeyer JJ.
Fawcett v BHP By-Products Pty Ltd
[1960] HCA 59
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
Aug. 15
Dixon C.J.
In my opinion the judgment of Walsh J. is right and this appeal should be dismissed. I have had the advantage of reading the judgment prepared by Menzies J. and I have nothing to add to his reasons.
McTiernan J.
I agree with the reasons for judgment of the learned primary judge Walsh J., and have nothing to add to them. In my opinion, the appeal should be dismissed.
Kitto J.
For the reasons given by my brother Menzies, I agree that the appeal should be dismissed.
Menzies J.
This is an appeal from Walsh J. in an action wherein the respondent, as a person insured under a third-party policy issued pursuant to the Motor Vehicles (Third Party Insurance) Act, 1942-1951 (N.S.W.), successfully sued the appellant—as the representative of Lloyd's, the authorized insurer who had issued the policy—for an indemnity in respect of a sum of £2,288 16s. 3d. paid by the respondent to one Jacobs in fair compromise of an action in the Supreme Court of New South Wales for damages in respect of bodily injuries suffered by Jacobs when operating a Caldwell mechanical loader in the surfacing of Wombat Road, near Young, New South Wales. In operating the loader, Jacobs was an employee of the respondent acting within the course of his employment and he sued for damages for negligence. The only question is whether Jacobs' injuries were caused by or arose out of the use of the insured motor vehicle so as to fall within the indemnity granted by the policy.
A Caldwell mechanical loader is a tractor upon which there has been mounted a bucket or grab which can pick up material from a heap in front of the tractor, travel along rails above the head of the operator to the back of the tractor and deposit its load there, usually in a truck or some other container, for removal. When being used to load in this manner, the vehicle moves forward toward the heap and backward toward the truck, as required. On the occasion on which Jacobs suffered injury, the loader was being so used when the bucket jammed after its contents had been emptied. Jacobs was the driver and operator and he was injured when he stood on the truck receiving the material at the back of the loader and tried to free the bucket, which fell on him. It appears that the mechanism to bring the bucket back into position after its contents had been tipped out had been in a defective condition for some time prior to the accident.
The Caldwell mechanical loader with which we are concerned was the only vehicle covered by the policy issued by Lloyd's, which insured the owner and driver against liability in respect of bodily injury to any person caused by or arising out of the use of the loader and contained the following provisions: "Limitation as to use— premium has been paid only for the use of the motor vehicle for the purposes set out in item 17a of the schedule annexed hereto. The motor vehicle must not be used for any other purpose unless the policy is endorsed and extra premium (if any) paid". Item 17a was as follows: "Miscellaneous—Any tractor and any motor vehicle not included in item 12, 15 or 16 which comprises an excavator, road-grader, tar-boiler, street-flusher, chaff-cutter, crane or other machinery or apparatus and which is not constructed principally for the conveyance of persons or goods". The loader in question was not included in item 12, 15 or 16. The provisions I have quoted indicate that the Caldwell mechanical loader was regarded by the parties as a motor vehicle—as it clearly was—and that the use to which it was anticipated that it would be put extended to its use as a loader. Prima facie, therefore, Jacobs' injury was "bodily injury caused by or arising out of the use of the motor vehicle", but the contention for the appellant is that the Act does not relate to the use of the machine as a loader but only to its use as a vehicle and that the policy should be similarly understood.
It would be sufficient to dispose of this argument to deny that the policy should be restricted by reference to the Act, but I am prepared to examine the full operation of the Act in relation to a vehicle such as a Caldwell mechanical loader to determine whether the appellant's initial proposition has been made out. Such a loader is without question a motor vehicle for the purposes of the Act and it would be a contravention of s. 7 to take it upon a public street unless it were insured under a policy conforming with the requirements of s. 10. To comply with the requirements of s. 10 the third-party insurance policy to be issued by an authorized insurer must insure the owner and the driver against all liability "in respect of the death of or bodily injury to any person caused by or arising out of the use of the motor vehicle in New South Wales" etc., so a conforming policy would have to provide indemnity against liability to a third person injured by the vehicle by reason of its movement whether on a road or not, including its moving back and forward between a heap of debris and a truck in the course of loading operations; furthermore, the indemnity could not be confined to liability arising while the vehicle was actually in motion, and it would perforce cover liability connected with its travelling, e.g., its being left upon a road by night without adequate lights. The policy would also have to cover liability arising out of the starting and stopping of the vehicle because these things are part of its use. So much the appellant does not really dispute and concedes that all liability of this sort can be properly described as liability caused by or arising out of the use of the loader as a vehicle. Mr. Reynolds contends, however, that the statutory obligations imposed by s. 10 would be satisfied by a policy which did not cover liability to a bystander for injury from a stone falling from the conveyor when the vehicle itself was stationary and, as I followed him, even if the vehicle were moving. Such injury, so the argument ran, would arise from the use of the machine as a loader and not as a vehicle and it is only when it is used as a vehicle that the statute is concerned. I cannot accept the distinction thus attempted. If, for instance, the loader were in operation upon a public street and while the conveyor was operating, although the vehicle was stationary, a stone fell from it upon a person passing it and injured him, it would be perfectly correct to say that the bodily injury so occasioned did arise out of the use of the vehicle. The same would be true if a collision occurred between the loader and some other vehicle upon the road which dislodged a stone in the bucket of the loader which fell upon a bystander and injured him. The Act is not, I think, concerned with fine distinctions but requires the issue of a policy that covers liability arising out of everything that falls fairly within the conception of the use of a motor vehicle. This does not mean that the words of s. 10 are to be regarded as not involving any limitation whatever. If, for instance, a man were to steal a car, park it outside the house of his enemy and use it as a fort from which to shoot that enemy as he emerged from his gateway, the injury so suffered would not give rise to a liability that had to be covered by a third-party policy, and this is so simply because the Act is not concerned with such a liability and the bodily injury so occasioned cannot fairly be described as arising out of the use of the motor vehicle. It arises out of the use of a rifle in a motor vehicle. It is easy, without elaborate explanation, to say that such a liability cannot properly be regarded as within the contemplation of the Act, but how can this be said of the use of a motor vehicle for the very purpose for which it was designed and constructed? To meet the circumstances that there are certainly some things that might be described as uses of a motor vehicle but are nevertheless outside the contemplation of the Act does not, I venture to think, require the implication of particular words in the statutory provisions; the proper course is to read the actual language as relating only to death or bodily injury that is caused by or arises out of what can fairly be described as the use of the motor vehicle itself. In the Supreme Court of New South Wales, there has recently been some difference of opinion upon the question whether any limitation upon the word "use" should be implied, similar to that adopted in the New Zealand cases of A. P. A. Union Assurance Society v. Ritchie and Barton Ginger & Co. Ltd. [1] , Commercial Union Insurance Co. Ltd. v. Colonial Carrying Co. of New Zealand Ltd. [2] , and State Fire Insurance Office v. Blackwood [3] . See King v. Government Insurance Office of New South Wales [4] , Quinn v. Government Insurance Office of New South Wales [5] . For the reasons I have given, although I think that not everything that could be called a use of the motor vehicle falls within the ambit of the Act, the reason why some things do not do so is to be found in the general scope and purpose of the Act rather than because of an implied limitation that is to be expressed by the implication of words qualifying or restricting the word "use".
1. (1937) N.Z.L.R. 414.
2. (1937) N.Z.L.R. 1041.
3. (1956) N.Z.L.R. 128.
4. (1959) 77 W.N. (N.S.W.) 164.
5. (1959) 77 W.N. (N.S.W.) 186.
Once, therefore, it is determined that a Caldwell mechanical loader is, as a whole, a motor vehicle, the Act requires a policy of insurance that covers its use as a loader. In my opinion, therefore, the appellant does not establish his first proposition—that is, that the Act only requires a policy covering the use of a Caldwell mechanical loader as a vehicle that moves and not as a vehicle that loads— because its use as a loader is part of its use as a motor vehicle. This makes it unnecessary to determine whether, if I had reached a contrary conclusion, it would have been proper to read the policy down to uses which the Act requires a policy to cover, notwithstanding that the policy issued is more widely expressed. I am, however, not disposed to think it would in a case such as this, where no question of invalidity under s. 10 (3) is involved.
This would conclude the case if it had been a person other than the owner or driver who had suffered bodily injury arising out of the use of the loader. But Jacobs was the driver and it is necessary to consider whether the indemnity of the owner covers liability for bodily injury to the driver which arises out of the use of the motor vehicle. Were it not for the decision of the House of Lords in Digby v. General Accident Fire and Life Assurance Corporation Ltd. [1] , I would have been prepared to decide that a policy issued in compliance with s. 10 of the Act would not provide the owner with indemnity against liability to the driver or the driver with indemnity against liability to the owner, but that the owner and driver should each have indemnity against liability to other persons, described as third parties, only. This seems to me to be the natural meaning of s. 10 (1) and such meaning receives some support from the provisions of ss. 20, 30 and 32. In Digby's Case [1] , however, it was decided that a policy issued in compliance with the corresponding English Act did provide the driver with indemnity against liability to the owner and the words "to any person" in the phrase under consideration does cover an owner who has established the liability of his driver for physical injury caused by the use of the motor vehicle. I see no valid basis on which to distinguish this decision when it is an owner who claims to be indemnified against liability to a driver, and the provisions of s. 10 (2) (a), although by no means clear, do seem to contemplate that without the exception thereby created, a policy would cover an owner's liability to his driver in respect of compensation under the Workers' Compensation Act. I am not, therefore, prepared to exclude from s. 10 (1) and a policy issued in compliance therewith the liability of an owner to a driver for injury caused by or arising out of the use of a motor vehicle.
1. (1943) A.C. 121.
2. (1943) A.C. 121.
It remains to say that I regard the bodily injury suffered by Jacobs in his attempt to free the grab of the Caldwell mechanical loader as one that arose out of the use of that vehicle as a loader.
For the foregoing reasons I consider that the judgment of Walsh J. should be affirmed and this appeal dismissed.
Windeyer J.
This is an appeal from a judgment in an action on a policy of insurance. The question depends upon the meaning of the policy not upon the meaning of the Act of Parliament. The policy recites that the insured "has made application and paid a premium for the issue of a third-party policy for the purposes of the Motor Vehicle (Third-Party Insurance) Act, 1942, in relation to the motor vehicle described". The motor vehicle is described as a Caldwell mechanical loader. It was argued that the extent of the indemnity given by the policy was to be ascertained from the Act, because the policy was taken out in compliance with the Act. This, no doubt, is a good reason for so construing it that it effects what the Act requires, in other words so that it complies with s. 10 (1) (b) (i) of the Act. But, provided it does not limit or modify the operation of any provision of the Act, and therefore does not contravene s. 19, it is no objection that it goes further than the Act requires. The policy is not an insurance against a statutory liability. It is an insurance that the statute requires shall be made against a common law liability. The risk that must be insured against is "all liability in respect of the death of or bodily injury to any person caused by or arising out of the use of the motor vehicle". The policy here insures the owner and any driver of the vehicle in those very terms. But it is the document that has to be construed and it is to be construed as a whole. Clause 5 provides that the premium has been paid only for the use of the motor vehicle for the purposes set out in item 17a of the schedule to the policy; and that it must not be used for any other purpose unless the policy be endorsed and an extra premium paid. So that only liabilities arising out of a use of the vehicle for the purposes set out in item 17 (a) were covered by the policy. That would be clear enough if item 17 (a) stated any purposes. In the form it bears in the renewal of the policy—it is slightly different in the original policy—it reads as follows: "Miscellaneous—Any tractor not being a tractor designed so that it is capable of being driven at a speed exceeding 18 miles per hour, and any motor vehicle not included in item 12, 15 or 16 which comprises an excavator, road-grader, tar-boiler, street-flusher, chaff-cutter, crane or other machinery or apparatus and which is not constructed principally for the conveyance of persons or goods". This is somewhat loosely drawn and elliptical. Items 12, 15 and 16 merely list fire engines, certain vehicles used in the motor trade and trailers and therefore may be disregarded. I take the effect of cl. 5 and item 17 (a) read together to be that insured excavators must only be used as excavators, road-graders as road-graders, tar-boilers as tar-boilers and so on; and that any other insured vehicle comprising any machinery or apparatus and which is not constructed principally for the conveyance of persons or goods may be used only for performing the normal function of such machinery or apparatus. That means in the present case that the mechanical loader might be used only as a mechanical loader. If a liability arose out of its use for some other purpose that liability would not be covered. But it is implicit in this that all liabilities caused by or arising out of its use as a mechanical loader were covered. That being so, the liability in question here was covered. Jacobs was engaged in using the mechanical loader to load road metal into a truck, a purpose for which it was designed. He was injured while he was trying to overcome a stoppage in the mechanism. The mishap occurred because of a defect in the mechanism. In the circumstances his injury could be said to have arisen out of the use of the mechanical loader. Walsh J. considered it had. It was a question of fact. His decision was in my view correct. The respondent incurred a liability to Jacobs by reason of the defective character of the loader that it had required him to use. The policy insures the respondent against "all liability" to "any person" arising out of the use of the mechanical loader for the purposes of a loader. The respondent's right by the terms of the policy to be indemnified against its liability to Jacobs is thus clear.
The appellant argued that word "use" in the expression "caused by or arising out of the use of the motor vehicle" and the expression "any person" appearing in the policy ought, by reason of what was said to be their meaning in the Act, to be given a restricted meaning in the policy. "Use" it was said, had a restricted meaning in the Act, a meaning that had been the subject of much debate in recent cases. And "all liability" to "any person" did not, it was said, include the liability of the owner to the driver in circumstances such as these. These propositions may be briefly examined.
As to the word "use": the Act is concerned with motor vehicles. The statutory definition in terms restricts the denotation of "motor vehicle" to "vehicles" mechanically propelled and to trailers. The reference to trailers appears to bring within the denotation anything on wheels towed behind a motor vehicle while it is being so towed (See Lynch v. Page [1] ). But a vehicle, in the sense the word has in relation to road traffic, properly means a carriage for the conveyance of passengers or goods or of some particular thing. Chaff-cutters, tar-boilers, concrete-mixers, mobile-cranes and the like may, as with the mechanical loader here, be called motor vehicles when they are mounted on wheels in such a way that, to use the expression in the insurance policy here, they are comprised in a vehicle. Strictly it is perhaps only so much of the total equipment as consists of the carriage by which the particular apparatus is conveyed that is the vehicle. But it is not inappropriate, when such a thing is considered as a unit in road traffic, to describe its totality as a vehicle (President &c. of the Shire of Tungamah v. Merrett [2] ). It is to the damages caused by or arising from the movement of vehicles as units in road traffic that the Act is primarily directed. In the case of a motor car it is said that to use it means, for the purposes of the Act, to employ it for what has been called its vehicular purpose. In that sense an injury caused by using a motor car to provide electric light, for example, could not ordinarily be said to be caused by the use of a motor vehicle in the sense that that expression is used in the Act. The Act, I think, does contemplate the "use" of a motor car as involving driving it or doing something to it or with it that is incidental to its normal use as a motor car. In the case of a vehicle not designed for the carriage of goods or passengers more difficulty may arise in applying the words of the Act. But the movement by road of any selfpropelled mobile plant is, in my view, clearly a use of it. Its mobility under its own power is one of its characteristics. Taking advantage of that characteristic is one of the ways of using it. That is so for the purposes of the Act and of the policy. Whether the static employment of such plant for the industrial purpose for which it is designed is a use of it within the meaning of the Act which primarily deals with vehicles on roads is, I think, a more difficult question. But it does not arise here, for, as I have said, the insurance policy governs the matter.
1. (1940) 57 W.N. (N.S.W.) 161.
2. (1912) 15 C.L.R. 407.
As to the question whether the Act contemplates proceedings by the driver against the owner or by the owner against the driver, here again if the policy goes beyond what the Act requires nevertheless it governs the matter. If it be necessary to go further I need say no more than that I agree with Walsh J. and with my brother Menzies as to the operation of the Act in this respect, although I recognize the force of the comments by Else-Mitchell J. in King v. Government Insurance Office of New South Wales [1] . This Act ought not, I think, to be given a narrow operation. We live as Lord Radcliffe has said "in a society which has been almost revolutionized by the growth of all forms of insurance" (Lister v. Romford Ice and Cold Storage Co. Ltd. [2] ). The system of compulsory third-party insurance against common law liability will, no doubt, continue to raise questions for the courts. In this case the judgment of Walsh J. was, in my opinion, right and the appeal should be dismissed.
1. (1959) 77 W.N. (N.S.W.) 164. at p. 183.
2. (1957) A.C. 555. at p. 591. |
high_court_of_australia:/showbyHandle/1/10876 | decision | commonwealth | high_court_of_australia | text/html | null | HR Sinclair Pty Ltd v Commissioner of Taxation (Cth) [1966] HCA 39 | https://eresources.hcourt.gov.au/showbyHandle/1/10876 | 2024-09-13T22:53:15.791401+10:00 | High Court of Australia
Taylor, Menzies and Owen JJ.
HR Sinclair Pty Ltd v Commissioner of Taxation (Cth)
[1966] HCA 39
ORDER
Question in case stated answered: Yes. Costs of case stated reserved for the judge disposing of the appeal.
Cur. adv. vult.
The following written judgments were delivered:—
June 2
Taylor J.
The case stated raises the question whether the sum of £3,461 10s. 11d. received by the appellant on 7th November 1960 formed part of its assessable income of the income year in which it was received.
The case shows that:—
(1) In the income years which ended in June 1957, 1958, 1959 and 1960 the appellant paid royalties to the Forests Commission of the State of Victoria in respect of timber removed from forest reserves in that State.
(2) Such royalties were paid at the rates specified in the "Timber Licences" held by the appellant from time to time.
(3) Royalties at the rates specified in the "Timber Licences" were legally payable and the appellant was unable to obtain supplies of timber from these sources without first paying royalties at those rates.
(4) Such royalties were claimed by the Forests Commission to have been calculated in accordance with a formula fixed by it in order, broadly, to provide differential rates to timber merchants according to the varying costs of transport from the forest to the mill.
(5) During the years 1957, 1958, 1959 and 1960 the appellant denied and continued to deny that the rates specified in its licences were calculated in accordance with the prevailing formula and maintained that, according to the formula, the rates specified in its licences should have been lower.
(6) Protracted negotiations finally resulted in an acknowledgment by the Commission that lower rates should have been specified in the appellant's licences and that if this had been done it would have resulted in a saving to the appellant in royalties of the sum £3,461 10s. 11d.
(7) On 7th November 1960 the Forests Commission refunded to the appellant the sum of £3,461 10s. 11d.
(8) In the appellant's returns of income made pursuant to the Income Tax and Social Services Contribution Assessment Act the appellant had claimed as deductions for the purpose of arriving at its taxable income in each of the four last-mentioned years the amounts which, in accordance with its licences from time to time, it had paid to the Commission for royalties and these amounts had been allowed as deductions by the respondent in the assessment of the appellant to tax in respect of each of those years.
The problem in the appeal is whether in the circumstances disclosed by the case stated it was proper to take into account the receipt of the sum in question for the purpose of ascertaining the gross "proceeds" of the business conducted by the appellant during the year which ended on 30th June 1961. This question is a practical one and its answer cannot be made to depend upon what deductions were or were not allowed pursuant to the Income Tax and Social Services Contribution Assessment Act in assessing the taxable income of the appellant and, ultimately, its liability to tax in past years. This, it seems to me, is quite beside the point in considering the question under review. The character of the amount which the appellant received cannot, in the absence of some appropriate statutory provision, be thought to vary according to whether or not deductions were claimed and allowed of expenditure which includes the sum now reimbursed. Indeed, the respondent ultimately conceded that the fact that the deductions had been allowed in past years could not affect the answer to the question.
However, it was contended that it would be more appropriate to treat the payment to the appellant as a diminution of its business outgoings in the earlier years rather than as assessable income for the year in question. Problems bearing some similarity to that which arises in this case have not infrequently been dealt with in this manner in England and, no doubt, it would in many cases be more equitable to reopen the earlier assessments and make the appropriate adjustments. But in England, where the relevant legislation permits this course, the matter seems to have been treated not so much as a question of business accounting as an appropriate method of adjusting the taxpayer's liability to tax. However, there is no power to adopt this course in Australia except in circumstances which do not present themselves in this case and I do not think the English cases by any means require the conclusion that, under the provisions of the Australian Act, the refund in this case was not assessable income of the appellant in the year of its receipt. Yet the appellant asserts on the strength of the English cases that the amount received by it should be regarded merely as a diminution of its business outgoings in past years and not as part of the proceeds of its business in the year of its receipt and, therefore, a receipt of moneys which does not effect its liability to tax in any year. It should be observed, however, that in the present case the royalties paid in the earlier years were legally payable and were properly taken into account for the purpose of determining the net proceeds of its business in those years.
The question, therefore, resolves itself into a consideration of the character of the receipt in question. There was a suggestion that the payment was made and received not merely as a voluntary refund but by way of compromise of past and future claims. In my opinion, however, there is no substance in this suggestion; the payment represents no more than a voluntary refund of part of the royalties which had been legally exacted. The refund was made because after protracted representations and negotiations the Commission conceded that it had, from time to time, incorrectly applied the formula so far as the appellant was concerned and decided that, apparently, in common fairness it should make the refund in question. In these circumstances I can see no reason why the amount should not be regarded as properly taken into account in determining the proceeds of the appellant's business of the year in which it was paid. Its attempts—which in the end were successful—to obtain a refund of amounts which it contended had been exacted as the result of the misapplication of the formula were just as much an activity of the business as would have been an attempt to avoid an overcharge in the first instance and the amount recovered in the year ended under review must be taken to have formed part of the appellant's income for that year.
Reference was made to provisions such as ss. 72 (2) and 74 (2) of the Act which provide, in effect, that refunds of amounts paid in respect of certain specified outgoings shall form part of a taxpayer's assessable income in the year of receipt. These are special provisions supplementary to the earlier provisions of those sections which allow deductions in respect of certain taxes and other specified items of expenditure. It was pointed out that these provisions do not extend to refunds of the character in question here but the appellant placed little or no reliance upon this fact. Indeed, this circumstance throws no light on the problem for it appears quite clearly that the provisions referred to operate whether or not the initial expenditure upon the specified items was, or was not, a business expense.
I, therefore, answer the question raised by the case in the affirmative.
Menzies J.
I have had the advantage of reading the other judgments. I agree that the payment in question is not excluded from the category of income as a payment indeterminate in character in settlement of a dispute relating to fees and future royalties. I also agree that, in the circumstances stated, the payment should be regarded as part of the annual proceeds of the taxpayer's timbergetting business. The taxpayer itself so treated the payment in its accounts and, in my opinion, it was correct in doing so.
I agree that the question submitted to us should be answered in the affirmative.
Owen J.
The question is whether the amount of £3,461 10s. 11d. received by the taxpayer company from the Forests Commission during the year ending 30th June 1961 was part of its assessable income for that year. There is no doubt that the amounts of the royalties paid by the company to the Forests Commission in the years preceding that year were rightly claimed by it as deductions in each of those earlier years and were rightly allowed by the Commissioner since they were calculated in accordance with the rates set out in the licences under which the company was permitted to take timber from the State forests and the company was bound to comply with the terms of its licences. But the fact that the amounts so paid were properly claimed and allowed as deductions in assessing the company to tax in those earlier years does not determine the question whether the amount refunded is to be regarded as part of the company's assessable income for the year in which the refund was received. It had without doubt made a full and true disclosure of all the material facts necessary for the assessment of its tax in the preceding years and no error in calculation or mistake of fact had been made in assessing it to tax so that the case is not one in which the Commissioner could act under s. 170 of the Income Tax and Social Services Contribution Assessment Act 1936-1961 Cth and amend the earlier assessments. But it does not follow that the amount refunded must therefore be regarded as part of the company's assessable income of the year in which the refund was made. I mention this because many of the arguments put to us by the counsel for the Commissioner seemed to suggest that because the earlier payments had been allowed as deductions since they had been made in gaining the company's assessable income in those years, it necessarily followed that the refund was to be treated as a receipt of income. This, I think, is not the right approach. The real question is whether the amount received by way of refund was part of the company's assessable income for the year in which it was received.
"Income from personal exertion" is defined by s. 6 of the Act to mean (inter alia) "income consisting of the proceeds of any business carried on by the taxpayer" and "income from property" to mean "all income not being income from personal exertion" but there is no definition of "income". Counsel for the company put his submissions in two ways. In the first place he pointed out that the amount refunded was paid in settlement of a dispute between his client and the Forests Commission and this is undoubtedly the case. The compromise, he then submitted, was one which affected the future as well as the past rights and liabilities of the parties as to royalty payments and for this reason the amount in question was not a revenue receipt. It was, he said, analogous to the payments which were considered in McLaurin v. Federal Commissioner of Taxation [1] and in Allsop's Case [2] . I do not agree that this is so. The compromise had no legal effect upon the future rights and liabilities of the company or of the Forests Commission. The Commission, under s. 51 of the Forests Act 1958 Vict. may grant licences conditioned upon the payment of such royalties as it determines and the person to whom a licence is granted is bound to comply with the conditions of his licence. It is true that the Commission had, in the course of its administration of the Forests Act, worked out a formula for use in determining the amounts of royalty to be charged to licensees and had failed to apply that formula correctly in the years 1957, 1958, 1959 and 1960 but the settlement of its dispute with the company did not bind it, as a matter of law, to continue to charge licence fees ascertained in accordance with the formula. The case cannot be treated as though the payment of the refund had been made in settlement of a variety of claims, some relating to the past and some to the future. In no way can it be said to resemble McLaurin's Case [1] or Allsop's Case [2] .
1. (1961) 104 C.L.R. 381.
2. (1965) 113 C.L.R. 341.
3. (1961) 104 C.L.R. 381.
4. (1965) 113 C.L.R. 341.
Counsel's second submission was that even if the compromise related only to royalties paid in past years, the amount refunded did not form part of the company's assessable income for the year in which it was received. He pointed out that there is nothing in the Act which expressly brings such a receipt into the category of assessable income although there are to be found provisions which appear to recognize that the refund of an amount which has been allowed as a deduction from the assessable income of an earlier year is not necessarily part of the assessable income in the year of receipt. Section 72 (2) is one example. It declares that where a taxpayer receives in the year of income a refund of an amount paid for rates or taxes which has earlier been allowed as a deduction, the amount refunded is assessable income, and there are other provisions to the like effect (see for instance s. 74 (2)). The refund, counsel went on to say, could not properly be described as income consisting of the proceeds of the taxpayer's business and he referred us to a passage in the judgment of Rowlatt J. in English Dairies Ltd. v. The Commissioners of Inland Revenue [3] . In that case the taxpayer in 1920 had paid £8,236 to the Food Controller who had claimed the payment in the belief that he was empowered to do so. The company debited this sum in its accounts for 1920 as being an outgoing expended for the purposes of its trade. Later the courts held that the Controller had no power to require the payment in question and in 1924 the amount was repaid to the taxpayer. The question arose whether, as the Crown claimed, the amount repaid should be taken into account as a receipt of the company's trade for the year 1920 which would involve a reopening of those accounts, or whether, as the taxpayer claimed, it was no part of the trading profits of the company for 1920 and should not be taken into account until 1924. Rowlatt J. upheld the Crown's contention and in the course of his judgment said "I quite agree that this sum by itself cannot be treated as in its nature a trade receipt. It is not a commercial operation to suffer extortion and it is not a commercial receipt to have the money handed back to you" [1] . Before us counsel did not question the fact that the scheme of the Commonwealth Act differs substantially from that of the English legislation but he placed some reliance on this dictum of Rowlatt J. in support of his submission that the refund in the present case should not be regarded as bearing the character of income. He referred us also to a number of other English decisions but none of them seems to me to throw any real light on the question which arises in the present case. Nor, I think, is any assistance to be had from the decision in the New Zealand case of Cromwell Jockey Club v. Commissioner of Inland Revenue (N.Z.) [2] which was cited to us by counsel for the Commissioner.
1. (1927) 11 Tax Cas. 597, at p. 605.
2. (1927) 11 Tax Cas., at p. 605.
3. (1954) 6 A.I.T.R. 188.
The conclusion to which I have come, not without doubt, is that the amount in question was properly treated by the Commissioner as part of the company's assessable income in the year ending 30th June 1961. The company's business was that of a saw-miller. It was in that capacity that it paid royalties for timber cut by it for the purposes of its business and it was in that capacity that it received the amount refunded. It was part of the proceeds of the business carried on by it and, in my opinion, properly found its place, as it did, in the company's profit and loss account for the year of its receipt and was taken into account in arriving at its net trading profit for that year although described in that account as a "non-taxable" receipt.
I would therefore answer the question in the affirmative. |
high_court_of_australia:/showbyHandle/1/10007 | decision | commonwealth | high_court_of_australia | text/html | null | Summergreene v Parker [1950] HCA 13 | https://eresources.hcourt.gov.au/showbyHandle/1/10007 | 2024-09-13T22:53:16.425034+10:00 | High Court of Australia
Latham C.J. Williams, Webb and Fullagar JJ.
Summergreene v Parker
[1950] HCA 13
ORDER
Appeal allowed. Order of Full Supreme Court and judgment entered for the plaintiff set aside. Judgment entered for defendant by Maxwell J. restored. Respondent to pay costs of this appeal and in the Supreme Court.
Cur. adv. vult.
The following written judgments were delivered:—
June 1
Latham C.J.
The plaintiff G. H. Parker sued the defendant Mrs. D. I. Summergreene for commission for effecting the sale of the defendant's business carried on by her under the name "The Dyeing King." The action was tried before Maxwell J. and a jury, and in answer to a question submitted to them the jury found that the defendant promised the plaintiff £500 commission if he effected a sale of her business. The question whether or not the plaintiff had effected a sale of the business depended upon the true effect of two documents. The first document was a letter from Messrs. Church & Co., solicitors for Messrs. A. O. Anderson and H. P. Jones, to the defendant. It was in the following terms:—
On behalf of Messrs. A. O. Anderson and H. P. Jones the Trustees on behalf of a Company to be formed and known as "The Dyeing King Pty. Limited" we hereby offer to purchase from you the business presently carried on by you under the name of "The Dyeing King" at 53 Northumberland Road, Auburn and elsewhere upon a walk-in walk-out basis including all the assets of the said business (except the freehold property) as disclosed to the Company's investigators upon the following conditions namely:—
1. The purchase price is to be £8,750 of which a Deposit of £500 is to be paid forthwith and the balance upon completion.
2. You are to grant to the Company a lease of the business premises known as No. 53 Northumberland Road, Auburn for five (5) years with an option of a further five (5) years at a rental equal to the rental paid by you for the said business premises immediately prior to your purchase of the freehold.
3. The due assignment to the Company of all tenancies of shops and portion of shops presently used by you in the said business.
4. The business is to be taken over on the 1st February 1947.
5. You are to have the right of taking up Five hundred (500) Shares in the Company at par for yourself and a further Five hundred (500) for your daughter.
6. The usual Agreement for sale and purchase to be entered into by you and the Company containing the usual terms of sale and these terms in a form satisfactory to you and to the Company.
You will notice that the Company proposes to carry on the business under the name of "The Dyeing King".
The second document was a letter from the defendant accepting the offer made in the letter already mentioned and was in the following terms:—
I acknowledge receipt of a letter from Messrs. F. J. Church & Co. on your behalf offering to purchase the business presently carried on by me under the name of "The Dyeing King" and I hereby accept the offer to purchase on the terms enumerated in the said letter.
In January 1947 a draft agreement was submitted on behalf of Messrs. Anderson and Jones to Mrs. Summergreene containing detailed provisions with respect to the purchase of her business by a company about to be formed. The defendant's solicitor informed the plaintiff's solicitor that the defendant was not satisfied with the proposed agreement and she refused to proceed with the transaction. In evidence she said that she made up her mind not to go on because her family objected to her selling the business. Maxwell J. held that the acceptance by the defendant of the offer made in the letter of 20th December did not result in the formation of a contract because par. 6 of the letter left terms of the contract to be determined in the future, so that the documents did not represent a concluded bargain. He therefore gave judgment for the defendant.
Upon appeal to the Full Court the court applied the rule for which Kelner v. Baxter [1] is cited. In that case it was held that where a contract is signed by a person who professes to be signing "as agent" but who has no existing principal at the time and the contract would be wholly inoperative unless binding upon the person who signed it, he is personally liable on it. In that case the defendants purported to make a contract to purchase goods on behalf of a proposed hotel company. The goods were delivered to persons who purported to act on behalf of the company and the goods were consumed. Afterwards a company was incorporated. The "agents" had no principal when they purported to make the contract and the company when it came into existence was incapable of "ratifying" the contract which the agents had purported to make on its behalf, though the company might of course have entered into a new contract itself. An action was brought against the agents and it was held that they were personally liable.
1. (1866) L.R. 2 C.P. 174.
In the present case the question is whether by the letters which have been quoted the plaintiff effected a sale of the defendant's business. It is plain that he did not effect a sale to the company then in contemplation. That company has never come into existence. On the principle of Kelner v. Baxter [1] the Full Court held that Anderson and Jones were liable upon the contract and that a sale had been effected to Anderson and Jones. Accordingly the appeal was allowed and it was ordered that judgment be entered for the plaintiff for £500. In dealing with par. 6 of the letter of 20th December 1946 the learned judges distinguished between a case where terms of a transaction were left to be settled by a future agreement of the parties to that transaction—where there would be no contract between them—and cases in which, though some terms were left outstanding, those terms were to be settled by agreement between one of the parties and a third party who was not a party to the alleged contract. It was pointed out that par. 6 contemplated the making of a contract upon usual terms satisfactory to the proposed company and the defendant, and not the making of a further contract upon terms to be agreed between the defendant and Anderson and Jones. Reference was made to the following statement quoted from May & Butcher Ltd. v. The King [2] where Viscount Dunedin said:—" to be a good contract there must be a concluded bargain, and a concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties. Of course, it may leave something which still has to be determined, but then that determination must be a determination which does not depend upon the agreement between the parties." It was held, therefore, that par. 6 did not prevent the formation of a contract between Anderson and Jones and the defendant for the sale of the business, and that there was a contract, effected by the plaintiff, for the sale of the business to Anderson and Jones, so that the plaintiff had earned his commission.
1. (1866) L.R. 2 C.P. 174.
2. (1934) 2 K.B. 17, at p. 21.
In Kelner v. Baxter [1] the contract in question was a simple contract of sale of goods. There was no difficulty in substituting the agents for the principal in relation to all the terms of the contract. It was evident that the intention of the parties was that the proposed company should buy the goods and not that the agents should buy them, but the court nevertheless held that as there was plainly an intention to contract and the goods were delivered and no other person than the agents could be liable upon the contract the agents should be held to be liable. In the present case it is plain that it was not intended that Anderson and Jones should buy the business. The intention is quite clear that a company to be formed was to be the purchaser of the business, the lessee of the premises and the assignee of tenancies, and that the defendant and her daughter should be shareholders in the company. But in Kelner v. Baxter [1] the intention was equally evident that the proposed company and not the persons purporting to act as agents should be the contracting parties, and yet the court found no difficulty in substituting the agents for the supposed principal as the contracting party. In the same way in this case the Full Court has said that Anderson and Jones should be substituted for the company wherever reference is made in the relevant letters to the company. It is possible to make the substitution in relation to several of the terms proposed in the letter of 20th December. For example Anderson and Jones could pay the purchase price (par. 1), they could take a lease (par. 2), they could accept an assignment of tenancies (par. 3), they could take over the business on 1st February (par. 4). But par. 5 presents a difficulty when it is endeavoured to substitute Anderson and Jones for the company wherever the company is mentioned. The defendant and her daughter cannot each become shareholders in respect of 500 shares in a company unless the company exists. It is impossible to substitute "Anderson and Jones" for "the company" in par. 5. Thus the application of the principle of Kelner v. Baxter [1] in the present case would mean that par. 5 must be ignored. In my opinion it is not consistent with any principle to ignore an actual term of a proposed contract in this manner and to hold that the parties are bound by the other terms but not by the term in relation to which it is impossible merely to substitute the agent for the supposed principal. In my opinion, therefore, effect cannot be given to the proposed transaction as a contract between the defendant and Anderson and Jones. The rule in Kelner v. Baxter [1] does not, in my opinion, authorize a court, in holding an agent liable even though it is clear that it was intended only that his principal should be liable, to hold the parties to be bound by a contract which omits some of the terms to which the parties agreed. On this ground I am of opinion that the documents exchanged between the defendant and Anderson and Jones did not make a contract between them and that they therefore did not constitute a sale of the business, or a binding contract to sell the business, to Anderson and Jones.
1. (1866) L.R. 2 C.P. 174.
2. (1866) L.R. 2 C.P. 174.
3. (1866) L.R. 2 C.P. 174.
4. (1866) L.R. 2 C.P. 174.
But, further, par. 6 of the letter of 20th December leaves various terms to be arranged. Paragraph 6 is as follows:—"The usual Agreement for sale and purchase to be entered into by you and the Company containing the usual terms of sale and these terms in a form satisfactory to you and to the Company." This is a provision that a "usual agreement for sale and purchase" is to be entered into, that that agreement shall contain "the usual terms of sale" and, further, that the terms of that agreement are to be in a form "satisfactory to you (the defendant) and to the company." It is therefore clear that a further agreement was contemplated which was to contain usual terms and to be satisfactory to the defendant and to the company to be formed. There was no evidence as to what provisions should be contained in a "usual agreement for sale and purchase." There was no evidence as to what were "the usual terms of sale." Therefore there was no concluded agreement between the parties as to what the terms of any sale were to be: see Scammel and Nephew Ltd. v. Ouston [1] . Further, the terms of the future agreement were to be in a form satisfactory to the defendant and to the company. Neither the defendant nor the company could be compelled to agree to any particular terms and it is therefore clear that all the terms of the proposed transaction had not been finally agreed between the defendant and Anderson and Jones. Accordingly changes might be made in the terms proposed and new terms could be introduced (see Sinclair, Scott & Co. Ltd. v. Naughton [2] ). In such a case there is no contract between the parties.
1. (1941) A.C., at p. 273.
2. (1929) 43 C.L.R., at p. 317.
In the Full Court it was held that par. 6 did leave terms outstanding, but it was emphasized that the new agreement contemplated was to be an agreement not between Anderson and Jones and the defendant, but between the defendant and a third party, namely the proposed company. It was held that the cases where it was decided that the necessity for a future agreement prevented the conclusion of a present agreement applied only when that future agreement was to be an agreement between the parties to the first agreement. Reference has already been made to May & Butcher Ltd. v. The King [3] . But it is impossible to hold that there is a contract between two persons unless the terms of the contract are certain. The terms must be identifiable, and not in the air. If the admissible evidence plainly shows that the matter was still in the stage of negotiation and that the parties had not reached an agreement by which each consented to be bound, it cannot be held that there was any contract (Hussey v. Horne-Payne [1] ; Sinclair, Scott & Co. Ltd. v. Naughton [2] ; Von Hatzfeldt-Wildenburg v. Alexander [3] ). The reason why the necessity for further agreement between the parties prevents the formation of a contract is that where this is the case the position is that all the terms of the transaction have not been agreed and that therefore the alleged contract is uncertain in its content. There is no consensus ad idem: Scammel and Nephew Ltd. v. Ouston [4] . The parties to a contract may bind themselves under a contract which is complete in itself to leave specified matters to be determined by a third party, e.g. by an architect or surveyor or arbitrator, but it is a quite different thing to provide that the actual terms of the contract shall depend upon what some two persons shall agree. There is no legal means of compelling any persons to agree upon anything. If the content of an agreement depends upon a further agreement between one of the parties and a third person, then the contract is as uncertain in its terms as if further terms had been left to be negotiated between the parties to the contract themselves. It is true that the cases relied upon do refer to the necessity for a further agreement between the parties as preventing the formation of a contract. But in these cases it happened that what was contemplated was an agreement in the future between the parties as to the terms which were to bind them. It was held that there was no finally concluded contract because there was uncertainty as to what those terms might be. Identical reasoning applies in any case where the terms which are finally to bind the parties depend upon one of the parties and any other person agreeing upon such terms.
1. (1934) 2 K.B. 17 (n).
2. (1879) 4 App. Cas. 311, at p. 323.
3. (1929) 43 C.L.R. 310.
4. (1912) 1 Ch. 284.
5. (1941) A.C., at p. 255.
Accordingly, I am of opinion that any argument that the plaintiff effected a sale to Anderson and Jones by the documents quoted is answered by the fact that any alleged contract between the defendant and Anderson and Jones is rendered uncertain in its terms by reason of par. 6 of the letter of 20th December 1946, and therefore did not amount to a contract which effected a sale of the business.
It was argued that Anderson and Jones impliedly promised that they would form a company which would buy the business and in which the defendant and her daughter could take shares. But if the alleged contract is thus interpreted in order to make it possible to treat it as a contract between Anderson and Jones and the defendant so as to give some effect and operation to par. 5, it then becomes a contract that Anderson and Jones will form a company which will purchase the business. Upon this construction the contract provides not for an actual sale, but for steps to be taken to bring about a sale in futuro. Therefore upon this construction it must be held that the plaintiff did not effect a sale of the business to any person, but only procured what, upon the construction suggested, was a contract by Messrs. Anderson and Jones to form a company which would, after its formation, purchase the business. Plainly such a transaction does not amount to "effecting a sale." Even if Anderson and Jones were held to have broken the contract by failing to form a company which was willing to buy the business and so became liable to pay damages to the defendant, it would still be the case that no sale had been effected. Further, it cannot be assumed as being clear that the document should be interpreted as meaning that Anderson and Jones undertook to form a company. They described themselves as trustees for a proposed company, but there are no words in the document by which they undertook to form it. Finally, par. 6 would still remain as creating uncertainty and preventing the formation of a contract even of the kind suggested.
For all these reasons I am of opinion that no sale was effected either to a company or to Anderson and Jones, and that the appeal should therefore be allowed.
Williams J.
The appellant is the defendant in an action brought in the Supreme Court of New South Wales by the respondent as plaintiff to recover £500 commission for effecting the sale of the appellant's business carried on by her under the name of "The Dyeing King." Several issues arose in the early stages of the action, but there is only one left, the answer to which will determine the appeal. It is whether the respondent effected a sale of this business, and this depends primarily upon whether two letters, the first dated 20th December 1946 from Church & Co., solicitors for Messrs. A. O. Anderson and H. P. Jones to the appellant, and the second, the reply of the appellant of the next day, constituted a binding contract for the sale of the business. The text of these letters is set out in the judgment of the Chief Justice and I shall not repeat them.
The letter of 20th December 1946 was written on behalf of Anderson and Jones as trustees on behalf of a company to be formed and known as "The Dyeing King Pty. Limited." It contained an offer to purchase from the appellant the business presently carried on by her under the name of "The Dyeing King" at 53 Northumberland Avenue, Auburn, and elsewhere, upon a walk-in walk-out basis including all the assets of the business (except the freehold property) as disclosed to the company's investigators upon the six conditions therein mentioned. The first condition was that the purchase price should be £8,750 of which a deposit of £500 should be paid forthwith and the balance upon completion. On 24th December 1946 this deposit was forwarded to the appellant enclosed in a letter from Church & Co. which stated that the deposit was paid by Anderson and Jones on behalf of a company to be formed and to be known as "The Dyeing King Pty. Limited" on that company's purchase from the appellant of the business known as "The Dyeing King."
At the time of this correspondence no such company as "The Dyeing King Pty. Limited" existed although Anderson and Jones were engaged in preparing for its incorporation and these preparations had reached an advanced stage. An agent cannot contract on behalf of a principal who is not in existence and ascertainable at the date of the contract, and the contract, if contract there be, must be a contract between the agent as principal and the other party, and therefore a contract on which the agent is personally liable. In Kelner v. Baxter [1] it was held that such an agent is personally liable unless it clearly appears from the terms and conditions of the alleged contract that it was not intended that the agent should be so liable.
1. (1866) L.R. 2 C.P. 174.
The Full Court of the Supreme Court of New South Wales, relying upon the principles enunciated in Kelner v. Baxter [1] and differing from the learned trial judge, held that the two letters constituted a binding contract for the sale of the business between Anderson and Jones and the appellant and ordered judgment to be entered for the respondent for the £500 claimed.
1. (1866) L.R. 2 C.P. 174.
I do not find anything in the letter of 20th December 1946 at variance with Anderson and Jones becoming personally liable on a contract made between them and the appellant except the sixth condition. The letter provides for the lease being granted and the assignment of the tenancies being made not to Anderson and Jones but to the company. But it is quite usual for a contract between a trustee on behalf of a proposed company as a purchaser and a vendor of property to provide that the vendor shall sell the property not to the trustee but to the proposed company. In In re Northumberland Avenue Hotel Co. [1] the agreement with the trustee for the proposed company (Doyle) provided that the vendor (Wallis) who had an agreement for a building lease, should grant an underlease to the company and that the company should erect the buildings. Nevertheless Cotton L.J. said: "that was a contract which was binding as between Mr. Wallis and the other gentleman (Doyle) whom I have mentioned, and was a contract which provided that certain things should be done by the company" [2] . Lopes L.J. said [3] : "There no doubt was an agreement between a man called Nunneley, who was agent for Wallis, and a man named Doyle, who described himself as trustee for the company." Under such a contract the trustee for the proposed company would be personally liable to pay the purchase money and the vendor would be bound to dispose of the property sold to the company when formed by the direction of the trustee. If, in addition to a cash payment, other consideration was to move from the company to the vendor, such as the company, as in the present case, entering into a lease with and becoming the assignee of other leases from the vendor and giving the vendor the right to apply for shares in the capital of the company, the trustee would be personally liable for any damage the vendor might suffer if the proposed company failed to achieve existence, or having succeeded refused to enter into a new contract with the vendor and undertake these obligations.
1. (1886) 33 Ch. D. 16.
2. (1886) 33 Ch. D., at p. 20.
3. (1886) 33 Ch. D., at p. 21.
It was not contended that the respondent, in order to earn his commission, had to do more than effect a binding contract for the sale of the business. It has been held in England that an agent employed to effect a sale of property does not earn his commission unless a binding contract of sale is made between the vendor and a purchaser who is not only ready and willing but able to purchase the property (Martin v. Perry and Daw [4] ; James v. Smith [5] ; Poole v. Clarke & Co. [6] ; Bennett and Partners v. Millett [7] ; McCallum v. Hicks [8] ). The Full Supreme Court of Victoria refused to follow the decision of the Court of Appeal in James v. Smith [5] in Scott v. Willmore & Randell [9] so that I prefer not to express an opinion on a point which was not argued. But, assuming that such an agent must prove that the purchaser is not only ready and willing but also able to perform the contract, it is sufficient if the purchaser is in a position to perform the contract at the time fixed for completion. In James v. Smith [10] , Atkin L.J. said: "I think it is sufficient if it is proved by the agent or by the purchaser that the circumstances are such that if the vendor had been ready and willing to carry out his contract, he on his part at the proper time could have found the necessary money to perform his obligation." Accordingly, where an agent for a proposed company agrees with the vendor that the purchase shall be completed by the company performing certain acts, the vendor, in the absence of evidence that the company will refuse to do so, must wait until the time fixed for completion to see whether the company is ready and willing and able to perform these acts before rescinding the contract.
1. (1931) 2 K.B. 310.
2. (1931) 2 K.B. 317 (n).
3. (1945) 2 All E.R. 445.
4. (1948) 2 All E.R. 929, at p. 931.
5. (1950) 66 T.L.R. 747.
6. (1931) 2 K.B. 317 (n).
7. (1949) V.L.R. 113.
8. (1931) 2 K.B., at p. 322.
There is no evidence that Anderson and Jones would not have been able to incorporate the new company before 1st February 1947 or that the new company would not have been ready and willing and able to perform the first, second, third, fourth and fifth conditions in the letter of 20th December 1946.
Were it not for the sixth condition in this letter, I would be of the opinion that the appeal should fail. But this condition appears to me to be at variance with any intention that Anderson and Jones should be under any personal liability. Mr. Kerrigan contended with force and plausibility, and I should be pleased if I could to accede to his argument, that this condition only related to a possible novation at a future date of the existing contract between Anderson and Jones and the appellant into a contract between her and the new company when incorporated, and did not prevent the making of a contract between Anderson and Jones and the appellant for the purchase and sale of the business on the five preceding conditions. But I am unable to place this construction on the condition. It must be taken into consideration in determining whether it is possible to read the letters so as to impose any personal liability on Anderson and Jones, and it appears to me to be decisive that the parties intended and intended only to bring a binding contract into existence between anyone when, and only when, after negotiations, all the terms and conditions of a contract of sale had been agreed upon between the appellant and the new company and those terms and conditions had been embodied in a formal document and executed by the appellant and the new company. Condition 6 does no doubt differ from similar clauses that have been before the courts in decided cases in that it relates not to a further contract to be entered into between Anderson and Jones and the appellant but to a contract to be entered into between the appellant and the new company. If the condition had provided for a contract to be entered into between Anderson and Jones and the appellant containing usual terms of sale and these terms to be in a form satisfactory to both parties, it would be beyond doubt that such a condition could not be construed as a mere expression of the desire of the parties as to the manner in which a transaction already agreed to would in fact go through and would make the execution of a further contract a condition or term of the bargain, so that until the further contract was executed there would be no binding contract (Von Hatzfeldt-Wildenburg v. Alexander [1] ). In the first place the meaning of the words in condition 6 "the usual agreement for sale and purchase to be entered into by you and the company containing the usual terms of sale" is quite uncertain and prevents the existence of an enforceable contract (In re Vince; Ex parte Baxter [2] ; Scammell and Nephew Ltd. v. Ouston [3] ; Bishop & Baxter Ltd. v. Anglo-Eastern Trading and Industrial Co. Ltd. [4] ). In the second place the words "these terms in a form satisfactory to you (i.e. the appellant) and the Company" clearly indicate that the letters are at most an agreement to enter into an agreement and contemplate the negotiation and execution of a formal contract between the parties. In such a case there is no binding contract until the formal contract is executed, and if the contract is recorded in two parts until the parties have signed and exchanged their copies (Eccles v. Bryant and Pollock [5] ). As I have said condition 6 does not relate to the execution of a further contract between Anderson and Jones and the appellant, but it is nevertheless an integral and essential part of the bargain between them and the appellant, and is, in my opinion, expressly at variance with any intention to attribute any personal liability to Anderson and Jones or to create any contractual relations other than a contract between the appellant and the company.
1. (1912) 1 Ch., at pp. 288, 289.
2. (1892) 2 Q.B. 478.
3. (1941) A.C. 251.
4. (1944) 1 K.B. 12.
5. (1948) Ch. 93.
I am therefore of opinion that the respondent did not effect a sale of the appellant's business to Anderson and Jones and that the respondent did not earn his commission.
For these reasons I would allow the appeal.
Webb J.
I would allow this appeal.
It was within the contemplation of the parties that the company might refuse to enter into an agreement for sale and purchase on the ground that the terms were not satisfactory to the company. The formation of a company and a new agreement with it are indicated by clauses 2, 3, 5 and 6 as necessary to effect the sale. Had clause 6 settled the terms of the new agreement the position would, of course, have been different. The refusal of the company to make the agreement would then have left the trustees fully liable, and an effective sale achieved or assured. But at the time when the appellant decided not to go ahead with the arrangement there was no sale and no certainty of one. There was no warranty on the part of Anderson and Jones that when the company came into existence it would make a contract satisfactory to Mrs. Summergreene. Even if there were this would give her a right to recover not the price, but damages. There would still be no sale.
Fullagar J.
In this case the defendant offered to pay to the plaintiff a commission of £500 if he "effected a sale" of her business. That was an offer of a promise capable of acceptance by the doing of an act, the effecting of a sale. The offer could be withdrawn or revoked at any time before it was accepted by the doing of the act. If the act was done before the offer was revoked, a contract between the plaintiff and the defendant came into existence, the consideration on the plaintiff's side being completely executed and the defendant being bound by her promise to pay the commission.
There can be no doubt, I think, that a "sale" of the business was "effected" by the plaintiff if, but not unless, he procured a binding contract with a purchaser. On 20th December 1946 he procured what purports to be an offer in writing to purchase the business signed by an authorized agent on behalf of Messrs. A. O. Anderson and H. P. Jones. The defendant on the following day wrote a letter purporting to accept this offer to purchase. The "offer" described Anderson and Jones as "the trustees on behalf of a company to be formed and known as "The Dyeing King Pty. Limited"." While the company was in process of being formed but before it was incorporated, the defendant refused to proceed with the transaction and purported to revoke her offer to pay commission on the effecting of a sale. If, but not unless, the "offer" and "acceptance" of 20th and 21st December 1946 constituted a contract for the sale of the business, the plaintiff is entitled to his commission, and the defendant's repudiation and revocation are of no effect.
The question depends on the effect of the document of 20th December 1946. It is set out in full in the judgment of the Chief Justice, as is also the letter of acceptance, and neither need be set out again here. Maxwell J. held that no contract was made, because clause 6 of the offer provided for further terms to be agreed upon. The case, in his view, fell within a well-known line of authority of which Sinclair, Scott & Co. Ltd. v. Naughton [1] is a good example. On appeal the Full Court of New South Wales held that there was a binding contract of sale between the defendant of the one part and Anderson and Jones of the other part. Before considering the view taken by the Full Court of clause 6, it will be convenient to consider the construction of the document without reference to the question whether clause 6 negatives the existence of a binding contract.
1. (1929) 43 C.L.R. 310.
Now, it is clear that there was no contract with any company. No company was in existence. But it was argued, and the Full Court decided, that there was a contract with Anderson and Jones, and that the names of Anderson and Jones must throughout the document be substituted for "the company" wherever "the company" was referred to as if it were contemplated as being the immediate purchaser. The substitution could not, of course, be made in clause 5, and it was not made in clause 6. In support of the argument that the effect of the document was to bind the defendant to sell and Anderson and Jones to buy, counsel relied upon Kelner v. Baxter [2] ; Scott v. Lord Ebury [3] ; In re North-umberland Avenue Hotel Co. [4] and Natal Land and Colonization Co. Ltd. v. Pauline Colliery and Development Syndicate Ltd. [5] . With In re Northumberland Avenue Hotel Co. [4] may be compared McLeod v. Cardiff Colliery Co. [6] . See also Dudley Buildings Pty. Ltd. v. Rose [7] .
1. (1866) L.R. 2 C.P. 174.
2. (1867) L.R. 2 C.P. 255.
3. (1886) 33 Ch. D. 16.
4. (1904) A.C. 120.
5. (1886) 33 Ch. D. 16.
6. (1924) V.L.R. 430; (1925) V.L.R. 1.
7. (1933) 49 C.L.R. 84.
I do not myself think that Kelner v. Baxter [2] or any of the cases cited affords any assistance in the present case. Where A, purporting to act as agent for a non-existent principal, purports to make a binding contract with B, and the circumstances are such that B would suppose that a binding contract had been made, there must be a strong presumption that A has meant to bind himself personally. Where, as in Kelner v. Baxter [2] , the consideration on B's part has been fully executed in reliance on the existence of a contract binding on somebody, the presumption could, I should imagine, only be rebutted in very exceptional circumstances. But the fundamental question in every case must be what the parties intended or must be fairly understood to have intended. If they have expressed themselves in writing, the writing must be construed by the court. If they have expressed themselves orally, the effect of what they have said is a question of fact—a question for the jury, if there is a jury. In Furnivall v. Coombes [1] , cited by Keating J. in Kelner v. Baxter [2] , the question was, and was treated as, a question of the construction of a covenant, and it was solved (rightly or wrongly) by reference to the principle that, if two provisions in a deed are repugnant or irreconcileable, the later must prevail. Tindal C.J. said: "It would have been a different thing if the defendants had so shaped their covenant as to make the payment come only out of the parish fund" [3] .
1. (1866) L.R. 2 C.P. 174.
2. (1866) L.R. 2 C.P. 174.
3. (1843) 5 Man. & G. 736 [134 E.R. 756].
4. (1866) L.R. 2 C.P., at p. 186.
5. (1843) 5 Man. & G., at p. 751 [134 E.R., at p. 762].
In the present case I should have no doubt (apart, of course, from the possible destructive effect of clause 6) that, on acceptance of the offer contained in the document of 20th December, a binding contract was made between Anderson and Jones of the one part and the defendant of the other part. But what did the contract bind the parties to do? I think that it bound Anderson and Jones to pay the deposit (clause 1), and I think that the defendant could have sued at common law for the deposit immediately (cf. Reynolds v. Fury [4] ). It may well be that Anderson and Jones also bound themselves personally to pay the balance of the purchase price, but they could not be sued at law for that balance. What did the defendant bind herself to do? I think that she bound herself expressly only to grant to the contemplated company (not to Anderson and Jones) a lease of the premises at Auburn (clause 2), and to assign to the contemplated company (not to Anderson and Jones) all other leases and tenancies which she had (clause 3). I think that she bound herself also (by necessary implication) to transfer to the contemplated company (not to Anderson and Jones), all other assets comprised in the description of "the business presently carried on by" the defendant. I think, finally, that Anderson and Jones bound themselves (by necessary implication—ut res magis valeat quam pereat) to form a company which would on or before 1st February 1947 (clause 4), take over the defendant's business and the tenancies mentioned in clauses 2 and 3.
1. (1921) V.L.R. 14.
Anderson and Jones could obtain specific performance of this contract, if at all, only if they had a company in existence and ready and willing to accept and take over the business and the tenancies. And (more important for present purposes) the defendant could obtain specific performance, if at all, only if there were a company in existence and ready and willing to accept and take over the business and the tenancies. The only immediate and enforceable right (apart from payment of the deposit) which the defendant obtained was a right to sue Anderson and Jones for damages for breach of an implied term of the contract, if they failed to produce on or before 1st February 1947 a company ready and willing to take over the business and the tenancies.
Did the procuring of such a contract amount to "effecting a sale" of the business? I am of opinion that (still ignoring the possible destructive effect of clause 6) such a contract was made. But I am also of opinion that the procuring of such a contract did not amount to "effecting a sale" of the business. A sale would, I think, be effected if, and only if, a contract were procured which could be directly enforced against a purchasing party. By procuring the contract in question the plaintiff did not obtain for the defendant such a contract. The only "purchasing party" was a non-existent company: in other words there was no true purchasing party. The only parties to the contract other than the defendant were not purchasing parties. They did not promise to purchase. They promised only to form a company which would purchase. No "sale" was "effected" by the contract.
So far I have considered the matter without reference to the question whether clause 6 precludes the existence of any contract. I have done this because I do not think that the effect of clause 6 can be determined until we have ascertained the true construction and effect of the document without reference to that question. The Full Court construed the document as containing (on acceptance) the terms of a binding contract by the defendant to sell and by Anderson and Jones to buy, a contract which might, if the parties so agreed, be performed by a transfer of the business to a company which it was proposed to form. If no company were formed, or if a company were formed but no new contract between it and the defendant could be agreed upon, then Anderson and Jones were bound to complete the contract by paying the balance of the purchase price in return for a transfer of assets to them. If this were the correct view of the document, I think I would agree with the view which the Full Court took of clause 6. If the new contract contemplated by clause 6 were not executed, either because the company and the defendant could not agree on its terms or for any other reason, then the contract simply stood as a contract that the defendant would sell to Anderson and Jones and that Anderson and Jones would buy from the defendant. On this view clause 6 does not matter, because it does not affect the binding character of the obligations undertaken between the defendant and Anderson and Jones. The plaintiff had brought about a sale to Anderson and Jones, and that sale would not be affected if no new contract were made between the defendant and a company.
I am unable, as I have indicated, to construe the document as the Full Court construed it. With great respect, I do not think that there is any justification for substituting the names of Anderson and Jones for "the company" in clauses 2 and 3. I can find nothing to justify saying that the defendant promises to transfer her business to any person or persons other than the company. And clause 5 seems to me to be entirely inconsistent with the view that the contract may be implemented without the formation of a company. The right to receive shares, if desired, is part of the consideration, and what is undertaken by clause 5 cannot be performed except upon the incorporation of a company. Nor can clause 6, in my opinion, be regarded as having a merely hypothetical operation. It contains a positive stipulation, and I can see no reason for thinking that its terms were not an integral part of the whole bargain, regarded as not less essential than clauses 1-5. Clause 6, indeed, affords, as I think, a very strong reason for adopting the construction of the document which I have adopted.
In the view which I take it is not really necessary to consider whether the terms of clause 6 deprive the document of any immediate contractual force. Even if there was a contract, I do not think that the contract effected a sale. But I think I should add that, in my opinion, no contract at all was really made. I think that clause 6 brings the present case within the authority of such cases as Sinclair, Scott & Co. Ltd. v. Naughton [1] .
1. (1929) 43 C.L.R. 310.
One other argument for the plaintiff should perhaps be noticed in conclusion. It was suggested that the defendant, in repudiating her contract with Anderson and Jones, was guilty of a breach of a duty to the plaintiff. In my opinion, there was no contract to repudiate. But, even if there were, it was not a contract of sale in the relevant sense, and I think that the defendant was entitled to revoke her offer to pay commission at any time before that offer was accepted by the procuring of a real contract of sale.
In my opinion this appeal should be allowed. |
high_court_of_australia:/showbyHandle/1/11189 | decision | commonwealth | high_court_of_australia | text/html | null | Stollery v Greyhound Racing Control Board [1972] HCA 53 | https://eresources.hcourt.gov.au/showbyHandle/1/11189 | 2024-09-13T22:53:34.666487+10:00 | High Court of Australia
Barwick C.J. McTiernan, Menzies, Gibbs and Stephen JJ.
Stollery v Greyhound Racing Control Board
[1972] HCA 53
ORDER
Appeal allowed with costs. Order of the Supreme Court of New South Wales, Court of Appeal Division, set aside and in lieu thereof order that the order nisi for writ of certiorari, made by Mr. Justice Slattery on 7th January 1972 be made absolute. Respondent to pay prosecutor's costs of the application.
Cur. adv. vult.
The following written judgments were delivered:—
Oct. 27
Barwick C.J.
The appellant, John Leslie Stollery, appeals by special leave of this Court against a decision of the Supreme Court of New South Wales, Court of Appeal Division, discharging a rule nisi for prohibition to restrain further proceedings upon a decision of the Greyhound Racing Control Board (the Board) or in the alternative for certiorari to bring up that decision to be quashed. By its decision the Board purported to disqualify the appellant as a bookmaker registered with the Board for the space of twelve months as from the date of the decision, namely, 13th August 1971. The ground on which the appellant sought the prerogative writs was that in the hearing of the matter in respect of which the decision was given by the Board natural justice was not observed. The Supreme Court was of opinion that it was.
The facts and circumstances of the matter are few. The Board is constituted by s. 56C (1) of the Gaming and Betting Act, 1912-1968 N.S.W. as a body corporate to control and regulate greyhound racing in New South Wales. In particular it is directed to control and regulate greyhound racing and empowered "in accordance with the rules" to "disqualify either permanently or temporarily any greyhound, or owner, trainer, bookmaker or bookmaker's clerk, or other person associated with greyhound racing from participating in or associating with greyhound racing" (s. 56G (1) (c) (iii)), and to make rules "for and with respect to the control and regulation of greyhound racing" (s. 56H (1)).
The Board duly made rules which, as operative in August 1971, provided for the registration of owners and trainers of greyhounds and of bookmakers and bookmaker's clerks. A registration as a person in one of these capacities, unless sooner cancelled by the Board, is effective until 31st March next after it was granted (r. 11 (1)). Application for renewal of such a registration is to be made on or before 1st March in the current year of registration. However, if such an application is not made in such time the Board has a discretion to grant or refuse a renewal of the registration (r. 12). Rule 21 (2) sub-ss. (a) and (c), so far as presently relevant, are in the following terms:
21.
(2) Without limitation of its powers under the Act, the Board may—
(a) inquire into or investigate or cause to be inquired into or investigated any matter, act or omission which it suspects to be or intended to be or to have been dishonest, corrupt, fraudulent or improper in connexion with a greyhound or greyhound racing or which, in its opinion, is or may be detrimental to the proper conduct, control or regulation of greyhound racing;
(c) cancel or withdraw the registration of any owner, trainer, bookmaker or bookmaker's clerk and disqualify either permanently or temporarily and/or fine or warn off any such registered person or other person associated with greyhound racing from participating in or associating with greyhound racing who—
(i)
(ii)
(iii) has been found guilty by the Board or Board Stewards or the Committee or Stewards of a club after notice to him and due inquiry of—
(a) any dishonest, corrupt, fraudulent or improper act or practice in connexion with greyhound racing or any act which, in the opinion of the Board, is in any way detrimental to the proper control and regulation of greyhound racing.
One Norman Smith was at all material times a member of the Board and was also manager of the N.S.W. Greyhound Breeders Owners and Trainers Association Ltd. (Harold Park) (the Association) which conducted dog racing in Sydney and elsewhere in New South Wales. It appears that a much greater number of dogs are sought to be nominated for greyhound races conducted by the Association than can be accepted having regard to the racing facilities available and also no doubt to the capacities of the greyhounds. Accordingly, the Association has graders who determine which of the dogs offered for nomination shall be accepted. The basis of selection was not fully expounded in the case but it would seem that the recent performances of the dog are matters of account in this connexion.
The appellant was the owner and trainer of a dog named "Double Chariot". The appellant took the dog to Grafton on the evening of 19th July 1971 there to be raced. However, before leaving he handed his wife an envelope which contained a nomination form in respect of the dog "Double Chariot" and a nomination form for another dog owned by her each for the Harold Park meeting to be held on 31st July 1971 and also ten twenty dollar notes. She was instructed to give this envelope to Mr. Norman Smith personally. She did so on 20th July. On opening the envelope and finding the $200 he thought, according to his account of the matter, that perhaps the appellant owed betting fees. He caused an inquiry to this end to be made in his office and found that the appellant was not so indebted. There was no explanation in the envelope for the presence of money in it. The appellant's wife, when later asked by Mr. Smith for an explanation of the money, informed Mr. Smith that it was a present to him. Mr. Smith informed her that he "looked on this as a serious action" and asked that the appellant see him. When interviewed by Mr. Smith the appellant said that the sum was intended as a gift to Mr. Smith in respect of his, Mr. Smith's recent marriage. Mr. Smith, after some conversation with the appellant, said that he would have to report the matter to the Board. In the course of conversation with the appellant Mr. Smith made remarks from which it might fairly be concluded that he, Mr. Smith, regarded the appellant as having attempted to bribe him. He said that "it", meaning at least the making of gifts to officials, "was the type of thing that" he "was fighting against" and that he "had a duty to the industry". Mr. Smith did report the matter to the Board both orally and in writing.
The appellant by letter of 3rd August was required by the Board to attend a meeting of the Board on 13th August. The appellant did so. According to the minutes of the Board, the appellant was informed by the chairman of the Board that the Board had opened the inquiry in accordance with the Board rules. This was apparently a reference to r. 21 (2) (a). Mr. Smith reported the incident to which I have referred. The appellant did not dispute that he had sent the money by his wife along with the nomination forms but he denied that there was any ulterior purpose in his doing so and said that it was an attempt on his part to make a gift to Mr. Smith for a reason unconnected with any question of the nomination of the dogs. The appellant made a statement as to the circumstances of the nominations and, although not minuted, must have referred to the fact that there had been some newspaper publicity on 4th August as to the pendency of the inquiry by the Board into the circumstances because, as the minutes record, Mr. Smith was asked whether he had informed anyone associated with the sport, other than the Board, of the incident of the money. He denied having done so and said that his staff were bound to secrecy in such matters.
After making his statement the appellant withdrew from the board room but Mr. Smith did not.
According to the minutes, Mr. Smith was asked by the chairman of the Board after the appellant had withdrawn whether he wished to take any further part in the deliberations of the Board with regard to the matter before it: to which inquiry Mr. Smith gave a negative reply. However, Mr. Smith remained during the Board's deliberations, perhaps at his place at the board table as a member of the Board, though there is no specific evidence on this point. After conferring amongst themselves the other members of the Board resolved that the appellant be charged under r. 21 (2) (c) (iii) (a) that he "being a bookmaker registered with the Board did an act which in the opinion of the Board was detrimental to the proper control and regulation of greyhound racing in that on 20th July 1971, he did cause to be handed to Mr. N. Smith, the Manager of the N.S.W. Greyhound Breeders, Owners and Trainers Association Ltd. (Harold Park), a sum of money to wit $200.00". Thereupon the appellant was recalled into the board room and the charge was read to him, Mr. Smith still being present. The appellant was informed that he could have an adjournment to consider the matter and that he could have counsel to assist him. However, the appellant said he wished the matter to be decided that day and pleaded not guilty to the charge. The appellant was then told by the chairman that it was for him to raise a reasonable doubt in the mind of the Board as to whether what had been done "was not detrimental to the proper control of greyhound racing". The appellant addressed the Board asserting his innocence of any attempt to do anything detrimental to the interests of greyhound racing and called attention to his long association with the sport. Though the appellant then withdrew from the Board, Mr. Smith still remained with the Board, which is recorded as having then conferred. Thereafter it was resolved by the members of the Board, other than Mr. Smith, that the appellant be found guilty as charged and that he be "disqualified for twelve months as from this date".
Thereafter the appellant was readmitted to the board room, Mr. Smith still being present, and informed of the Board's decision. The $200 was returned to him.
In the reasons for judgment of the Court of Appeal for discharging the orders nisi for prerogative writs it was accepted that the mere physical presence of an unqualified or disqualified member of the Board during the period of its deliberations on a matter in respect of which it was required to act in a judicial manner was such a denial of natural justice as required the consequential decision to be declared void. But the Supreme Court was of opinion that Mr. Smith was not disqualified as a member of the Board from participating in its deliberations, though, in fact, according to the record he had not done so.
It is to my mind quite evident that Mr. Smith stood in a very special relationship to the appellant and to the matter which the Board was called upon to consider. He it was who reported the matter to the Board. So far it was his duty so to do. However, he was personally involved in the incident which he reported. The incident, so far as the objective facts were concerned, was not a matter of dispute, but the gravamen of the matter was the purpose or motive with which the appellant had proffered money to Mr. Smith and the likely effect of the offer to Mr. Smith upon the control and regulation of the sport. There can be little doubt, on the material before the Court, that Mr. Smith, at the time he received the money, concluded that there had been an attempt to bribe him. Not unnaturally he was affronted by such an attempt. I am of opinion that in the circumstances Mr. Smith was in the position of an accuser, accusing the appellant of having done an act detrimental to the control of the sport. It seems to me, therefore, that he was not in a position to participate either in the discussion or decision of the question whether or not what had occurred was an act detrimental to the control and regulation of greyhound racing, or of the question of what was the appropriate penalty to be inflicted if the first question should be answered unfavourably to the appellant.
It may be accepted that he did not participate in the deliberation or decision of the Board by any positive act. But as well as being a member of the Board Mr. Smith was a very important official of the Association. He was probably an influential person in the sport. It might well be said that, although he did not speak during the deliberations or vote on the proposed decision, the deliberations of the Board were not free of his influence. But for the purposes of my decision, I will assume that, although he was present, his presence had no actual bearing or effect on those deliberations or that decision. The matter can therefore be approached, in my opinion, on the footing that the disqualified member of the Board, though present, had no part whatever in the decision at which the Board arrived.
But so to conclude does not end the matter. The most important feature of the matter is the appearance which his continued presence in the board room during the time the matter was decided and the penalty agreed must present to any reasonably minded man who knew the facts antecedent to the hearing before the Board but who was completely unaware of what had occurred in the board room. In my opinion, the reasonable inference to be drawn by the reasonable bystander in that situation was that Mr. Smith was in a position to participate in the Board's deliberations and at least to influence the result of those deliberations adversely to the appellant. The existence of that reasonable inference, in my opinion, is sufficient warrant for concluding that, in a matter in which the Board was bound to act in a judicial manner, natural justice was denied.
I find little need to discuss the law at any length. We are, of course, not concerned here, and indeed we would have no power, to review the decision of the Board as to whether or not the appellant had committed an act which was detrimental to the business of greyhound racing. We are not concerned with the appellant's guilt or innocence in that connexion. What we are concerned with is the regularity of the proceedings of the Board in which he was found guilty of doing an act as charged. In my opinion, it is of the utmost importance that tribunals such as the Greyhound Racing Control Board should conduct their proceedings with scrupulous adherence to the requirements of natural justice. What is required to satisfy these principles no doubt depends very largely on the nature of the matter in hand and the circumstances in which the hearing takes place. Mr. Wood, who argued the case for the appellant, gave the Court the benefit of a useful review of a number of decided cases. Some of these cases related to bias in a person participating in the decision of a tribunal and others, such as Dickason v Edwards [1] in this Court, were instances of a disqualified member of a tribunal officiating but not participating in the tribunal's deliberation or decision. I append a list of the cases cited in argument but I find no need to discuss them in these reasons. It suffices, in my opinion, for the disposal of this application to refer to and cite from R. v Sussex Justices; Ex parte McCarthy [2] . In that case, a deputy clerk, who was a member of the firm of solicitors acting for a person concerned in the collision of motor vehicles out of which the action arose, acted as clerk to the justices and retired with them, as would be the right of the clerk, when they adjourned to consider the case. He did not take part in the deliberations or offer the justices any advice whatever. However, on an application for certiorari, the resulting conviction by the justices was set aside on the ground that there had been a departure from the requirements of natural justice. Giving judgment, Lord Hewart L.C.J. had this to say [3] :
It is clear that the deputy clerk was a member of the firm of solicitors engaged in the conduct of proceedings for damages against the applicant in respect of the same collision as that which gave rise to the charge that the justices were considering. It is said, and, no doubt, truly, that when that gentleman retired in the usual way with the justices, taking with him the notes of the evidence in case the justices might desire to consult him, the justices came to a conclusion without consulting him, and that he scrupulously abstained from referring to the case in any way. But while that is so, a long line of cases shows that it is not merely of some importance but is of fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done. The question therefore is not whether in this case the deputy clerk made any observation or offered any criticism which he might not properly have made or offered; the question is whether he was so related to the case in its civil aspect as to be unfit to act as clerk to the justices in the criminal matter. The answer to that question depends not upon what actually was done but upon what might appear to be done. Nothing is to be done which creates even a suspicion that there has been an improper interference with the course of justice. Speaking for myself, I accept the statements contained in the justices' affidavit, but they show very clearly that the deputy clerk was connected with the case in a capacity which made it right that he should scrupulously abstain from referring to the matter in any way, although he retired with the justices; in other words, his one position was such that he could not, if he had been required to do so, discharge the duties which his other position involved. His twofold position was a manifest contradiction.
Lush J. added [1] :
It must be clearly understood that if justices allow their clerk to be present at their consultation when either he or his firm is professionally engaged in those proceedings or in other proceedings involving the same subject matter, it is irrelevant to inquire whether the clerk did or did not give advice and influence the justices. What is objectionable is his presence at the consultation, when he is in a position which necessarily makes it impossible for him to give absolutely impartial advice. I have no doubt that these justices did not intend to do anything irregular or wrong, but they have placed themselves in an impossible position by allowing the clerk in those circumstances to retire with them into their consultation room.
As in that case, so in this the continued presence of a disqualified person is fatal to the validity of the decision taken as the result of deliberations in his presence. Also it seems to me that, had Mr. Smith been asked by the Board for his opinion as to whether what had happened was likely to be detrimental to the control and regulation of the sport, he would not have been in a position to have offered entirely objective and unbiased advice.
1. (1910) 10 C.L.R. 243.
2. [1924] 1 K.B. 256.
3. [1924] 1 K.B., at pp. 258-259.
4. [1924] 1 K.B., at pp. 259-260.
I fully agree, with respect, with the above statements of principle which have been reinforced by their adoption and application in subsequent cases. The citations I have made from the judgments in R. v Sussex Justices; Ex parte McCarthy [2] sufficiently bear out the views I have expressed of the circumstances of this case as to leave no need for further discussion of the decided cases. The basic tenet that justice should not only be done but be seen to be done does not, of course, warrant fanciful and extravagant assertions and demands. What justice requires will ever depend on circumstances, and the degree to which it should be manifest that it is being done will likewise be related to the particular situation under examination by a supervising tribunal. But, in my opinion, dissatisfaction engendered in the mind of an observer aware of the facts, by the continued presence of Mr. Smith in this board room, having regard to his personal connexion with the matter in hand, is not extravagant or far-fetched. As I have said, a reasonable man could very properly suspect that the clear opportunity which Mr. Smith had for influencing the decision of the Board might well have been used.
1. [1924] 1 K.B. 256.
I am quite clear that Mr. Smith could not have properly participated in the discussion or decision of the matter concerning the appellant's conduct or in the imposition of a penalty. He was thus disqualified from acting as a member of the Board in relation to those matters. His continued presence in the room was inconsistent, in my opinion, with the requirements of natural justice. In my opinion, the rule for certiorari ought to be made absolute.
Appendix.
R. v Sussex Justices; Ex parte McCarthy [1] ; R. v Essex Justices; Ex parte Perkins [2] ; R. v Justices of County of Armagh [3] ; Allinson v General Council of Medical Education and Registration [4] ; Reg. v Camborne Justices; Ex parte Pearce [5] ; Leeson v General Council of Medical Education and Registration [6] ; Cooper v Wilson [7] ; Dickason v Edwards [8] ; Reg. v London County Council; Ex parte Akkersdyk [9] ; Australian Workers' Union v Bowen [No. 2] [10] ; Ethell v Whalan [11] ; Reg. v Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co. Pty Ltd [12] ; Ex parte Angliss Group [13] ; Reg. v Justices of Rankine River [14] ; University of Ceylon v Fernando [15] ; Banks v Transport Regulation Board (Vict.) [16] ; Wiseman v Borneman [17] ; Mobil Oil Australia Pty Ltd v Commissioner of Taxation [18] .
1. [1924] 1 K.B. 256.
2. [1927] 2 K.B. 475.
3. [1913] 2 I.R. 410.
4. [1894] 1 Q.B. 750.
5. [1955] 1 Q.B. 41.
6. (1889) 43 Ch.D. 366.
7. [1937] 2 K.B. 309.
8. (1910) 10 C.L.R. 243.
9. [1892] 1 Q.B. 190.
10. (1948) 77 C.L.R. 601.
11. [1971] 1 N.S.W.L.R. 416.
12. (1953) 88 C.L.R. 100.
13. (1969) 122 C.L.R. 546.
14. (1962) 3 F.L.R. 215.
15. [1960] 1 W.L.R. 223; [1960] 1 All E.R. 631.
16. (1968) 119 C.L.R. 222.
17. [1971] A.C. 297.
18. (1962) 113 C.L.R. 475.
McTiernan J.
I agree in the judgment of the Chief Justice.
Menzies J.
A long line of authority establishes that the decision of a tribunal, whose duty it is to act judicially, will be invalidated if, while the tribunal deliberates and reaches a finding adverse to a person whose conduct is under scrutiny, there is present some person who, in fairness, ought not to be there: R. v Sussex Justices; Ex parte McCarthy [1] ; R. v Essex Justices; Ex parte Perkins [2] ; Cooper v Wilson [7] ; Reg. v Camborne Justices; Ex parte Pearce [5] ; Ex parte Angliss Group [13] .
1. [1924] 1 K.B. 256.
2. [1927] 2 K.B. 475.
3. [1937] 2 K.B. 309.
4. [1955] 1 Q.B. 41.
5. (1969) 122 C.L.R. 546.
Authority further establishes that a person who has an interest adverse to, or in such proceedings, has been opposed to, the person on trial, is within the category of persons who in fairness ought not to be present at the deliberations of the tribunal: Dickason v Edwards [1] ; Allinson v General Council of Medical Education and Registration [2] ; Reg. v London County Council; Ex parte Akkersdyk [3] .
1. (1910) 10 C.L.R. 243.
2. [1894] 1 Q.B. 750.
3. [1892] 1 Q.B. 190.
Here we are concerned with an appeal from a decision of the Court of Appeal of the Supreme Court of New South Wales which rejected the contention that proceedings of the Greyhound Racing Control Board on 13th August 1971, at which the appellant was found guilty and disqualified for twelve months upon a charge under Board r. 21 (2) (c) (iii) (a) that:
being a bookmaker registered with the Board (he) did an act which in the opinion of the Board was detrimental to the proper control and regulation of greyhound racing in that on 20th July, 1971, he did cause to be handed to Mr. N. Smith, the Manager of the N.S.W. Greyhound Breeders, Owners and Trainers Association Limited (Harold Park), a sum of money to wit $200.00.
were invalidated by the presence of Mr. Norman Smith at the meeting of the Board.
Mr. Smith was himself a member of the Board; he was also the manager of the N.S.W. Greyhound Breeders, Owners and Trainers Association Ltd. which, inter alia, conducts greyhound racing at Harold Park. In the latter role, Mr. Smith could exercise a powerful influence in the determination of what nominations should be accepted for events at Harold Park.
On 20th July 1971 Mr. Smith received from the appellant's wife an envelope containing nominations for the greyhounds, "Flying Seagull" and "Double Chariot", for events at Harold Park, together with ten $20.00 notes. The appellant was responsible for this and it was his conduct in causing $200 of his money to be handed to Mr. Smith that gave rise to the charge upon which he was found guilty and disqualified. To round out the story, it may be added that the appellant's explanation of his conduct was that, being elated with a good win by one of his dogs, he had decided to give a present to Mr. Smith who had always been obliging and had recently remarried and that in doing so, he had no ulterior purpose.
There is no doubt that having opened the envelope and having ascertained that no fees were owing by the appellant, Mr. Smith suspected that an attempt was being made to bribe him. He immediately communicated his suspicion to members of his staff. He also made a verbal report to the Board on 23rd July 1971, and on 29th July presented a written report in which he set out the facts already stated together with his account of subsequent conversations to the effect (1) that in a telephone conversation with the appellant's wife on 22nd July 1971 he had asked why the $200 was in the envelope and had said to her that he looked on what had been done as a serious action and told her to inform her husband that he must contact him, and (2) that in a telephone conversation with the appellant on 26th July, there had been the following exchanges:
I asked was he in the habit of giving presents to Club Officials when his greyhounds won and his reply was to the effect that he had never done it before and was sorry that he had caused "such a fuss" and couldn't I accept the $200 as a gift to the Association as had been done in the past by bookmakers, I replied that I could not and would have to report the whole incident to the Board. Mr. Stollery asked me not to do this, as he would probably get into worse trouble than he was now, I informed him that I was sorry that he had done it as it was the type of thing that I was fighting against and I had a duty to the industry.
It was upon this report that the Board called the appellant before it on 13th August 1971. The record of what then occurred is as follows:
3. Interview—Mr. J. Stollery—bookmaker, 25a Percival Street, Bexley.
Mr. J. Stollery was admitted.
A report from N. Smith, manager of the N.S.W. Greyhound Breeders, Owners and Trainers Association Limited, dated 29th July 1971 was read to Mr. Stollery.
He was shown the envelope containing the $200.00. At the conclusion of the reading a copy of the report of Mr. Smith was handed to Mr. Stollery.
After reading the report Mr. Stollery agreed that to his knowledge the report was correct.
Mr. Stollery submitted that in his 'phone conversation he stressed to Mr. Smith that the $200.00 was not to be connected with the nomination form. Mr. Stollery said he had been successful with his greyhound at Grafton. He felt he should give Mr. Smith something. He knew he had recently been married, he had heard his home had been burgled and he had just given it to his wife to give to Mr. Smith personally as a gift and in no way connected with the nomination form. He said his wife did not enclose a note with the money but he reiterated that it was given not to obtain preferential treatment but purely as a kindness.
Chairman: I want you to understand that the Board has opened this inquiry in accordance with the Board rules. Mr. Stollery: The nomination for "Flying Seagull" was already in for the next meeting at Harold Park as it had won a qualifying trial and the other nomination was for "Double Chariot". The nominations were not intended to be given to Mr. Smith by me but they were enclosed in the same envelope. However, the money was not intended to seek any privilege.
Mr. Smith was asked whether he had informed any person associated with the sport other than the Board of the money.
Mr. Smith said only the Board and his office staff who were bound to silence.
Mr. Stollery advised he had been registered with the Board for some twenty years. He had been engaged as a secretary of a branch of the Owners and Trainers. He was a man of good character.
Mr. Fell: In the 'phone conversation Mr. Stollery had with you Mr. Smith, did Mr. or Mrs. Stollery make any reference to a letter omitted in the envelope? Mr. Smith: No. Mr. Fell: Do you confirm this Mr. Stollery? Mr. Stollery: Yes. Mr. Stollery withdrew. Chairman: Mr. Smith, do you wish to take any further part in the deliberations of the Board with the matter now before it? Mr. Smith: No, I do not propose to take any part.
The Board conferred.
MOVED by Mr. Fell seconded by Mr. Geldard THAT Mr. Stollery be charged under Board r. 21 (2) (c) (iii) (a) with being a bookmaker registered with the Board did an act which in the opinion of the Board was detrimental to the proper control and regulation of greyhound racing in that on 20th July 1971, he did cause to be handed to Mr. N. Smith, the manager of the N.S.W. Greyhound Breeders, Owners and Trainers Association Ltd. (Harold Park), a sum of money to wit $200.00.
CARRIED.
Mr. Stollery was readmitted and the charge was read.
He was advised he could plead to the charge today or seek an adjournment to consider such charge and have legal counsel to assist him.
Mr. Stollery: I would like it decided today. I plead not guilty to the charge. Chairman: What you have to do is to raise a reasonable doubt in the Board's mind that what you did was not detrimental to the proper control of greyhound racing. Mr. Stollery: I did not think this detrimental to greyhound racing. I was giving this to Mr. Smith, not as an official but as a person. I would not do anything detrimental to greyhound racing. I bought my first greyhound when I was selling papers. That is all I wish to say.
Mr. Stollery withdrew, the Board conferred.
MOVED by Mr. Fell seconded by Mr. Geldard THAT Mr. Stollery be found guilty as charged.
CARRIED.
Question of Penalty:
MOVED by Mr. Fell seconded by Mr. Geldard THAT Mr. Stollery be disqualified for twelve (12) months as from this date.
CARRIED.
Mr. Stollery was readmitted and advised of the Board's decision and the $200.00 in question was handed to Mr. Stollery.
The relevant rules of the Greyhound Racing Control Board are as follows:
21.
(1)
(2) Without limitation of its powers under the Act, the Board may—
(a) inquire into or investigate or cause to be inquired into or investigated any matter, act or omission which it suspects to be or intended to be or to have been dishonest, corrupt, fraudulent or improper in connexion with a greyhound or greyhound racing or which, in its opinion, is or may be detrimental to the proper conduct, control or regulation of greyhound racing;
(b)
(c) cancel or withdraw the registration of any owner, trainer, bookmaker or bookmaker's clerk and disqualify either permanently or temporarily and/or fine or warn off any such registered person or other person associated with greyhound racing from participating in or associating with greyhound racing who—
(i)
(ii)
(iii) has been found guilty by the Board or Board Stewards or the Committee or Stewards of a club after notice to him and due inquiry of—
(a) any dishonest, corrupt, fraudulent or improper act or practice in connexion with greyhound racing or any act which, in the opinion of the Board, is in any way detrimental to the proper control and regulation of greyhound racing,
It seems to me clear that Mr. Smith had brought to the Board a matter requiring investigation and had done so by a report which disclosed that he had formed the conclusion that what the appellant had done was, at least, seriously detrimental to the proper conduct or control of greyhound racing and that it was necessary to stamp out such conduct. He had also given the evidence upon which the charge against the appellant depended, albeit that the appellant himself accepted Mr. Smith's account of the actual events on 20th July 1971 and of the conversations which followed it.
In these circumstances, I have come to the conclusion that Mr. Smith was disqualified from sitting as a member of the Board to consider and deal with the appellant's conduct and that his presence when the other members of the Board did so and found the appellant guilty as charged was not in conformity with the principles of natural justice. The basis of this conclusion is simply that in the circumstances, Mr. Smith had a personal interest in the outcome of the proceedings before the Board and had formed a conclusion, adverse to the appellant, about what their result should be. This is, of itself, enough to invalidate the proceedings and a court will not investigate whether or not his presence did in fact influence the decision of the Board.
The Court of Appeal, as I have said, came to a different conclusion. It did so on the footing that, as Mr. Smith could have taken an active part in the proceedings as a member of the Board concerning the appellant without any departure from the principles of natural justice, his non-participating presence was unobjectionable. It is because I have, with respect to and for the reasons already indicated, formed a different conclusion about the first point, that I am constrained to differ from their Honours in relation to the second point. I should perhaps make it clear that there was no requirement that all members must participate in a decision of the Board. A quorum provision is contained in s. 56D of the Gaming and Betting Act, 1912-1968 N.S.W.. Had it been required that there should be a full meeting of the Board in order to exercise its powers, the circumstances would, in my opinion, have been very different. Accordingly, I would allow the appeal.
The period of suspension imposed on the appellant by the Board has now passed. It was, however, current on 7th January 1972 when the rule nisi for prohibition or certiorari was granted. In these circumstances, I consider that the Court of Appeal should have granted certiorari to quash the proceedings of the Board in relation to the appellant and that this is the order which this Court should now make.
Gibbs J.
I have had the advantage of reading the judgments of the Chief Justice and my brother Menzies. I agree with their conclusions, but since we are differing from the Court of Appeal, I would shortly state my reasons.
The Court of Appeal considered that if Mr. Smith was disqualified from sitting on the Greyhound Racing Control Board ("the Board") when it came to deliberate on the question whether the appellant was guilty of any act which in the opinion of the Board was in any way detrimental to the proper control and regulation of greyhound racing, natural justice would require the decision of the Board, reached when Mr. Smith was present, to be set aside. This view was correct. It is true that the Board is not a regular judicial tribunal and that it has been doubted whether the principles which require the decision of a tribunal to be set aside if a member who was interested or biased was present when the decision was reached apply with the same strictness to the case of administrative bodies: Reg. v London County Council; Re Empire Theatre [1] ; Reg. v Huggins [2] . However, when the Board is adjudicating as to whether a bookmaker should be found guilty of conduct that may result in his disqualification, it is making a decision which may have a serious effect on the rights and livelihood of the person whose conduct is called in question. Rules conferring jurisdiction of that kind must be construed as requiring that the proceedings should be carried on in accordance with the principles of natural justice, unless an intention to exclude those principles plainly appears: Australian Workers' Union v Bowen [3] ; Wiseman v Borneman [4] . No such intention appears in the rules of the Board; on the contrary, those rules required "due inquiry" in the present case—r. 21 (2) (c) (iii). The principles of natural justice are not rigid or technical. "The requirements of natural justice must depend on the circumstances of the case, the nature of the inquiry, the rules under which the tribunal is acting, the subject matter that is being dealt with, and so forth": Russell v Duke of Norfolk [5] . It is, however, clear that it would not be in accordance with the principles of natural justice for a person who was in truth the accuser to be present as a member of the tribunal when the charge which he had promoted was heard, even if he took no actual part in the proceedings: Reg. v London County Council; Ex parte Akkersdyk [1] ; Dickason v Edwards [2] . The very presence of a person who has brought forward a complaint may, even unconsciously, inhibit the discussions and affect the deliberations of the other members of the tribunal.
1. (1894) 71 L.T. 638, at p. 640.
2. [1895] 1 Q.B. 563, at pp. 565-566.
3. (1948) 77 C.L.R. 601, at p. 631.
4. [1971] A.C. 297, at p. 318.
5. [1949] 1 All E.R. 109, at p. 118.
6. [1892] 1 Q.B. 190, at pp. 195-196.
7. (1910) 10 C.L.R. 243, at pp. 252-253, 256, 263.
However, the Court of Appeal held that Mr. Smith was not disqualified from sitting with the Board. They took the view that, because the facts as reported to the Board by Mr. Smith were undisputed, Mr. Smith was in no different position from any other member of the Board. With all respect, I cannot accept this view. It was necessary for the Board, in deciding whether the appellant was guilty of the conduct alleged, to draw inferences from the undisputed facts and make judgments upon them. Mr. Smith had already drawn an inference and made a judgment—he had inferred that the appellant had offered him a bribe and had formed the view that the appellant's conduct was of the sort which he was trying to stamp out. In other words, he had made up his mind that the appellant had been guilty of conduct which was detrimental to the proper control and regulation of greyhound racing. When, holding these opinions, he had brought the matter to the attention of the Board he was, perhaps not technically, but in truth and substance, and not merely formally, making a charge against the appellant of a breach of the rules. He was in substance the accuser and therefore was disqualified to act as a judge.
There is no suggestion that Mr. Smith acted otherwise than in good faith and with a desire to do his duty. He indeed moved to withdraw, first, when the Board conferred in the course of its preliminary inquiry, and again before the Board deliberated on the questions of guilt and punishment. He should not have been persuaded to remain, at least on the second occasion when the Board considered the questions whether the appellant had been guilty as charged and, if so, what punishment should be imposed upon him. Although he took no part whatever in the Board's discussions, his presence as a member of the Board rendered the proceedings invalid and the decision bad.
The period of disqualification imposed by the Board has now expired. The Board's finding, however, may have continuing serious consequences for the appellant. For example, if he should again apply for registration the Board might claim to refuse to register him on the ground that it was of the opinion that it was in the interests of greyhound racing to refuse to register a person found guilty of conduct detrimental to the proper control and regulation of greyhound racing—see r. 17. Although the direct effect of the Board's decision is now spent, it may have indirect consequences and ought not to be allowed to stand. Of course, nothing that I have said reflects any view as to the merits of the actual decision made by the Board.
I would allow the appeal.
Stephen J.
I agree that this appeal should be allowed and do so for the reasons stated in the judgment of my brother Gibbs. |
high_court_of_australia:/showbyHandle/1/9452 | decision | commonwealth | high_court_of_australia | text/html | null | Allwrights Transport Ltd v Ashley [1962] HCA 1 | https://eresources.hcourt.gov.au/showbyHandle/1/9452 | 2024-09-13T22:53:39.770540+10:00 | High Court of Australia
Dixon C.J. McTiernan, Kitto, Taylor and Windeyer JJ.
Allwrights Transport Ltd v Ashley
[1962] HCA 1
ORDER
Appeals dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
1962, Feb. 9
Dixon C.J., McTiernan, Kitto and Windeyer JJ.
This proceeding is an appeal or appeals from convictions of the appellant upon four several complaints for offences under s. 8 (1) (e) of The Roads (Contribution to Maintenance) Acts 1957 to 1958 Q.. Somewhat irregularly a single notice of appeal was filed to cover all four convictions. The appeal was brought directly to this Court because the nature of the defence set up means that the prosecutions fell under federal jurisdiction. The defendant in fact relied upon s. 10 of the Northern Territory (Administration) Act 1910-1955 and the decision of this Court in Lamshed v. Lake [1] upholding the constitutional validity of the provision as a law of the Commonwealth operating within the States according to its tenor. Section 10 provides that trade, commerce and intercourse between the Northern Territory and the States, whether by internal carriage or ocean navigation, shall be absolutely free.
1. (1957) 99 C.L.R. 132.
Section 8 (1) (e) of The Roads (Contribution to Maintenance) Acts 1957 to 1958, under which the appellant was convicted, provides that every person who fails to pay to the Commissioner for Transport, as required by that Act, any charges payable in respect of any vehicle shall be guilty of an offence against the Act. The Act requires the owner of every commercial goods vehicle to pay to the Commissioner, towards compensation for wear and tear caused thereby to public highways in Queensland, a charge at a rate consisting of one-third of a penny per ton of the sum of—(a) the tare weight of the vehicle; and (b) forty per centum of the load capacity of the vehicle per mile of public highway along which the vehicle travels in Queensland. The defendant maintains that in the application of the provisions to traffic between the Northern Territory and the State of Queensland there is an inconsistency between these State provisions and s. 10 of the Northern Territory (Administration) Act 1910-1955 and that the State provisions are accordingly invalid to that extent under s. 109 of the Constitution. In their application to inter-State trade the same provisions have been held valid notwithstanding s. 92 of the Constitution: Boardman v. Duddington [1] . This decision applied the case of Commonwealth Freighters Pty. Ltd. v. Sneddon [2] which upheld in its application to inter-State traffic the corresponding legislation in New South Wales, viz. The Road Maintenance (Contribution) Act 1958. Some observations were made in that case [3] about the characteristics of the Act which, as against the prima facie presumption which would arise from the bare imposition of a charge in the form of a tax, raised a counter-presumption that the charge possessed a foundation bringing it within the doctrine explained in Armstrong's Case [No. 2] [4] . The observations were followed by the statement that no material before the Court weakened or overturned the counter-presumption, which should therefore be acted upon. In the present case two arguments were put forward. The first was that because of the concern, financial and otherwise, of the Commonwealth in the highway which is the subject of this case, the effect of s. 10 of the Northern Territory (Administration) Act 1910-1955 upon the State charge could not be governed by the same considerations as had been applied under s. 92 to highways in general in Queensland by the decision in Boardman v. Duddington [1] . The second was that facts were established which would make it right to treat the counter-presumption referred to in that case and in Commonwealth Freighters Pty. Ltd. v Sneddon [2] . as overturned. The possibility of sustaining this second ground has, since the argument, been negatived by the decision of the Court in Breen v. Sneddon; Martin v. Sneddon [5] . In view of that decision no more need be said as to that ground for appealing against the convictions.
1. (1959) 104 C.L.R. 456.
2. (1959) 102 C.L.R. 280.
3. (1959) 102 C.L.R., at p. 295.
4. (1957) 99 C.L.R. 28.
5. (1959) 104 C.L.R. 456.
6. (1959) 102 C.L.R. 280.
7. (1961) 106 C.L.R. 406.
As to the other contention it is necessary to say something about the facts, although perhaps very little. The four offences alleged were committed in failing to pay the charge in connexion with journeys upon Barkly Highway from the Northern Territory to Mt. Isa. The vehicles were owned by the defendant company and ran from Alice Springs upon the Barkly Highway through Camooweal in Queensland to Mt. Isa. It is substantially the only road from Alice Springs and other places in the Northern Territory to Queensland. Half the cost of maintaining the road, so far as it lies in the State of Queensland, is paid by the Commonwealth, that is, by a contribution to the State authorities. From Mt. Isa a road goes on to Mary Kathleen and thence to Cloncurry, but it is said that in effect the Barkly Highway is not a connected part of the road system of Queensland. The defendant's vehicles form part of the service of the Territory Transport Association and it is said that the vehicles forming that service constitute half the traffic on the Barkly Highway in Queensland. The charges payable by them are known and from that starting point the total of the charges payable by all the transport traffic is estimated. When the total is compared with the expenditure upon the Highway in the relevant period, it shows, so it is said, that ten times more is collected than is expended on that isolated part of the Queensland system and it is argued that it should be dealt with separately and upon its own basis. The fact, moreover, should be taken into account that half the expenditure is contributed by the Commonwealth. Thus, so the argument runs, charges are levied upon traffic confined, so far as Queensland is concerned, to the Barkly Highway, and the quantum levied exceeds many times what would be a fair contribution to the cost to the State of the wear and tear involved and the consequent upkeep of the Highway. The defendant contends that to compel it to bear such charges must be an impairment of the freedom of carriage between the Territory and Queensland which s. 10 of the Northern Territory (Administration) Act confers. The answer is that there is no warrant for dealing with the subject as if the Barkly Highway must be treated in isolation and as separated from the rest of Queensland. That Highway may not be linked up with the general system of roads by any highways or roads which could carry the traffic of the Territory Transport Association. But that is not the relevant consideration; nor is it a relevant consideration that the contribution of the owners of transports using that Highway exceeds the cost of its upkeep. What matters is that a rate is adopted by the State law for the whole of Queensland and the rate so adopted has a reasonable relation to the upkeep of the roads of the State and is expended only upon the maintenance of highways, using the word "maintenance" in the widest sense. The charge is imposed by a State law of general operation, of which the purpose and the content is definitely limited so that it is directed, so to speak, to the upkeep, maintenance and repair of State highways and the levying of a charge therefor which aims at uniformity of incidence. The validity of its application to inter-State commerce has depended on the question whether such a thing, considered as a whole, is inconsistent with freedom of inter-State commerce: not whether this or that carrier of goods or the users of this or that highway, considered separately and in their particular circumstances, obtain a full return for what they pay by way of charge or whether the State Government receives from them, regarded as separate individuals, more money than it spends to cover their particular needs or to repair the wear and tear for which they may properly be held responsible: still less is a particular contribution of money made by the Commonwealth to be taken into account. Breen v. Sneddon [1] and the decisions preceding it really cover the argument and make it no longer tenable.
1. (1961) 106 C.L.R. 406.
The appeal or appeals should therefore be dismissed.
Taylor J.
In my view the decision in Breen v. Sneddon [1] following upon Commonwealth Freighters Pty. Ltd. v. Sneddon [2] and Boardman v. Duddington [3] —is fatal to the appellant in this case. I should add that I agree that the particular matters which were relied upon by the appellant in relation to the Barkly Highway furnish no basis upon which the present case can be distinguished from the earlier cases.
1. (1961) 106 C.L.R. 406.
2. (1959) 102 C.L.R. 280.
3. (1959) 104 C.L.R. 456. |
high_court_of_australia:/showbyHandle/1/10911 | decision | commonwealth | high_court_of_australia | text/html | null | Ravenshoe Tin Dredging Ltd v Commissioner of Taxation (Cth) [1966] HCA 86 | https://eresources.hcourt.gov.au/showbyHandle/1/10911 | 2024-09-13T22:53:41.885865+10:00 | High Court of Australia
Taylor J. Barwick C.J. Menzies and Owen JJ.
Ravenshoe Tin Dredging Ltd v Commissioner of Taxation (Cth)
[1966] HCA 86
ORDER
Appeal allowed with costs. Order of Taylor J. dismissing appeal against assessment set aside and in lieu thereof order that that appeal be allowed with costs, the respondent's assessment of the appellant's income tax be varied by increasing the amount of taxable income to the sum of £32,839 and by increasing the amount of income tax payable accordingly.
Cur. adv. vult.
1965, April 28
Taylor J
. delivered the following written judgment:—
This is an appeal against the assessment of the appellant to income tax in respect of income derived during the year ended 30th June 1961. Tax was assessed upon a taxable income of £26,271 whereas the appellant's taxable income according to its return was £32,839. But the appellant was a company whose business during the relevant period consisted solely of the carrying on of mining operations of the character specified in s. 23A (1) of the Income Tax and Social Services Contribution Assessment Act 1936-1960 Cth and part of its income was "exempt from income tax" pursuant to the provisions of that section. According to the appellant's calculations this part of its income amounted to £34,974 whilst according to the method of assessment employed by the respondent it amounted only to £6,568. The appeal involves consideration of the proper method of assessment of this item pursuant to the section in question which reads as follows:—
23a. (1) Where a person carries on mining operations in Australia or the Territory of Papua and New Guinea for the purpose of, or for purposes which include, the production of a prescribed metal or mineral, an amount equal to one-fifth of the amount remaining after deducting from so much of the assessable income of that person as is attributable to the production or is derived from the sale of the prescribed metal or mineral produced by those operations—
(a) all allowable deductions which relate to that income; and
(b) so much of any other allowable deduction as, in the opinion of the Commissioner, may appropriately be related to that income,
shall be exempt from income tax.
It is common ground that after deducting specified deductions, which are not in question, from what were characterized in an annexure to the appellant's return as its net profits for the relevant year there remained an amount of £174,873. But this was not the taxable income of the appellant for it was entitled, pursuant to s. 80 of the Act, to take into account losses made during previous years amounting to £142,034. The difference between the methods employed by the appellant and the respondent in calculating the amount of the former's exempt income results from the manner in which, respectively, they sought to deduct the amount of these losses. The appellant, purporting to apply the provisions of s. 23A, calculated one-fifth of the amount of £174,873 — £34,974—and deducted the latter amount from the former figure, producing an amount of £139,899. Thereafter it set off the amount of its previous losses, first of all against the amount of £34,974, which it regarded as exempt income for the purposes of s. 80, and then the balance of its losses—£107,060—against the figure of £139,899, leaving as its taxable income the amount of £32,839. The respondent, on the other hand, deducted from the amount of £174,873 the total amount of the appellant's past losses—£142,034—producing a figure of £32,839 and treated one-fifth of this amount—£6,568—as exempt income for the purposes of s. 23A. The difference between these last two figures—£26,271—he then treated as the appellant's taxable income. In other words, he treated the total amount of the past losses as deductions of the character specified in par. (a) of s. 23A (1). That is to say, he treated the total amount of the past losses as allowable deductions relating to the appellant's assessable income. It is contended that this method of assessment was erroneous for the deduction for which s. 80 (2) (b) provides is, in the first place, a deduction from exempt income, which is not assessable income, so that in order to apply the provisions of s. 80 (2) (b) the amount, if any, of the taxpayer's exempt income must first be ascertained.
For the respondent, however, it is contended that the appellant did not derive any exempt income within the meaning of that expression as it is used in s. 80 (2) and that it is impossible to treat any part of its income as "net exempt income" as defined in s. 80 (3). Accordingly, it is said, the deduction of the appellant's past losses must be made from its assessable income before finally ascertaining the amount one-fifth of which is treated by s. 23A as income exempt from income tax. In support of the respondent's contention reference was made to other sections of the Act, in particular many paragraphs of s. 23, which place outside the category of assessable income particular kinds of income and it was pointed out that s. 80 (2), which was to be found in the Act prior to the enactment of s. 23A, was designed, so far as its references to exempt income and net exempt income are concerned, to deal with cases of that character. Accordingly it was necessary to provide that net exempt income, and not the whole of the exempt income, should be first of all applied in making up past losses. So sub-s. (3) of s. 80 defined the "net exempt income" of a taxpayer to mean for the purposes of the section " the amount by which his exempt income derived from all sources exceeds the sum of the expenses incurred in deriving that income ". It is, it is said, impossible to fit into the scheme of the section income exempted from tax which is, itself, a net amount and which as the provisions of s. 23A (1) acknowledge, initially forms part of a taxpayer's assessable income.
As I see the case, however, the problem falls to be resolved by a consideration of the meaning and substantial effect of s. 23A (1). If it appears that in the application of that section past losses should not be taken into account until after ascertainment of that part of a taxpayer's income which it provides shall be exempt from income tax then the appeal must succeed and the exempt income, which is a net amount, treated as "exempt income" and "net exempt income" for the purposes of s. 80. If, on the other hand, the section reveals an intention that past losses are to be regarded for the purposes of the section "as allowable deductions which relate to that income", that is, the taxpayer's assessable income, then the appeal must fail.
For the appellant it is asserted that one-fifth of the "amount remaining" ascertained in accordance with s. 23A is by force of the section removed from the category of assessable income. It is an amount which is "exempt income" as defined by s. 6 and is removed from the category of assessable income (s. 25) though the starting point for the calculation which the section requires to be made is the taxpayer's assessable income or, perhaps, more precisely, the amount which would constitute his assessable income were it not for the provisions of s. 23A (1). That being so it is impossible, it is contended, to say what part, if any, of the past losses can be said to relate to the taxpayer's assessable income until the amount of exempt income has been calculated. The submission is reinforced by reference to the fact that until 1942 the whole of a taxpayer's income derived from activities similar to those of the appellant was assessable income and it is asserted that, in these circumstances, the prototype of s. 23A was enacted for the purpose of removing from that category a part of the income derived from the carrying on of such activities. Further it was pointed out that in cases arising under provisions such as, for example, s. 23 (o) the degree of tax relief afforded is, in substance, measured only by a net amount for the effect of s. 51 is to exclude as deductions losses and outgoings incurred in relation to the gaining or production of exempt income and it was suggested that by s. 23A it was intended to provide a partial exemption of much the same character.
There may be something to be said for this point of view but on the whole I do not think the language of the section supports it. The starting point of the calculation which the section requires to be made is the assessable income of the taxpayer, or where he derives other income, so much of his assessable income as is attributable to the specified activities. Accordingly the figure taken as the starting point includes the amount which the section subsequently declares to be exempt from income tax. There is then to be deducted from the assessable income, or such part of it, "all allowable deductions which relate to that income and so much of any other allowable deduction as, in the opinion of the Commissioner, may appropriately be related to that income." It may be that s. 23A was framed without consideration of the problem which arises in this case, but what the section plainly enough requires is that where a taxpayer's assessable income is wholly derived from activities of the kind prescribed a net amount shall be ascertained by reference to the taxpayer's assessable income and to "all allowable deductions which relate to that (assessable) income". In other words, it requires an account to be constructed which takes, on the one side, the whole of the taxpayer's assessable income and, on the other side, all allowable deductions which relate to that assessable income. Until that account has been constructed it is impossible to say whether the taxpayer has any income which is exempt from income tax within the meaning of s. 23A and, for the purpose of constructing it, regard may properly be had to s. 80 which allows a deduction of past losses from assessable income. Such a deduction is, for the purpose of constructing such an account, an allowable deduction "relating to" the taxpayer's assessable income.
In such cases the effect of the section is not to remove a portion of a taxpayer's income from the category of assessable income but rather to exempt from liability to tax part of his taxable income assessed in accordance with the Act. But as the section is designed to deal also with cases where a taxpayer derives part only of his assessable income from activities of the character specified, it was not possible simply to express the extent of the exemption by reference to a proportionate part of a taxpayer's taxable income, for it by no means follows that allowable deductions relating to assessable income derived from activities of the specified character will bear the same ratio to the total amount of deductions relating to the total assessable income, as assessable income of the former character bears to total assessable income. It is for this reason, no doubt, that the section requires a separate account to be constructed starting with that part of the assessable income which is attributable to activities of the specified character, and thereafter, stipulates that there shall be deducted from that assessable income all allowable deductions which relate to that income whilst, at the same time, the section authorizes the Commissioner, by par. (b), to make an appropriate apportionment "of other allowable deductions", that is to say, deductions which relate to the taxpayer's assessable income generally some part of which can be related only by an appropriate apportionment to that part of the taxpayer's assessable income which has been derived from activities of the specified character.
For these reasons the appeal should, in my opinion, be dismissed.
From this decision the appellant appealed to the Full High Court.
Cur. adv. vult.
The following written judgments were delivered:—
1966, May 13
Barwick C.J.
The appellant taxpayer in the year of income ending in June 1961 carried on tin mining operations in the State of Queensland and from those operations derived its only income. In that year the company had a "net profit" for taxation purposes of £174,873. This sum represented its income from mining operations less such deductions as s. 51 of the Income Tax and Social Services Contribution Assessment Act 1936-1961 Cth (the Act) authorized. However, such operations carried on in prior years had not always proved profitable with the result that as at the commencement of the taxation year 1960-1961, the appellant had available to it for the purposes of s. 80 of the Act a sum of £142,034 representing unrecouped "losses" within the meaning of that section.
As tin is a prescribed metal or mineral within the meaning of s. 23A (1) of the Act, the appellant was entitled to have an amount of its income, which might otherwise be subject to income tax, exempt from such tax.
The controversy between the appellant and the respondent Commissioner of Taxation is as to the use to be made of the amount of the unrecouped "losses" in the calculation of the appellant's taxable income, having regard to the terms of s. 23A (1) and of s. 80 of the Act. The respondent Commissioner calculated the taxable income of the appellant by first deducting from the amount of the said "net profits" from the mining operations the amount of the unrecouped "losses" and then applying the provisions of s. 23A (1) to the balance treating that balance as the assessable income within the meaning of that section. He assessed the appellant to tax accordingly. The appellant appealed to this Court against this assessment, claiming that the proper method of computing its taxable income is first to deduct from the amount of the said "net profits" an amount equal to one-fifth thereof, and thereafter to deduct the amount of the unrecouped "losses" from the remaining four-fifths. The balance, according to the appellant, was its taxable income.
The contentions of the parties are set out by my brother Taylor in his judgment on the hearing of the appeal against the assessment, and I have no need to repeat them, or the precise figuring which each party derived from them. These submissions were repeated in the hearing of this appeal from his Honour's order dismissing the appellant's appeal against the assessment; but, as it seems to me, much greater emphasis has been placed before this Court on the significance of the word "relates" in s. 23A (1) and upon the nature of the "losses" which s. 80 makes deductible than would appear to have been the case in the argument before his Honour.
It is convenient first to set out the precise terms of relevant parts of each section:
80.
(1) For the purposes of this section, a loss shall be deemed to be incurred in any year when the allowable deductions (other than the concessional deductions and the deductions allowable under this section) from the assessable income of that year exceed the sum of that income and the net exempt income of that year, and the amount of the loss shall be deemed to be the amount of such excess.
(2) So much of the losses incurred by a taxpayer in any of the seven years next preceding the year of income as has not been allowed as a deduction from his income of any of those years shall be allowable as a deduction in accordance with the following provisions:
(a) where he has not in the year of income derived exempt income, the deduction shall be made from the assessable income;
(b) where he has in that year derived exempt income, the deduction shall be made successively from the net exempt income and from the assessable income;
(c) where a deduction is allowable under this section in respect of two or more losses, the losses shall be taken into account in the order in which they were incurred.
(3) In this section "net exempt income" means—
(a) where the taxpayer is a resident—the amount by which his exempt income derived from all sources exceeds the sum of the expenses (not being expenses of a capital nature) incurred in deriving that income, and any taxes payable in respect of that income in any country outside Australia or under the Income Tax Ordinances of the Territory of Papua and New Guinea;
23a. (1) Where a person carries on mining operations in Australia or the Territory of Papua and New Guinea for the purpose of, or for purposes which include, the production of a prescribed metal or mineral, an amount equal to one-fifth of the amount remaining after deducting from so much of the assessable income of that person as is attributable to the production or is derived from the sale of the prescribed metal or mineral produced by those operations—
(a) all allowable deductions which relate to that income; and
(b) so much of any other allowable deduction as, in the opinion of the Commissioner, may appropriately be related to that income,
shall be exempt from income tax.
It is at once apparent, in my opinion, that the Act contemplates that the deductions authorized by s. 80 will be made at a point in the computation of the taxable income after the amount of net exempt income (if any) has been ascertained. Section 23A (1) does provide for the computation of an amount of exempt income for, in my opinion, the sum calculated in accordance with that section is exempt income within the meaning of that expression as defined. Accordingly, one might well expect from the language of s. 80 itself that the relevant application of s. 23A (1) to the taxpayer's circumstances would be complete before occasion arose to apply s. 80.
The use of the expression "assessable income" both in s. 23A (1) and in s. 80 (1) (a) was suggested as a difficulty in the way of the appellant's contention to the above effect. But it is clear that the expression "assessable income" is not used throughout the Act inflexibly with the same denotation. In my opinion, the mere use of the adjective assessable in s. 23A (1) to denote the income with respect to which a calculation is to be made does not compel the conclusion that this is the same amount of income as that against which s. 80 requires the "losses" of which it speaks to be put. An examination of s. 23A (1) shows, I think, that the reference to assessable income in that section is clearly not a reference to the same sum as is mentioned in s. 80 (2) (a). What s. 23A (1) directs is a calculation to determine an amount of exempt income. It assumes that there is an amount of income which has been derived from the sale of a prescribed metal or mineral and which, apart from the section, would continue wholly to be assessable income. It directs that a fraction of this amount of income shall be set aside as exempt income and thus no longer a component of the assessable income. Section 25 does at least require that exempt income shall not be included in that assessable income which is to become the taxable income. Section 23A (1) does not provide for a deduction but for an exclusion.
But the matter is advanced further in favour of the appellant's submissions, when the terms of s. 23A (1) are further considered. In my opinion, it would be difficult, to say the least, having regard to the evident purpose of s. 23A (1) to read assessable income as meaning the described assessable income after all deductions for which the Act provides have been made; for the section in sub-par. (a) is careful to qualify the deductions of which it speaks. The allowable deductions to be made from the assessable income from the sale of prescribed metals or minerals are to be those which "relate" to that income. The allowable deductions in the nature of losses or outgoings within the meaning of s. 51 and which relate solely to the production of the income from the sale of prescribed metals or minerals will not be difficult to identify. Where such a loss or outgoing does not relate solely to the production of such income, sub-par. (b) of s. 23A (1), in my opinion, enables the Commissioner to apportion an expenditure, being an allowable deduction, so as to determine what part of it ought to be regarded as related to the production of that income. In my opinion, that is the function of that sub-paragraph. The word "relate" in sub-par. (a) of that section, in my opinion, describes only those allowable deductions which solely relate to the production of the income from the sale of the prescribed metal or mineral.
In the case in hand, the whole amount of the deductible losses resulted from the carrying on of the mining operations which resulted in the sale of tin. But if such "losses" could be regarded as relating to the production of income in a subsequent year, sub-par. (b), in my opinion, would authorize the Commissioner to apportion the "losses" in a case where the losses were derived from more than one kind of operation so as to apply to the income derived from the sale of the metal or mineral that part of the losses which he regarded as related to that income.
However, in my respectful opinion, losses resulting from operations in past years cannot be regarded as in any relevant sense "related" to the income of the current year. Once annual accounting to ascertain assessable income is undertaken, apart from special statutory provisions, the financial experience of the year is, as it were, isolated from earlier and from subsequent years: so to speak, it is self-contained. This is true, in my opinion, though the closing balances of one year became the opening figures for the next year's accounting. By contrast the balance sheet, in its item of accumulated profits or losses, whether carried into an item of shareholders' funds or kept in an appropriation account, endeavours to overspan the annual accounting in relation to profits or income, so as to reflect the total experience of the enterprise to date. The losses of prior years, in my opinion, have no place in an annual account of profits or of income. They are neither of the nature of a receipt nor of a disbursement in or relating to that year.
Apart from the general position in annual accounting, s. 23A (1) of the Act seems to me to intend to exempt from income tax a portion of the income derived from the sale in the year of tax of the prescribed metal or minerals diminished by the amount of allowable deductions which the gaining or production of that income in that year attract, either wholly or partly, in the latter case an apportionment being made. The idea of setting against that net income, losses of prior years, in my opinion, is quite foreign to the purpose and intention of the section.
Further, when the real nature of a deductible "loss" is considered, the matter becomes to my mind even clearer. First, these "losses" are not themselves actual expenditures either in the tax year, or for that matter in any year nor need they necessarily result from any actual expenditure. They are derived from the operation of the Act, perhaps partly from what it includes (or excludes) in or from assessable income and perhaps partly from the deductions which it permits from that assessable income. Thus, they are figures arrived at by setting against the assessable income gained or produced in a year the appropriate amounts of allowable deductions, which have proved to be greater in amount than that assessable income. To the extent to which they are not recouped in accordance with the provision of s. 80, they are aggregated from year to year. These figures, in my opinion, do not "relate" to the income derived in a subsequent tax year. Consequently, the amount of unrecouped losses ought not to be included in the sum by which the assessable income from the sale of tin is to be diminished for the purposes of s. 23A (1).
In my opinion, the calculation called for by s. 23A (1) should be made before the application of s. 80: the assessable income of which s. 80 (2) (a) speaks should not include any exempt income and, in particular, should not include the amount resulting from the calculation called for by s. 23A (1) and, lastly, in that calculation, no part of the unrecouped losses within s. 80 should be deducted from the "net income" derived from the sale of the prescribed metal or mineral.
It follows, in my respectful opinion, that this appeal should be allowed, the respondent's assessment of the appellant's income tax for the year ending June 1961 should be set aside, the amount of the appellant's taxable income as shown in such assessment be increased to the sum of £32,839 and the appellant assessed to tax accordingly.
Menzies J.
The facts to which s. 23A (1) and s. 80 of the Income Tax and Social Services Contribution Assessment Act 1936-1961 Cth have here to be applied are set out in the judgment of Taylor J., from which this appeal has been brought, and in the judgment of Owen J., which I have had the advantage of reading. I will not repeat them and I propose to do no more than state shortly my reason for thinking that, upon those facts, the taxpayer is entitled to succeed.
The assessment in question depended upon treating the taxpayer's losses of previous years as deductions relating to the taxpayer's income of the year of tax. With this I cannot agree. It seems to me that the problem to which s. 23A (1) gives rise is not unlike that which has often arisen under s. 50 of the Act and, for the requisite relationship to exist between the income and the deduction, there must be some specific connexion between the two amounts in question. It is not enough that one is assessable income and the other is an allowable deduction. I have not been able to find any sufficient connexion here between the past losses and the current income, notwithstanding that it may be assumed that what the taxpayer spent in past years prepared the way for the making of profits in later years, including the year of tax. Past losses, however, which arose simply because receipts did not match expenditure, did not themselves contribute to present profits.
Because I think that the assessment was accordingly made upon a wrong basis, I am of the opinion that the appeal should be allowed and the assessment varied by increasing the amount of the income exemption under s. 23A of the Act from £6,568 to £34,974, in which case the taxable income should be increased from £26,271 to £32,839.
Owen J.
This is an appeal from an order made by Taylor J. dismissing an appeal by the company against its assessment to income tax for the year ending 30th June 1961. During that year the whole of the company's revenue was derived from tinmining operations carried on by it in Queensland. This was its sole activity and at all material times tin was a prescribed metal or mineral within the meaning of s. 23A (1) of the Income Tax and Social Services Contribution Assessment Act 1936-1961 Cth. That sub-section, so far as material to the present case, provides that
Where a person carries on mining operations in Australia for the purpose of the production of a prescribed metal or mineral, an amount equal to one-fifth of the amount remaining after deducting from so much of the assessable income of that person as is attributable to the production of the prescribed metal or mineral —
(a) all allowable deductions which relate to that income; and
(b) so much of any other allowable deduction as, in the opinion of the Commissioner, may appropriately be related to that income,
shall be exempt from income tax.
In earlier years the company, a "resident" within the definition of s. 6 of the Act, had incurred losses in carrying on its mining operations and, by s. 80 (2) and (3),
(2) So much of the losses incurred by a taxpayer in any of the seven years next preceding the year of income as has not been allowed as a deduction from his income of any of those years shall be allowable as a deduction in accordance with the following provisions:—
(a) where he has not in the year of income derived exempt income, the deduction shall be made from the assessable income;
(b) where he has in that year derived exempt income, the deduction shall be made successively from the net exempt income and from the assessable income;
(c)
(3) In this section "net exempt income" means—
(a) where the taxpayer is a resident—the amount by which his exempt income derived from all sources exceeds the sum of the expenses (not being expenses of a capital nature) incurred in deriving that income .
In the year in question in this appeal an amount of £142,034 of the company's earlier losses remained unapplied under s. 80 and was available to it for the purposes of that section and during that year the company made what it described as a "net profit" amounting to £245,622. This sum—as I understand it—represented the difference between its gross income from tin mining and the deductions which it was entitled to make under s. 51 (1). From that figure of £245,622 it made further deductions, one of them for instance being under s. 122, amounting in all to £72,015. It is not disputed that these deductions were properly made and it is unnecessary to detail them. The amount then remaining was £174,873. The company, however, was entitled to the benefit of s. 23A and the difference between it and the Commissioner on this appeal is as to the way in which that section and s. 80 are to be applied. The interpretation of the sections presents some difficulties. For example, the assessable income in s. 23A which is made the starting point for the calculation which that section requires to be made obviously includes an amount which, when the calculation is finished, is declared to be exempt from tax, and the words cannot be given the same meaning as the "assessable income" to which s. 80 refers and from which losses may be deducted by virtue of that section. This is no doubt explained by the fact that the sections were introduced into the Act at different times.
The rival contentions can perhaps best be illustrated by stating the method of calculation adopted by the company on the one hand and that adopted by the Commissioner on the other. Each began with the figure of £174,873, representing the difference between the gross income from the production of tin and what, for the sake of brevity, I will call the sum of the s. 51 deductions and the other deductions of £72,015. The company took one-fifth of £174,873, namely £34,974, as being income exempt from tax under s. 23A. This left £139,899 and from that amount it deducted what I will call its available s. 80 losses of £142,034 by applying par. (b) of s. 80 (2). It set £34,974 against its exempt income of £34,974 and the balance of the losses, amounting to £107,060, against its "assessable income" of £139,899. This left the figure of £32,839 and this it claimed to be the amount upon which its tax should be assessed. The method of calculation thus adopted by it was based upon the submissions that a s. 80 loss is not within the words "all allowable deductions which relate to that income " in s. 23A (1) (a), "that income" being "so much of the assessable income as is attributable to the production or is derived from the sale of the prescribed metal or mineral produced by" the mining operations referred to in the section, and that, under s. 80 (2) (b) the amount of "exempt income" and the amount of "assessable income" to which s. 80 refers must be ascertained before it is possible to make the allocation for which s. 80 (2) (b) provides.
The method of calculation applied by the Commissioner was based upon the view that a s. 80 loss is one of the "allowable deductions which relate to that income" within the meaning of s. 23 (1) (a). He took £174,873 as his starting figure and from it deducted £142,034, the amount of the available s. 80 losses. This left a balance of £32,839. One-fifth of that amount, namely £6,568, was thus arrived at as being the amount exempt from tax under s. 23A. This left £26,271 as the taxable income and on that he assessed the company. On the face of it, the result at which the Commissioner arrived was more favourable to the company than was the figure claimed by it to be its taxable income but no doubt s. 44 explains the somewhat unusual circumstance that a taxpayer should be complaining that his taxable income is larger than that on which he has been assessed.
The first question to be determined is whether the deduction of losses incurred in earlier years which s. 80 allows to be made is a deduction which "relates" to the company's revenue from its tin-mining operations during the year ended 30th June 1961. I find it difficult to see how a loss made in a previous year or years can fairly be said to "relate" to the income of a later year. I can understand that, in an appropriate case, expenditure in an earlier year may properly be said to relate to the income of a later year as, for example, when that expenditure has been incurred in carrying out work which will bear fruit in later years. But what s. 80 allows to be deducted is not expenditure in earlier years but the loss resulting from the fact that the expenditure in that earlier accounting period has exceeded the revenue for that period. If s. 23A (1) (a) has the meaning for which the Commissioner contends, it is difficult to see why the draftsman would have said more than "all allowable deductions". But he went further and confined the "allowable deductions" to those which "relate" to the income earned from mining operations in the accounting period. A further objection to the method of calculation adopted by the Commissioner seems to me to arise from the terms of s. 80 (2) (a) and (b). Those provisions plainly contemplate that before any deductions for past losses are made, it must first be determined whether any part, and if so how much, of the taxpayer's income is "net exempt income" and how much represents his "assessable income", because it is first from his "net exempt income" and then from his "assessable income" that the deductions are to be made, yet the Commissioner's method is to deduct the available amount of s. 80 losses not first from the "net exempt income" and then from the "assessable income" but from the sum which contains both these components and before ascertaining how much of that sum represents "net exempt income" and how much "assessable income". In other words, the Commissioner's method seems to me to disregard the directions laid down by s. 80 (2) (a) and (b). It was said that difficulties in the way of adopting the company's method arise from the use in s. 80 of the words "net exempt income" and the definition of those words in s. 80 (3). As I have said earlier, the two sections do not easily run together but the amount which s. 23A exempts from tax is arrived at after making all allowable deductions which relate to the income attributable to the mining operations with which the section deals. It is a net figure and should, I think, be treated for the purposes of s. 82 (2) (b) as being the "net exempt income" against which the losses of previous years are first to be set.
For these reasons I am of opinion that the company's contention should prevail but I should, I think, say something about s. 23 (1) (b). That paragraph is, I think, designed to enable the Commissioner in an appropriate case to apportion an amount claimed as a deduction where part only of it is related to carrying out the operations to which s. 23 (1) refers. For example, where a taxpayer is carrying on mining operations and at the same time conducting a general store and incurs expenditure for a purpose which is common to both branches of his business. In such case s. 23A (1) (b) gives the Commissioner a discretion to determine how much of that total expenditure may appropriately be related to the revenue earned in carrying out the mining operations.
I would allow the appeal. |
high_court_of_australia:/showbyHandle/1/9852 | decision | commonwealth | high_court_of_australia | text/html | null | Svikart v Stewart [1994] HCA 62 | https://eresources.hcourt.gov.au/showbyHandle/1/9852 | 2024-09-13T22:53:56.196235+10:00 | High Court of Australia
Mason C.J. Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ.
Svikart v Stewart
[1994] HCA 62
ORDER
Answer the questions reserved as follows: 1. Does s. 52(i) of the Constitution apply to places in the Northern Territory acquired by the Commonwealth for public places? Answer: No. 2. Is the R.A.A.F. Base Darwin a Commonwealth place within the meaning of s. 52(i) of the Constitution? Answer: No. 3. If yes to 1 and 2, do the Acts and Regulations referred to in par. 1 of the Case Stated [the Traffic Act and the Traffic Regulations] apply to the driving by the defendant of the motor vehicle on the R.A.A.F. Base? Answer: Unnecessary to answer.
Cur. adv. vult.
The following written judgments were delivered:—
1994, Dec. 7
Mason C.J., Deane, Dawson and McHugh JJ.
The defendant was charged under s. 19(2) of the Traffic Act 1987 (NT) with having driven a motor vehicle on a public street whilst his blood alcohol concentration was more than .08 per cent. He was also charged with having driven without a licence on a public street contrary to s. 32 of the Traffic Act and with having driven on a public street without due care contrary to reg. 95 of the Traffic Regulations 1988 (N.T.). The Traffic Regulations are made pursuant to s. 53 of the Traffic Act. The offences are alleged to have occurred in Anaroo Road or at the intersection of Anaroo and Billeroy Roads. Both Anaroo Road and Billeroy Road are wholly within the R.A.A.F. Base at Darwin in the Northern Territory.
Section 5 of the Northern Territory (Self-Government) Act 1978 Cth established the Northern Territory as a body politic under the name of the Northern Territory of Australia. Section 6 of that Act gave to the Legislative Assembly of the Territory power, subject to the assent of the Administrator or the Governor-General, to make laws for the peace, order and good government of the Territory. Under s. 69(2) of that Act all interests of the Commonwealth in land in the Territory, other than certain specified interests, were vested in the Territory. Section 70 provided for the acquisition by the Commonwealth without compensation of any interest in land vested in the Territory by s. 69(2). The R.A.A.F. Base at Darwin, which had been acquired by the Commonwealth before self-government of the Territory, was re-acquired by the Commonwealth pursuant to s. 70 for the purpose of defence. The Commonwealth is now the registered proprietor of the land comprising the Base pursuant to the provisions of the Real Property (Special Provisions) Act 1979 (NT).
The question was raised before the stipendiary magistrate hearing the charges against the defendant whether, assuming the R.A.A.F. Base was a Commonwealth place within the meaning of s. 52(i) of the Constitution, the Traffic Act had any application to the roads in question. Subsequently the matters being heard by the stipendiary magistrate were removed into this Court pursuant to s. 40(1) of the Judiciary Act 1903 Cth and a case was stated and questions were reserved for the consideration of the Full Court. The questions reserved are:
1. Does s. 52(i) of the Constitution apply to places in the Northern Territory acquired by the Commonwealth for public purposes?
2. Is the R.A.A.F. Base Darwin a Commonwealth place within the meaning of s. 52(i) of the Constitution?
3. If yes to 1 and 2, do the Acts and Regulations referred to in par. 1 of the Case Stated [the Traffic Act and the Traffic Regulations] apply to the driving by the defendant of the motor vehicle on the R.A.A.F. Base?
Section 52 of the Constitution provides:
The Parliament shall, subject to this Constitution, have exclusive power to make laws for the peace, order, and good government of the Commonwealth with respect to —
(i) The seat of government of the Commonwealth, and all places acquired by the Commonwealth for public purposes;
(ii) Matters relating to any department of the public service the control of which is by this Constitution transferred to the Executive Government of the Commonwealth;
(iii) Other matters declared by this Constitution to be within the exclusive power of the Parliament.
In Worthing v Rowell & Muston Pty Ltd [1] it was held that s. 52(i) gives to the Commonwealth Parliament an exclusive power to legislate generally with respect to places of the kind referred to in that provision. As a consequence in that case, New South Wales building regulations were held to have no application within the R.A.A.F. Base at Richmond in New South Wales, that being a place "acquired by the Commonwealth for public purposes" within the meaning of s. 52(i). This decision was followed in Attorney-General (N.S.W.) v Stocks & Holdings (Constructors) Pty Ltd [2] in respect of a place acquired by the Commonwealth in New South Wales for use as a rifle range. In Reg. v Phillips [3] the Court held that, upon the acquisition of a place by the Commonwealth for public purposes, the effect of s. 52(i) was to displace State laws which had previously applied in that place. In that case the place was an R.A.A.F. Base in Western Australia.
1. (1970) 123 C.L.R. 89.
2. (1970) 124 C.L.R. 262.
3. (1970) 125 C.L.R. 93.
As a result of these decisions the Commonwealth Places (Application of Laws) Act 1970 Cth was passed. Section 4 of that Act applies the laws of a State, whether in force before or after the commencement of the Act, to Commonwealth places within the State. The Act has, therefore, no application to places acquired by the Commonwealth in a Territory. In that regard, it is relevant to note that the question of the applicability of s. 52(i) to places acquired in a Territory did not arise for consideration in any of the earlier cases. It is that question which now arises for the first time for the decision of the Court.
It is permissible to have regard to the history of constitutional provisions in order to establish their object and the draft Bills considered by the Constitutional Conventions have long been considered a legitimate aid to interpretation [4] . The successive drafts of s. 52(i) shed considerable light upon the object of that provision. Clause 53 of the draft Bill contained in the Report submitted by the Constitutional Committee on 31 March 1891 and debated at the National Australasian Convention (Sydney) in 1891, was relevantly as follows [5] :
The Parliament shall, also, subject to the provisions of this constitution, have exclusive legislative power to make all such laws as it thinks necessary for the peace, order, and good government of the commonwealth with respect to the following matters:
(2) The government of any territory which may by surrender of any state or states and the acceptance of the parliament become the seat of government of the commonwealth, and the exercise of like authority over all places acquired by the commonwealth, with the consent of the parliament of the state in which such places are situate, for the construction of forts, magazines, arsenals, dockyards, quarantine stations, or for any other purposes of general concern.
It is clear that the origin of the provision in that form was s. 8(17) of Art. 1 of the Constitution of the United States which provides:
The Congress shall have Power To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings.
The first part of cl. 17, relating to the seat of government, is said to have been prompted by occurrences which took place near the close of the Revolutionary War when Congress in session in Philadelphia was surrounded and insulted by a body of mutineers of the Continental Army and the State did little to assist [6] . The second part, dealing with places purchased with the consent of the State, was thought necessary so that the consent of the State would carry with it political dominion and legislative authority. This was before the right of eminent domain was recognized [7] , and the view was that, in the case of land acquired without consent, the possession of the United States would be simply that of an ordinary proprietor subject to the legislative authority and control of the State [8] .
1. See Tasmania v The Commonwealth and Victoria (1904), 1 C.L.R. 329, at pp. 333, 350; New South Wales v The Commonwealth (the Incorporation Case) (1990), 169 C.L.R. 482, at p. 501.
2. See Official Record of the Debates of the Australasian Federal Convention (Sydney), 3 April 1891, pp. 701-702; see also Griffith, Successive Stages of the Commonwealth of Australia (1891), p. 477.
3. See Spratt v Hermes (1965), 114 C.L.R. 226, at p. 273.
4. See Kohl v United States (1875), 91 U.S. 367.
5. See Fort Leavenworth Railroad Co. v Lowe (1885), 114 U.S. 525, at pp. 538, 542.
The reasoning which lay behind cl. 17 may not have had any precise application to cl. 53, but it is clear from the words "with the consent of the parliament of the state in which such places are situate" that the clause was intended to be confined to places acquired in a State and not to extend to places in a Territory where the Commonwealth would, in any event, have political dominion and legislative authority. Territories were, of course, envisaged, though there were no Territories at the time of federation.
The words "with the consent of the parliament of the state in which such places are situate" remained in cl. 53 until the 1898 Convention in Melbourne. At that Convention Mr. O'Connor successfully moved the insertion in the draft Bill of what was to become s. 51(xxxi) of the Constitution, giving the Parliament power to make laws with respect to the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws [9] . Immediately thereafter, again upon Mr. O'Connor's motion, the words "with the consent of the state in which such places are situate" were deleted from cl. 53 [9] . After the 1898 Convention the words of the clause were further simplified so as to result in the provision which is now s. 52(i). The removal of the words "with the consent of the state in which such places are situate" would seem to be explicable only by reference to the power of compulsory acquisition given to the Commonwealth immediately beforehand. At all events, that was the context in which the amendment was made and, no reference being made to places in a Territory, it can hardly be thought that its purpose was to extend the ambit of the clause to places acquired in a Territory. And, of course, the Convention had agreed to a clause, which was to become s. 122 of the Constitution, giving power to the Parliament "to make such laws as it thinks fit for the administration and government of any Territory" [10] . It also had before it a clause, previously agreed to, which was to become s. 111 of the Constitution, providing for the surrender by a State and the acceptance by the Commonwealth of any part of the State whereupon "such part of the state shall become and be subject to the exclusive jurisdiction of the Commonwealth" [11] .
1. See Official Record of the Debates of the Australasian Federal Convention (Melbourne), 4 March 1898, p. 1874.
2. See Official Record of the Debates of the Australasian Federal Convention (Melbourne), 4 March 1898, p. 1874.
3. See Official Record of the Debates of the Australasian Federal Convention (Melbourne), 8 February 1898, p. 699.
4. ibid., p. 646.
These considerations point ineluctably to the conclusion that, in referring to the exclusive power of the Parliament to make laws for the peace, order and good government of Commonwealth places, s. 52(i) is speaking of legislative power which is exclusive of the legislative power of the States. That was the view expressed by Isaacs J. in Nott Bros. & Co. Ltd. v Barkley where he said of the word "exclusive" in s. 90 [12] :
The word "exclusive" means simply exclusive of State Parliaments, "exclusive" as opposed to concurrent, "exclusive" in the sense in which that word is found in ss. 52 and 107. It was not intended to limit the ambit of Commonwealth parliamentary power but to make that power exclusive on the subject matter.
That view requires some modification in relation to s. 90 and, as a consequence, s. 52(iii) in the light of the decision of the majority in this Court in Capital Duplicators Pty Ltd v Australian Capital Territory [13] , but there is, in our view, no reason to question it in relation to s. 52(i).
1. (1925) 36 C.L.R. 20, at p. 29.
2. (1992) 177 C.L.R. 248.
It is otherwise plain that s. 52(i) was intended to provide for exclusive Commonwealth legislative power with respect to places acquired by the Commonwealth in a State. To achieve this in an Australian context there was no need, as there was in the United States, to think in terms of territorial sovereignty. It was sufficient that acquisition of property should carry with it legislative authority without political dominion. In any Territory surrendered by a State and accepted by the Commonwealth, territorial sovereignty, or political dominion, would exist under ss. 111 and 122 of the Constitution and would, by its very nature, exclude the States. Nevertheless, in arriving at this situation, the American experience was instructive and so it is that the terminology of s. 52(i) reflects s. 8(17) of Art. 1 of the United States Constitution [14] .
1. See Worthing v Rowell & Muston Pty Ltd (1970), 123 C.L.R., at pp. 100, 125; Reg. v Phillips (1970), 125 C.L.R., at pp. 100-101, 113.
Section 52(i) provides for the exclusive power to make laws with respect to the seat of government as well as places acquired by the Commonwealth for public purposes. Under s. 125, the seat of government is required to be within territory granted to or acquired by the Commonwealth. There is now a Territory, the Australian Capital Territory [15] , within which the seat of government has been located, although its limits have not been precisely determined by the Parliament. The seat of government is, however, not co-extensive with the Territory in which it is located nor, under s. 125, is it intended to be. The Parliament must rely upon s. 122 for the power to make laws for the government of that Territory. That power is not made subject to the Constitution as is the power to make laws with respect to the seat of government under s. 52(i). Moreover, the power to make laws with respect to the seat of government would seem to be concerned with its political or constitutional aspects, rather than with the government of the territory which it occupies. It is not only the presence of s. 122 which indicates this to be so, but also the fact that, unlike the power under s. 122, the power to make laws with respect to the seat of government is expressed to be a power to make laws for the peace, order and good government of the Commonwealth. It is, however, unnecessary for the purposes of this case to seek to work out the difficult question of the precise relationship between s. 52(i)'s specific reference to the "seat of government" and s. 122. It suffices to say that there is nothing in the inclusion of the seat of government in s. 52(i) as a subject matter of exclusive legislative power which would place in question a construction of the provision which confines places acquired by the Commonwealth to places acquired in a State.
1. See Seat of Government Act 1908 Cth, Seat of Government Acceptance Act 1909 Cth, Seat of Government Surrender Act 1909 (NSW).
In Capital Duplicators Pty Ltd v Australian Capital Territory [16] this Court held by a majority that s. 122 should not be construed as authorizing the Parliament to create a new legislature for an internal Territory with power to make laws imposing duties of customs or excise or granting bounties on the production or export of goods. The view was taken that a legislature created to confer self-government upon a Territory — in that case the Australian Capital Territory — must be regarded as a body separate from the Commonwealth Parliament, so that the exercise of its legislative power, although derived from the Commonwealth Parliament, is not an exercise of the Parliament's legislative power. Hence, it was concluded that, since the power of the Parliament to impose duties of customs and excise and the power to grant bounties on the production or export of goods are made exclusive by s. 90 of the Constitution, s. 122 could not authorize the Parliament to confer those powers upon the Territory legislature.
1. (1992) 177 C.L.R., at pp. 279, 289, 290.
It was for these reasons that Brennan, Deane and Toohey JJ. said [17] that Isaacs J.'s observation in Nott Bros. & Co. Ltd. v Barkley [18] that "exclusive" meant exclusive of State Parliaments was right as a matter of history, there being no self-governing Territory legislatures at the time, but was not right as a matter of construction. But in Capital Duplicators Pty Ltd v Australian Capital Territory the Court was concerned with the construction of s. 90 rather than s. 52. Section 90 is not the source of the legislative powers which it makes exclusive to the Parliament. Those powers are to be found in s. 51(ii) (the taxation power) and s. 51(iii) (the bounties power) and are circumscribed. In the case of the power to make laws with respect to taxation the power must be exercised so as not to discriminate between States or parts of States. In the case of the power to make laws with respect to bounties the power must be exercised so that the bounties shall be uniform throughout the Commonwealth. It was the nature of the powers and the evident intention of other sections of the Constitution to create a type of internal free trade area embracing the geographical territory of the Commonwealth, rather than any considerations arising from s. 52, which led the majority to their conclusion [19] . There is, we think, nothing in their reasoning which would throw any doubt upon a construction of s. 52(i) which confines places acquired by the Commonwealth to places acquired within a State. On the other hand, it would be a curious result, to say the least, if s. 52(i), in making exclusive the power of the Parliament to legislate with respect to Commonwealth places, were to reduce the scope of s. 122 which, particularly when read with s. 111, was clearly intended to confer upon the Parliament a largely unfettered as well as an exclusive power to legislate with respect to the government of a Territory. As Capital Duplicators Pty Ltd v Australian Capital Territory shows, there may be some qualifications to the power to make laws under s. 122 which are to be found elsewhere in the Constitution but which as yet remain unidentified but, putting to one side the special considerations applicable to the "seat of government" [20] , there is nothing elsewhere in the Constitution which would inhibit s. 122 so as to prevent it conferring power upon a Territory legislature to legislate with respect to Commonwealth places in a Territory. And if s. 52(i), which is the source of the exclusive power to make laws with respect to Commonwealth places, does not confine the Parliament's power under s. 122 because the places referred to are places in a State, then there is no reason why, in a Territory, a separate legislature should not have power conferred upon it by the Parliament to legislate with respect to places acquired by the Commonwealth within the Territory.
1. (1992) 177 C.L.R., at p. 277.
2. (1925) 36 C.L.R., at p. 29.
3. Capital Duplicators Pty Ltd v Australian Capital Territory (1992), 177 C.L.R., at p. 276.
4. (1992) 177 C.L.R., at p. 273.
For these reasons, we would answer the questions reserved as follows:
1. No.
2. No.
3. Unnecessary to answer.
Brennan J.
The R.A.A.F. Base at Darwin in the Northern Territory was acquired by the Commonwealth for public purposes. The defendant, seeking to abort a prosecution for an alleged offence under the Traffic Regulations 1988 of the Territory (made pursuant to a law enacted by the Legislative Assembly of the Northern Territory), contends that the Regulations do not operate within the base. The contention is founded on s. 52(i) of the Constitution and the decision of this Court in Worthing v Rowell & Muston Pty Ltd [21] . If the base is a place of the kind with respect to which the Parliament has exclusive legislative power under s. 52(i), the question whether the Regulations operate within the base will turn on the meaning of exclusive in s. 52: is the legislative power of the Parliament with respect to such a place exclusive of the legislative power of the Territorial legislature or exclusive only of the legislative power of State legislatures? If it be exclusive of the legislative power of the Territorial legislature, the Regulations would not operate within the base. Unlike State laws which are picked up by the Commonwealth Places (Application of Laws) Act 1970 Cth and applied as Commonwealth law to Commonwealth places in a State [22] , the laws of a Territory are not similarly applied to Commonwealth places.
1. (1970) 123 C.L.R. 89.
2. Reg. v Loewenthal; Ex parte Blacklock (1974), 131 C.L.R. 338, at pp. 342, 346.
"Exclusive" in s. 52
When the Constitution came into force, the only legislative powers (other than Imperial legislative power) which could have been exercised concurrently with the legislative power of the Parliament were the legislative powers of the respective Australian States. That historical fact suggests that it was only State legislative power that was to be excluded by s. 52 [23] . However, there is no apparent policy reason why the matters with respect to which the Parliament's legislative power was made exclusive by s. 52 should be outside the reach of State legislative power but within the reach of the legislative power of a Territorial legislature. The distinction, if there be a distinction, between State and Territorial legislative powers for the purposes of s. 52(i) must arise from s. 122 which confers on the Parliament the exclusive authority to create a Territorial legislature and to define the powers of that legislature [24] . As the Parliament retains legislative power over both the subject matter of s. 52(i) and the Parliament's creatures, the Territorial legislatures, it might be said that the Parliament ultimately retains an exclusive legislative power over "places" and "the seat of government" situated within the boundaries of a Commonwealth territory. It is not necessary to decide that question in this case, for reasons next to be stated. And, as the exclusivity of the legislative power of the Parliament with respect to the seat of government is a question of considerable importance to the federal polity [25] , it is desirable to leave the issue for determination to another day.
1. See Nott Bros. & Co. Ltd. v Barkley (1925), 36 C.L.R. 20, at p. 29; but cf. Capital Duplicators Pty Ltd v Australian Capital Territory (1992), 177 C.L.R. 248, at p. 277.
2. Spratt v Hermes (1965), 114 C.L.R. 226, at p. 242; Capital Duplicators Pty Ltd v Australian Capital Territory (1992), 177 C.L.R., at pp. 272-273.
3. ibid., at p. 273.
"Places" in s. 52(i)
Whatever meaning be attributed to "exclusive" in s. 52, it will not conclude the meaning to be attributed to "places" in sub-s. (i). The question for determination in this case is whether the reference in sub-s. (i) to "all places acquired by the Commonwealth for public purposes" includes places in the Northern Territory.
It is noteworthy that the general legislative power that is made exclusive to the Parliament by sub-s. (i), unlike the particular powers made exclusive by sub-s. (ii) and the powers referred to in sub-s. (iii), is defined by reference to geographic area [26] , not subject matter. At the time of federation, the six Colonies covered the whole of the geographic area of the Commonwealth, but provision was made for the creation of Commonwealth Territories in areas which theretofore had been included within the boundaries of a State. At that time, the only concurrent legislative power that might have been exercised over a Commonwealth place within Australia was the legislative power of the State within the boundaries of which it lay [27] . Thus any place in a State acquired by the Commonwealth for a public purpose would have been within the area over which the State exercised legislative power. In the absence of s. 52(i), that place would have been governed by the enacted laws of the State, subject (by reason of s. 109) to any inconsistent law of the Commonwealth [28] .
1. Worthing v Rowell & Muston Pty Ltd (1970), 123 C.L.R., at pp. 97, 124.
2. Quick and Garran, Annotated Constitution of the Australian Commonwealth (1901), pp. 659-660; see The Commonwealth v New South Wales (1923), 33 C.L.R. 1, at p. 46, per Isaacs J. and R. v Bamford (1901), 1 S.R. (N.S.W.) 337, discussed in Worthing v Rowell & Muston Pty Ltd (1970), 123 C.L.R., at pp. 94, 116, 118, 129-130.
3. The Commonwealth v New South Wales (1923), 33 C.L.R., at p. 46, per Isaacs J.; Reg. v Phillips (1970), 125 C.L.R. 93, at p. 111.
The Australian Capital Territory was granted to or acquired by the Commonwealth pursuant to s. 125 which prescribed that that territory be "in the State of New South Wales" [29] . Being within the boundaries of New South Wales, the laws of that State might have applied or might have been thought to have applied to that territory including, if it were not for s. 52(i), the seat of government that was to be within that Territory [30] .
1. See Capital Duplicators Pty Ltd v Australian Capital Territory (1992), 177 C.L.R., at p. 285, per Gaudron J.
2. In Paterson v O'Brien (1978), 138 C.L.R. 276, at p. 280, this Court referred to the Australian Capital Territory as "vested in the Commonwealth by surrender or acquisition", but s. 125 prescribes "granted to or acquired by the Commonwealth" as the mode of creating the Australian Capital Territory. The power of surrender of territory was vested by s. 111 only in the Parliament of the surrendering State whereas s. 125 contemplated compulsory acquisition of the Australian Capital Territory by the Commonwealth. And see Sugerman, "The Seat of Government of the Commonwealth", Australian Law Journal, vol. 47 (1973) 344.
By contrast with "places" within State boundaries and the Australian Capital Territory, the territories which were to be created pursuant to s. 111 of the Constitution could not be subject to the legislative power of a State. Territories surrendered by a State and accepted by the Commonwealth pursuant to s. 111 were declared to be "subject to the exclusive jurisdiction of the Commonwealth". They were taken out of the boundaries of the surrendering State [31] . The Commonwealth acquired, subject to the Constitution, full sovereignty over a s. 111 territory [32] . Not only did a surrendering State lose legislative power over the s. 111 territory; it lost all "jurisdiction" over it, including executive and judicial power. To construe the word "places" in s. 52(i) as including areas within a s. 111 territory would therefore be otiose, for the exclusivity of the legislative power of the Parliament with respect to the "places" referred to in s. 52(i) was effected in any event by s. 111. But it was not otiose to provide that "places" within a State or the seat of government ("within territory in the State of New South Wales") should be subject to the exclusive legislative power of the Parliament.
1. The Commonwealth v Woodhill (1917), 23 C.L.R. 482, at pp. 486-487; Worthing v Rowell & Muston Pty Ltd (1970), 123 C.L.R., at pp. 124-125.
2. Reg. v Phillips (1970), 125 C.L.R., at p. 112; Worthing v Rowell & Muston Pty Ltd (1970), 123 C.L.R., at p. 126; and see Official Record of the Debates of the Australasian Federal Convention (Melbourne), 4 March 1898, vol. 4, p. 259.
Having regard to the purpose of s. 52(i) and the effect of a surrender and acceptance of territory under s. 111, I would construe "places" in s. 52(i) as being places outside a s. 111 territory. The R.A.A.F. Base at Darwin is not such a place, for the Northern Territory is a s. 111 territory. Therefore I would answer the questions reserved for the opinion of the Full Court as follows:
1. No.
2. No.
3. Unnecessary to answer.
Toohey J.
The defendant, Charles Edward Stewart, has been charged with three offences under the provisions of the Traffic Act 1987 (NT) and the regulations made thereunder. The complainant, Gottlieb Thomas Svikart, is a senior sergeant in the Northern Territory Police Force.
The first charge is of driving a motor vehicle on a public street, while having a concentration of alcohol in his blood in excess of that permitted. The second is of driving on a public street without due care. The third is of driving on a public street without being licensed to do so. The "public street" referred to in each of the charges is wholly within the R.A.A.F. Base, Darwin.
In the Court of Summary Jurisdiction at Darwin the defendant submitted that the Traffic Act had no application to streets within the R.A.A.F. Base because the base was a Commonwealth place within s. 52(i) of the Constitution and that only the Parliament of the Commonwealth could make laws in respect of such places. After the defendant and the complainant had made submissions to Mr. Lowndes S.M., the matter between the parties was removed into this Court.
The Chief Justice stated a case and reserved for the consideration of the Full Court of the Court questions which, as amended, read:
(i) Does s. 52(i) of the Constitution apply to places in the Northern Territory acquired by the Commonwealth for public purposes?
(ii) Is the R.A.A.F. Base Darwin a Commonwealth place within the meaning of s. 52(i) of the Constitution?
(iii) If yes to (i) and (ii), do the Acts and Regulations referred to in par. 1 of the Case Stated apply to the driving by the defendant of the motor vehicle on the R.A.A.F. Base?
There is in fact only one Act involved, the Traffic Act; the regulations are those made pursuant to that Act.
Status of R.A.A.F. Base
It is necessary, at the outset, to say something of the status of the land occupied by the R.A.A.F. Base. The base was originally acquired by the Commonwealth for defence purposes between 1938 and 1942. The circumstances in which the base was acquired were not detailed to the Court but it was said by the Solicitor-General for the Northern Territory that, during this period, "there were a large number of purchases or acquisitions from individuals and institutions".
The Northern Territory (Self-Government) Act 1978 Cth ("the Self-Government Act") provides that all interests of the Commonwealth in land in the Territory are, by force of the section, vested in the Territory on the commencing date (s. 69(2)). "Territory" is defined to mean "the Northern Territory of Australia" (s. 4(1)). The Northern Territory of Australia is established as a body politic, under the Crown, by that name (s. 5). However, the Act provides machinery whereby the Commonwealth, within one year after the commencing date, may acquire land from the Territory for a public purpose, without any liability for payment of compensation (s. 70). In essence, that acquisition is effected by notice of acquisition. Land so acquired is "vested in the Commonwealth" (s. 70(4)(a)). The R.A.A.F. Base was acquired by the Commonwealth from the Territory pursuant to s. 70 of the Self-Government Act and the Commonwealth of Australia is and was at the relevant date the registered proprietor in accordance with the Real Property (Special Provisions) Act 1979 (NT).
The Constitution
Section 52 of the Constitution reads:
The Parliament shall, subject to this Constitution, have exclusive power to make laws for the peace, order and good government of the Commonwealth with respect to —
(i) The seat of government of the Commonwealth, and all places acquired by the Commonwealth for public purposes;
(ii) Matters relating to any department of the public service the control of which is by this Constitution transferred to the Executive Government of the Commonwealth;
(iii) Other matters declared by this Constitution to be within the exclusive power of the Parliament.
In the present case it is a law of the Territory which, the defendant argues, has no application to the R.A.A.F. Base as a Commonwealth place. An examination of that argument requires some reference to decisions of the Court touching the operation of s. 52(i) in relation to Commonwealth places in the States.
In Worthing v Rowell & Muston Pty Ltd [33] the Court held that a law of New South Wales regulating the conduct of persons engaged in building operations had no application to the R.A.A.F. Base at Richmond. That base was owned by the Commonwealth and had been acquired for the purpose of a base before the law came into force. The Court applied this decision in Attorney-General (N.S.W.) v Stocks & Holdings (Constructors) Pty Ltd [34] to hold that a law of New South Wales bringing into operation a building scheme had no application to land acquired by the Commonwealth for use as a rifle range for the defence forces of the Commonwealth. In Reg. v Phillips [35] the Court held that on the acquisition by the Commonwealth of land for the purpose of an air force base, the operation of State laws formerly applicable to that place had been terminated. Accordingly, an indictment against the defendant under the Criminal Code (WA), charging him with an offence committed at the base, did not disclose an offence under the laws of Western Australia.
1. (1970) 123 C.L.R. 89.
2. (1970) 124 C.L.R. 262.
3. (1970) 125 C.L.R. 93.
The problems raised by these decisions were met by the enactment of the Commonwealth Places (Application of Laws) Act 1970 Cth ("the Application of Laws Act"). Section 3 defines "Commonwealth place" to mean:
a place (not being the seat of government) with respect to which the Parliament, by virtue of s. 52 of the Constitution, has, subject to the Constitution, exclusive power to make laws for the peace, order and good government of the Commonwealth.
Section 4 of the Application of Laws Act sets out a formula for the operation of State laws in Commonwealth places. For present purposes it is enough to mention only s. 4(1) which reads:
The provisions of the laws of a State as in force at a time (whether before or after the commencement of this Act) apply, or shall be deemed to have applied, in accordance with their tenor, at that time in and in relation to each place in that State that is or was a Commonwealth place at that time.
Section 4 applies only to the laws of a State; it has nothing to say as to the laws of a territory.
The defendant's argument
The defendant's argument has the virtue of succinctness. It is that s. 52(i) of the Constitution grants exclusive power to the Parliament to legislate with respect to Commonwealth places. The Application of Laws Act does not apply to the Territory. The only effective legislation with respect to Commonwealth places in the Territory can be legislation which has been enacted by the Parliament. Therefore the Traffic Act (NT) and regulations made thereunder can have no application to the R.A.A.F. Base, which is a Commonwealth place.
The complainant's answer
The complainant's answer can likewise be stated succinctly although it was the subject of considerable elaboration. Put shortly it is that s. 52(i) has no application to places in the Territory acquired by the Commonwealth for public purposes and that, if it does have application, the Commonwealth has empowered the Legislative Assembly of the Territory to legislate for such places, subject only to any inconsistent laws of the Parliament. And there are no inconsistent laws.
The complainant's submissions relied upon the reasoning which Muirhead J. found persuasive in Pryce v King [36] . In that case the defendant was charged with offences under the Traffic Act (NT) in relation to the driving of a vehicle on a public roadway at Darwin Airport, land which was vested in the Commonwealth. Muirhead J. distinguished Worthing v Rowell on the ground that s. 52(i) did not apply to land within a territory and because the Traffic Act was an exercise of the plenary power granted by the Commonwealth to the Territory Government under the Self-Government Act, pursuant to s. 122 of the Constitution.
1. (1985) 37 N.T.R. 19.
The proper construction of s. 52(i)
The R.A.A.F. Base is unquestionably a place which was acquired by the Commonwealth for a public purpose, namely, defence. However, the complainant submitted that, as a matter of construction, the power conferred by s. 52(i) applies only to places in a State and not to places in a territory. This argument had the support of the Commonwealth and the Australian Capital Territory, both of which were interveners. The submission contended that an examination of the Convention Debates shows clearly that s. 52(i) was intended to have operation in the States only.
Reference may be made to the Convention Debates in order to identify the contemporary meaning of language used in s. 52(i), and the subject to which that language was directed [37] . There is no doubt that in their consideration of what ultimately became s. 52(i) the framers of the Constitution had in mind Art. 1, s. 8 of the Constitution of the United States, which reads:
The Congress shall have power to exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of Particular States, and the Acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards and other needful Buildings. (Emphasis added.)
1. Cole v Whitfield (1988), 165 C.L.R. 360, at p. 385; New South Wales v The Commonwealth (the Incorporation Case) (1990), 169 C.L.R. 482, at p. 501.
The initial draft of cl. 53(2) of the Australian Constitution, which became s. 52(i), reflected closely its American counterpart. It gave to the Parliament exclusive power to make laws with respect to:
The government of any territory which may by surrender of any state or states and the acceptance of the parliament become the seat of government of the commonwealth, and the exercise of like authority over all places acquired by the commonwealth, with the consent of the parliament of the state in which such places are situate for the construction of forts, magazines, arsenals, dockyards, quarantine stations, or for any other purposes of general concern. (Emphasis added.)
In this form cl. 53(2) was adopted at the National Australasian Convention of 1891 in Sydney and appeared in the draft Bill of that year.
However, at the Convention Debates of 1898 in Melbourne it was agreed to omit "with the consent of the State in which such places are situate". A proposal to omit the words "by the surrender of any State and the acceptance of the Commonwealth" was discussed but then withdrawn [38] . The draft Bill proposed at the end of the Melbourne Convention was in the form in which s. 52(i) appears in the Constitution, that is, with no reference to Commonwealth places in States.
1. See Official Record of the Debates of the Australasian Federal Convention (Melbourne), 4 March 1898, p. 1874.
The drafting history of the provision is too inconclusive to support the complainant's contention that s. 52(i) was to be limited to Commonwealth places in States only. If anything, the omission agreed to in 1898 strengthens the argument that s. 52 is not confined to places within the States but rather confers an exclusive power on the Parliament.
The complainant relied on Reynolds v The People [39] which held that Art. 1, s. 8 of the Constitution of the United States had no application to a federal military reservation within Colorado Territory because the Territory was an emanation of Federal Power. But it must be kept in mind that Art. 1, s. 8 gave Congress exclusive legislative power over all places purchased by "the consent of the State" in which it was situated. The deliberate omission of any reference to "the consent of the State" in the Australian provision renders the U.S. case of no persuasive value in the present context.
1. (1869) 1 Colo. 179.
Confirmation that s. 52(i) is not confined to places within the States may be found in s. 125 of the Constitution. That section, which is part of Ch. VII Miscellaneous, provides that the seat of Government of the Commonwealth "shall be determined by the Parliament, and shall be within territory which shall have been granted to or acquired by the Commonwealth". Speaking of that section in Paterson v O'Brien [40] , the Court said:
So far as the Australian Capital Territory is concerned, s. 125 contemplated that such a territory, vested in the Commonwealth by surrender or acquisition, should be geographically in New South Wales. Thus it was contemplated that in due course the State of New South Wales should surrender part of its territory to the Commonwealth to form a Commonwealth Territory, wherein the seat of Government of the Commonwealth would be sited.
1. (1978) 138 C.L.R. 276, at p. 280.
Plainly s. 52(i), so far as it confers exclusive power on the Parliament in regard to the seat of government, must be taken as referring to a place in a territory, indeed only in a territory. It follows that in a paragraph which deals both with the seat of government and places acquired by the Commonwealth, there is no good reason for confining "places" to places in a State.
Purpose of s. 52(i)
The complainant further submitted that the only purpose of s. 52(i) is to provide the Commonwealth with exclusive legislative power over places it may acquire for public purposes and to ensure that the Commonwealth is free from State interference in those places. And, the submission continued, the Commonwealth already has exclusive legislative power over a territory by reason of s. 122 of the Constitution. As the interests of the Commonwealth are adequately protected by the overriding power in s. 122, it does not need to rely upon s. 52(i) in the present case and that provision should not be read as requiring it to do so.
But the scope of s. 122 may be qualified by other provisions in the Constitution. In Capital Duplicators Pty Ltd v Australian Capital Territory [41] , Brennan, Deane and Toohey JJ. approached s. 122 on the footing expressed by Kitto J. in Lamshed v Lake [42] , namely:
the necessity of adopting an interpretation which will treat the Constitution as one coherent instrument for the government of the federation, and not as two constitutions, one for the federation and the other for its territories.
Their Honours concluded [41] :
It would therefore be erroneous to construe s. 122 as though it stood isolated from other provisions of the Constitution which might qualify its scope.
1. (1992) 177 C.L.R. 248, at p. 272.
2. (1958) 99 C.L.R. 132, at p. 154. See also Spratt v Hermes (1965), 114 C.L.R. 226, at p. 242, per Barwick C.J.
3. (1992) 177 C.L.R. 248, at p. 272.
Capital Duplicators was concerned with the power of the Legislative Assembly of the Australian Capital Territory to impose duties of excise within the meaning of s. 90 of the Constitution. The Court held that the term "exclusive" in s. 90 makes the legislative power of the Parliament in respect of duties of customs and excise and of bounties exclusive of any other legislative power, including one created pursuant to s. 122 [43] . In the course of their judgment, Brennan, Deane and Toohey JJ. made reference to s. 52(i) so far as that provision conferred exclusive power on the Parliament to make laws with respect to "The seat of government of the Commonwealth". As their Honours observed [44] :
It would be surprising if laws made by an independent legislature for the seat of government of the Commonwealth, or executive action taken pursuant to those laws, could affect the performance of any function of the government of the Commonwealth, any facility used in the performance of such a function or any otherwise lawful provision — legislative or executive — which the organs of that government wished to make for the performance of any of its functions.
1. (1992) 177 C.L.R., at p. 277, per Brennan, Deane and Toohey JJ.; p. 290, per Gaudron J.
2. ibid., at p. 273.
In vesting in the Parliament exclusive power to make laws with respect to places acquired by the Commonwealth for public purposes, the Constitution evinces no reason why that power should be exclusive of the States but not exclusive of a territory to which the Commonwealth has entrusted legislative functions. Section 52(i) must be seen as conferring upon the Parliament, exclusive of any other law-making authority, the power to make laws relating to places acquired by the Commonwealth for public purposes.
The legislative power of the Northern Territory
To resolve questions of construction and purpose in this way does not dispose of the complainant's case. His argument takes the further step that, in any event, the Commonwealth has empowered the Legislative Assembly of the Territory, with the assent required by the Self-Government Act, to make laws relating to Commonwealth places, subject to any overriding laws of the Parliament.
Section 6 of the Self-Government Act empowers the Legislative Assembly, with the assent of the Administrator or the Governor-General, to make laws "for the peace, order and good government of the Territory". There is a power of disallowance in the Governor-General (s. 9(1)).
In exercising its legislative function, the Legislative Assembly is not acting as a delegate of the Commonwealth. This is in contrast to the capacity of the Parliament to confer upon the Executive a power to legislate upon some matter within the legislative power of the Parliament [45] . What was said by Brennan, Deane and Toohey JJ. in Capital Duplicators [46] in relation to the Australian Capital Territory applies equally here, namely, that the power to make laws for the peace, order and good government of the Territory is a plenary power and that the Parliament intended the Legislative Assembly to have plenary power, subject to the Constitution. Indeed, speaking of s. 6 of the Self-Government Act some ten years earlier, Wilson J. said [47] :
Section 6 invests the Legislative Assembly with power to make laws for the peace, order and good government of the Territory, a power which in my opinion, subject to the limits provided by the Act, is a plenary power of the same quality as, for example, that enjoyed by the legislatures of the States. The constitution of the Territory as a self-governing community is no less efficacious because it emanates from a statute of the Parliament of the Commonwealth than was the constitution of the Australian colonies as self-governing communities in the nineteenth century by virtue of an Imperial statute.
The Legislative Assembly exercises, not the Parliament's powers, but its own. Once that is understood, many of the arguments relied upon by the complainant and the interveners fall away.
1. See Victorian Stevedoring & General Contracting Co. Pty Ltd v Dignan (1931), 46 C.L.R. 73.
2. (1992) 177 C.L.R., at p. 281.
3. Reg. v Toohey; Ex parte Northern Land Council (1981), 151 C.L.R. 170, at p. 279.
The complainant contends that, relevantly, s. 52(i) and s. 122 of the Constitution are in competition. The argument is that when the Commonwealth acquired the Northern Territory in 1911, the Parliament was empowered by s. 122 to make laws for the government of that territory, a power which is not expressed to be subject to the Constitution and which does not depend on s. 52(i), so far as places acquired by the Commonwealth are concerned. It was therefore competent for the Parliament, so the argument runs, to empower the Legislative Assembly of the Territory to make laws having operation in a place acquired by the Commonwealth.
In Teori Tau v The Commonwealth [48] the Court spoke of the source of power in s. 122 as "general and unqualified" and the grant of legislative power by that section as "plenary in quality". But, as has been said earlier in this judgment, the scope of s. 122 may be qualified by other provisions in the Constitution. While the Commonwealth may conceivably delegate the power to legislate in respect of places acquired by it, there has been no delegation in the present case. The Parliament has conferred on the Territory plenary powers which, like the powers of the States, are subject to the Constitution. Being subject to the Constitution, they are subject to s. 52(i), that is, to the exclusive power of the Parliament to make laws with respect to places acquired by the Commonwealth for public purposes.
1. (1969) 119 C.L.R. 564, at p. 570.
The R.A.A.F. Base, being a Commonwealth place, and the Application of Laws Act having no application to the Territory, the Legislative Assembly lacks power to make laws "with respect to" the base. It is a consequence of what has been said that Pryce v King should not be followed.
Since writing these reasons, I have read the judgment of Gaudron J. in which her Honour entertains serious doubt whether traffic laws are properly classified as laws "with respect to a place acquired by the Commonwealth for public purposes". For my part, it is enough to record that no argument to this effect was addressed to the Court nor was the authority of Reg. v Phillips challenged.
The questions reserved must therefore be answered:
(i) Yes.
(ii) Yes.
(iii) No.
Gaudron J.
The facts and the questions reserved for the consideration of the Full Court are set out in the joint judgment of Mason C.J., Deane, Dawson and McHugh JJ. and in the judgments of Brennan J. and Toohey J. The questions require consideration of s. 52 of the Constitution which is as follows:
The Parliament shall, subject to this Constitution, have exclusive power to make laws for the peace, order, and good government of the Commonwealth with respect to —
(i) The seat of government of the Commonwealth, and all places acquired by the Commonwealth for public purposes;
(ii) Matters relating to any department of the public service the control of which is by the Constitution transferred to the Executive Government of the Commonwealth;
(iii) Other matters declared by this Constitution to be within the exclusive power of the Parliament.
The first question that arises is whether s. 52(i) applies to places acquired by the Commonwealth for public purposes ("Commonwealth places") in the Northern Territory ("the Territory"). The terms of s. 52(i) are perfectly general and, as a matter of ordinary language, they clearly extend to places in the Territory. If s. 52(i) does not extend to them, it can only be because of an implication to that effect. And if s. 52 is approached on the basis that it is primarily a grant of legislative power, there is little scope for that or, indeed, any implication, for it is well settled that a grant of legislative power is to be construed according to its terms "without making implications or imposing limitations which are not found in the express words" [49] .
1. Reg. v Public Vehicles Licensing Appeal Tribunal (Tas.); Ex parte Australian National Airways Pty Ltd (1964), 113 C.L.R. 207, at p. 225. See also F.A.I. General Insurance Co. Ltd. v Southern Cross Exploration N.L. (1988), 165 C.L.R. 268, at pp. 284-285, 290; Knight v F.P. Special Assets Ltd. (1992), 174 C.L.R. 178, at pp. 185, 202-203, 205.
Three of the Justices who constituted the majority in Worthing v Rowell & Muston Pty Ltd [50] seem to have proceeded on the basis that s. 52 is first and foremost a grant of legislative power. Certainly that was the approach taken by Barwick C.J. who said that "in approaching the construction of this provision of the Constitution it is well to be reminded that it is a constitutional power to legislate which we have to interpret" [51] . The approach taken by Windeyer J. was more tentative. His Honour thought, at first, "that a law in respect of a place must be supported by some specific head of power to be found elsewhere in the Constitution and that all that the section does is to make exclusive the exercise of that power in respect of the place", but concluded that that was "probably too narrow a view". His conclusion was based on the consideration that, although laws with respect to many places, including post offices, quarantine stations and military barracks, can be enacted under s. 51, "there may be places which are validly acquired by the Commonwealth for some public purpose not obviously embraced by any specific head of legislative power or the incidental power" [52] . On the other hand, Kitto J., who was in the minority in that case, was clearly of the view that the primary function of the second part of s. 52(i) was not to add "to the constitutional scheme for the distribution of legislative powers" but to make explicit what would otherwise have been implied, namely, that "the Parliament of the Commonwealth, and it alone, is the intended repository of power to make any laws that are to be made on the subject of [places acquired by the Commonwealth for public purposes]" [53] .
1. (1970) 123 C.L.R. 89.
2. ibid., at p. 96; see also p. 113, per Menzies J.; p. 136, per Walsh J.
3. ibid., at p. 127.
4. (1970) 123 C.L.R., at pp. 110-111.
There is, in my view, much to be said for approaching s. 52 on the basis that it is primarily concerned with the exclusivity of powers found elsewhere in the Constitution, not the conferral of power. And that is so even if there is also scope for its operation as an independent source of legislative power. On that approach, its primary purpose is to effect a prohibition in much the same way as s. 51(xxxi) which, although it grants legislative power, effects a prohibition on the acquisition of property other than on "just terms" [54] . And notwithstanding the decision in Worthing v Rowell & Muston Pty Ltd , there is much to be said for the view that, just as a law which affects property interests "as an incident of, or a means for enforcing, some general regulation of the conduct, rights and obligations of citizens in relationships or areas which need to be regulated in the common interest" [55] is not properly characterized as a law for the acquisition of property within the meaning of s. 51(xxxi), a general regulatory law of the same kind which only incidentally affects Commonwealth places is not properly characterized as a law with respect to those places. However, that is of no present relevance as there is no issue as to the correctness of the decision in Worthing v Rowell & Muston Pty Ltd and the later cases on s. 52 [56] . What is relevant is that if s. 52(i) is approached on the basis that it is not primarily a grant of legislative power, there may be more scope for implication than would otherwise be the case.
1. Section 51(xxxi) confers legislative power with respect to: "The acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws."
2. Mutual Pools & Staff Pty Ltd v The Commonwealth (1994), 179 C.L.R. 155, at pp. 189-190. See also Georgiadis v Australian and Overseas Telecommunications Corporation (1994), 179 C.L.R. 297, at p. 307.
3. Attorney-General (N.S.W.) v Stocks & Holdings (Constructors) Pty Ltd (1970), 124 C.L.R. 262; Reg. v Phillips (1970), 125 C.L.R. 93.
The argument that s. 52(i) does not apply to Commonwealth places in the Territory was made by reference to the amplitude of the Commonwealth's powers with respect to territories. In this regard, the argument relied on s. 111 of the Constitution which provides for the Commonwealth to have "exclusive jurisdiction" over territory surrendered by a State [57] and on s. 122 which confers legislative power on the Commonwealth for the government of internal and external territories [58] . It was put that these powers are such that there is no need for any other power with respect to Commonwealth places in the internal territories and, in the light of the "exclusive jurisdiction" conferred by s. 111 and in contradistinction to the position relating to Commonwealth places in a State, no need for the legislative power to be made exclusive. It was also put, by reference to the same considerations, that s. 52 is concerned only with the distribution of powers between the Commonwealth and the States and that "places" in s. 52(i), thus, means "places in a State".
1. Section 111 provides: "The Parliament of a State may surrender any part of the State to the Commonwealth; and upon such surrender, and the acceptance thereof by the Commonwealth, such part of the State shall become subject to the exclusive jurisdiction of the Commonwealth."
2. Section 122 provides: "The Parliament may make laws for the government of any territory surrendered by any State to and accepted by the Commonwealth, or of any territory placed by the Queen under the authority of and accepted by the Commonwealth, or otherwise acquired by the Commonwealth, and may allow the representation of such territory in either House of the Parliament to the extent and on the terms which it thinks fit."
There are two difficulties with the argument that s. 52(i) does not apply to places in the Territory. First, it is clear from s. 125 [59] that the seat of government must be "within territory granted to or acquired by the Commonwealth" (to which both ss. 111 and 122 apply) and yet the first part of s. 52(i) is expressly concerned with the power to legislate with respect to the seat of government.
1. Section 125 provides: "The seat of Government of the Commonwealth shall be determined by the Parliament, and shall be within territory which shall have been granted to or acquired by the Commonwealth, and shall be vested in and belong to the Commonwealth "
The second difficulty with the argument is that s. 52(i) was modelled on Art. 1, s. 8, cl. 17 of the Constitution of the United States of America [60] which, because of the status of the federating states as sovereign independent states, was concerned to deal with the position of places purchased in those states [61] . Indeed, the earlier draft of what is now s. 52(i) closely followed the wording of Art. 1, s. 8, cl. 17 and was limited to places in the States [62] . Whatever the reason which led to the final formulation of s. 52(i), the deletion from the earlier draft of words which would have confined its operation to places in a State presents a formidable, if not insuperable, barrier to the implication of an exception to the same effect. In this regard, it is sufficient to note the rule that a term cannot be implied in a contract if it appears from the contract that the parties adverted to the point and deliberately refrained from dealing with it [63] .
1. Art. 1, s. 8, cl. 17 provides: "The Congress shall have power To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards and other needful Buildings."
2. For a comparison with the different status of the Colonies which, on federation, became the Australian States, see Worthing v Rowell & Muston Pty Ltd (1970), 123 C.L.R., at pp. 99-100, per Barwick C.J.
3. Clause 53 of the draft Bill, as debated at the Sydney Convention in 1891, was expressed to confer power on the Parliament with respect to: "The government of any territory which may by surrender of any State or States and the acceptance of the parliament become the seat of government of the commonwealth, and the exercise of like authority over all places acquired by the commonwealth, with the consent of the parliament of the State in which such places are situate, for the construction of forts, magazines, arsenals, dockyards, quarantine stations, or for any other purposes of general concern." See Official Record of the Debates of the Australasian Federal Convention (Sydney), 3 April 1891, pp. 701-702. The reference to "the consent of the State in which such places are situate" was later removed at the Melbourne Convention in 1898. See Official Record of the Debates of the Australasian Federal Convention (Melbourne), 4 March 1898, p. 1874.
4. See Heimann v The Commonwealth (1938), 38 S.R. (N.S.W.) 691, at p. 695, per Jordan C.J. See also Chandler Bros. Ltd. v Boswell [1936] 3 All ER. 179, at pp. 186-187; Maritime National Fish Ltd. v Ocean Trawlers Ltd. [1935] AC. 524, at p. 529; Codelfa Construction Pty Ltd v State Rail Authority of N.S.W. (1982), 149 C.L.R. 337, at pp. 352-354, per Mason J.; p. 403, per Brennan J. Note also the rule referred to in Heimann (1938), 38 S.R. (N.S.W.), at pp. 695-696, that "[w]here a term is not expressed in a contract, but would be implied by law, its implication may be excluded by proof that both parties agreed or intended to exclude the term".
By far the greatest difficulty with the argument that s. 52(i) does not apply to places in the Territory is that an implication is not to be made lightly and, certainly, not in disregard of the language of the Constitution. And that is so even if s. 52(i) is approached on the basis that it is not primarily a grant of legislative power.
So far as the issue in this case is concerned, there are two ways in which an implication might be read into s. 52(i). The first is to read "exclusive" as though it were "exclusive of the States but not the territories". The second is to read "places acquired" as "places acquired in a State". In my view, both approaches are inconsistent with the language of the Constitution.
It is convenient to consider the meaning of exclusive in s. 52 by reference to the meaning of the same word in s. 90. By that latter provision, the legislative power to impose duties of customs and excise and to grant bounties is made exclusive to the Commonwealth. It was held in Capital Duplicators Pty Ltd v Australian Capital Territory [64] that "exclusive" in s. 90 is not to be read as "exclusive of the States" but as "exclusive of the States and the territories" or, more accurately, that s. 90 is to be read according to its terms. The meaning of exclusive in s. 90 necessarily bears on the meaning of s. 52, not only because the same word is used in both provisions but because s. 52 and s. 90 overlap. That is because s. 52(iii) is concerned with "[o]ther matters declared by [the] Constitution to be within the exclusive power of the Parliament" which necessarily includes the imposition of duties of customs and excise and the granting of bounties.
1. (1992) 177 C.L.R. 248.
It is rare enough for the same word to be construed differently in the one document. It is rarer still for the same word to mean different things depending on whether it is read in conjunction with one rather than another part of the very provision in which it appears. Yet that is what is involved if "exclusive" is read as "exclusive of the States" in s. 52(i) for, consistent with the decision in Capital Duplicators, it must mean "exclusive of the States and the territories" when read with s. 52(iii), at least in its application to duties of customs and excise and the grant of bounties.
There is another reason for not reading exclusive in s. 52(i) as meaning "exclusive of the States but not the territories". In ordinary usage, "exclusive" is a word the precise content of which depends on the specification of those to whom exclusivity is to attach or those who are to be excluded. Of course, its content may sometimes depend on the specification of both. But whatever method is used, the word "exclusive" is a word that calls out for specification. Exclusive to whom? Exclusive of whom? It is not a word the content of which is ordinarily left to speculation or, even, implication. Nor is it left to implication in s. 52. The section specifies to whom the power is exclusive, namely, the Parliament of the Commonwealth. Given that specification, to read "exclusive" as "exclusive of the States and not of the territories" is to give s. 52 a new and different meaning, not merely to imply an exception. That cannot be done.
The difficulties associated with reading the phrase "all places acquired by the Commonwealth for public purposes" as though it were confined to places in the States are as great, in my view, as reading "exclusive" to mean "exclusive of the States but not the territories". First, there is the difficulty to which I have already referred, namely, the difficulty of making an implication to the same effect as an earlier draft which, for whatever reason, did not become the final constitutional provision. And of greater significance, is the difficulty involved in implying a limitation or exception when the expression used is "all places acquired by the Commonwealth", not merely "places acquired by the Commonwealth". The adjective "all" when used in association with the completely general expression, "places acquired by the Commonwealth", signifies that there is to be no exception whatsoever.
There is, in my view, another and more fundamental reason why "exclusive" in s. 52(i) cannot be read as "exclusive of the States but not the territories" and why "places acquired by the Commonwealth" cannot be read as "places acquired in a State by the Commonwealth". It is this: although there are differences between a territory and a State and, although the power to legislate for the government of a territory conferred by s. 122 of the Constitution is different from the power to legislate with respect to identified topics conferred by s. 51, the internal territories are part of the Commonwealth of Australia and Australians resident in those territories are part of its body politic. Whatever be the differences that the Constitution dictates for the territories and for territorians, there is, in my view, no basis for implications which exacerbate or add to those differences. After all, and as Kitto J. said in Lamshed v Lake [65] , it is necessary to adopt "an interpretation which will treat the Constitution as one coherent instrument for the government of the federation, and not as two constitutions, one for the federation and the other for its territories".
1. (1958) 99 C.L.R. 132, at p. 154.
In my view, s. 52(i) of the Constitution applies to Commonwealth places in the Northern Territory. It is thus necessary to consider the second of the questions reserved which, in effect, asks whether the R.A.A.F. Base at Darwin is a Commonwealth place. Given the manner in which the Commonwealth came to acquire the Base, as set out in the judgment of Toohey J., and given the decisions in Worthing v Rowell & Muston Pty Ltd , which concerned the Air Force Base at Richmond in New South Wales, and Reg. v Phillips [66] , which concerned the Pearce Air Force Base in Western Australia, there can be no doubt that it is a Commonwealth place.
1. (1970) 125 C.L.R. 93.
The third of the questions reserved for the consideration of the Full Court asks, in effect, if the Traffic Act 1987 (NT) and the regulations made thereunder ("the traffic laws") apply on the R.A.A.F. Base at Darwin. I agree with Toohey J., essentially for the reasons that his Honour gives, that they do not. However, that agreement flows, in large part, from the fact that I am constrained by the authority of Reg. v Phillips which decided that s. 52(i) precluded the operation of the Criminal Code Act 1913 (WA) ("the Code") within the Pearce Air Force Base. The traffic laws, like the Code, apply generally to regulate conduct which must be regulated in the common interest. As I earlier indicated, I think there is good reason to approach s. 52 in much the same way as s. 51(xxxi), particularly when it comes to the characterization of a law which is said to infringe its prohibition, and, were the matter free of authority, I would entertain serious doubt whether the traffic laws are properly classified as laws "with respect to a place acquired by the Commonwealth for public purposes".
The questions reserved should be answered:
(i) Yes.
(ii) Yes.
(iii) No. |
high_court_of_australia:/showbyHandle/1/10042 | decision | commonwealth | high_court_of_australia | text/html | null | Lindner v Murdoch's Garage [1950] HCA 48 | https://eresources.hcourt.gov.au/showbyHandle/1/10042 | 2024-09-13T22:54:01.321253+10:00 | High Court of Australia
Latham C.J. McTiernan, Webb, Fullagar and Kitto JJ.
Lindner v Murdoch's Garage
[1950] HCA 48
ORDER
Appeal allowed with costs. Judgment of Supreme Court discharged. Action dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
Nov. 21
Latham C.J.
In an action by a firm called Murdock's Garage against F. R. W. Lindner an injunction was granted restraining the defendant for a period of one year from 4th February 1950 from being employed by any person or company in any business similar to that of the plaintiffs' within five miles from the plaintiffs' premises in Crystal Brook. The judgment was founded upon an agreement in writing made between the plaintiff firm and the defendant on 10th August 1946 when the defendant became an employee of the plaintiff firm at its motor garage in the township of Crystal Brook, South Australia. The agreement provided for a rate of pay and for determination on either side by twenty-one days' notice, and contained the following clause:—"3. The workman will not during his employment or within one year from the termination thereof in any way carry on or be engaged concerned or interested either personally or as a partner or as a servant or employee of any other person or company in the business of garage proprietors, motor and general engineers, agents for the distribution of or dealers in motor accessories or in any other similar business now and hereafter carried on by the employers within the same area either personally or by his agent or by letters, circulars or advertisement in any way compete with the employers in any of the employer's business nor in any way interfere with the employer's customers nor solicit their custom nor use any information concerning the employers, their business or customers which may have been acquired by him through his employment for his own benefit or any person other than the employers or to the detriment or the intended detriment of the employers".
The meaning of the words "within the same area" is not clear if only the clause itself is considered, but there was a schedule to the agreement in the following terms: "This agreement shall apply to the sales territory for motor cars, trucks and tractors etc. of Murdock's Garage—Crystal Brook and Wirrabara". Sales agreements appointing Murdock's Garage as agents for the sale of some ten brands of motor cars and trucks within specified areas were proved. The schedule, therefore, defines the area within which the restriction of clause 3 is to apply.
In February 1950, the defendant left the employment of the plaintiff and became an employee of East Bros., who had recently opened a motor garage at Crystal Brook two or three hundred yards away from the plaintiffs' garage. There is no doubt as to the breach by the defendant of clause 3, if it is valid.
By the injunction the first part of clause 3 is enforced but no case was made based upon the provision in the clause prohibiting solicitation of customers, no solicitation of customers by the defendant having been proved.
It was contended for the defendant that he was simply a garage hand and that the relevant part of clause 3, therefore, was directed towards protection of the plaintiff from mere competition. It was urged that no authority was to be found which could justify the upholding of a restraint upon trade in the case of such an occupation as that of a garage hand.
It is well established that prima facie all restraints upon trade are invalid, but that they may be upheld if the party seeking to enforce them shows that circumstances exist which make the restraint reasonably necessary for protection of a covenantee's business and that it is not contrary to public interests. A distinction is drawn between a restraint upon trade included in an agreement for the sale of a business and a restraint included in an agreement with an employee. The restraint is more easily upheld in the former than in the latter case. In the former case the purchaser is entitled to protect himself against competition on the part of the vendor, but in the latter case he cannot acquire such a right by agreement with the employee: Herbert Morris Ltd. v. Saxelby [1] ; Attwood v. Lamont [2] . It is sometimes said as, for example, in Attwood v. Lamont [2] that a restraint of trade, in order to be valid, must be in the interests of both parties, the covenantor and the covenantee. The restraint in itself may obviously be advantageous to the covenantee. It is difficult to see how any restraint in itself can ever be advantageous to the covenantor, though it may be that he would not, in the case of employer and employee, have been able to obtain employment from the employer, or in the case of the sale of a business, have been accepted as a purchaser of the business, unless he had entered into the covenant. The true meaning of the proposition that the restraint must be in the interests of both parties is explained by Isaacs J. in Brightman v. Lamson Paragon Ltd. [3] , and see Herbert Morris Ltd. v. Saxelby [4] . Where an employee has access to trade secrets or other confidential information he may be restrained by agreement from communicating those secrets or such information to other persons, and particularly to competitors in trade with his employer. Again, an employee who is brought into personal contact with the customers of his employer may by agreement effectively bind himself to abstain after his term of service has been completed from soliciting the customers of his former employer. In these cases the covenant in restraint of trade is not a covenant against mere competition but is a covenant directed to securing a reasonable protection of the business interest of the employer, and in the circumstances is not unjust to the employee. The interest which can validly be protected is the trade connection, the goodwill of the business of the employer.
1. (1916) 1 A.C. 688.
2. (1920) 3 K.B. 571.
3. (1920) 3 K.B. 571.
4. (1913) 18 C.L.R. 331, at p. 337.
5. (1916) 1 A.C., 688, at p. 707.
These propositions are established by many decisions. In Mason v. Provident Clothing & Supply Company [1] , which was a case of a servant employed as a canvasser to obtain customers for his employers, it was held that if the employers had been "content with asking him to bind himself not to canvass within the area where he had actually assisted in building up the goodwill of their business, or in an area restricted to places where the knowledge which he had acquired in his employment could obviously have been used to their prejudice, they might have secured a right to restrain him within these limits" [2] . The restraint which was under consideration in that case went beyond a restriction upon canvassing customers and was held to be bad. It will be observed that the learned lords were of opinion that a clause which was really directed towards preventing an employee, after his employment had ceased, from taking away customers from his employer was not necessarily invalid.
1. (1913) A.C. 724.
2. (1913) A.C. 724, at pp. 731, 732; see also pp. 734, 741.
In Herbert Morris Ltd. v. Saxelby [3] , the same principles were recognised and applied. In that case a covenant by a draughtsman not to enter into any form of employment with any person carrying on the manufacture and sale of particular machinery was held to be invalid because it was in the circumstances a covenant against what was described as "competition per se". Lord Atkinson said [4] that the employer "is undoubtedly entitled to have his interest in his trade secrets protected, such as secret processes of manufacture which may be of vast value. And that protection may be secured by restraining the employee from divulging these secrets or putting them to his own use. He is also entitled not to have his old customers by solicitation or such other means enticed away from him. But freedom from all competition per se apart from both these things, however lucrative it might be to him, he is not entitled to be protected against. He must be prepared to encounter that even at the hands of a former employee". Lord Parker of Waddington referring to covenants against competition by a servant, said [5] :—"Wherever such covenants have been upheld it has been on the ground, not that the servant or apprentice would, by reason of his employment or training, obtain the skill and knowledge necessary to equip him as a possible competitor in the trade, but that he might obtain such personal knowledge of and influence over the customers of his employer, or such an acquaintance with his employer's trade secrets as would enable him, if competition were allowed, to take advantage of his employer's trade connection or utilize information confidentially obtained". Thus the acquisition of personal knowledge of, and of an influence over customers, is an element to be considered in relation to the possibility, "if competition were allowed", of "taking advantage of an employer's trade connection". It was said in Mason's Case [1] per Lord Moulton, that the first task of the court in dealing with a covenant in restraint of trade is to ascertain with due particularity the nature of the master's business and of the servant's employment therein.
1. (1916) 1 A.C. 688.
2. (1916) 1 A.C., at p. 702.
3. (1916) 1 A.C., at p. 709.
4. (1913) A.C., at p. 742.
In the present case there is no evidence that the defendant obtained or was expected to obtain any knowledge of trade secrets of his employers. He was, however, brought into close and daily touch with customers who brought in their cars for servicing and repairs, and in a small country town (the population of the district of Crystal Brook is some one thousand five hundred persons) he would develop relations of intimacy with the persons with whom he dealt on behalf of the plaintiffs. Napier C.J. heard evidence on behalf of the plaintiffs, the defendant calling no evidence. His Honour's finding on the nature of the work which the defendant did and the significance thereof in relation to the matter in issue between the parties was:—"If he should stay as he did—for a period of years, he might expect to qualify himself to set up in business on his own account, or to obtain other employment, in some similar capacity, but, from the plaintiff's point of view, the employment must necessarily bring the defendant into constant and intimate contact with the customers of the garage. He was a stranger in the district, but he would not only get to know the customers, but they would get to know him, and—if he stayed on—it would be on the footing that he had their trust and confidence. If he should then leave the plaintiffs' service, and set up in business on his own account or take other employment in the same neighbourhood, he would be in a position to take with him some part of the goodwill of the garage business, and it might well be a very substantial part. It seems to me that there is a difference, in this respect, between a garage in the city and a garage in a country township like Crystal Brook. Even in the city I think that the risk would be appreciable, but in a township like Crystal Brook I think that it would be manifest". In my opinion these conclusions are supported by the evidence, which shows that all the customers of the plaintiff who required their cars to be serviced or repaired would normally deal with the defendant. I base my judgment upon these findings.
Where an employee is in a position which brings him into close and personal contact with the customers of a business in such a way that he may establish personal relations with them of such a character that if he leaves his employment he may be able to take away from his former employer some of his customers and thereby substantially affect the proprietary interest of that employer in the goodwill of his business, a covenant preventing him from accepting employment in a position in which he would be able to use to his own advantage and to the disadvantage of his former employer the knowledge of and intimacy with the customers which he obtained in the course of his employment should, in the absence of some other element which makes it invalid, be held to be valid. Reference has already been made to the right of an employer to protect his "trade connection"—a right recognised in cases in which covenants were held to be invalid because they went beyond what was reasonably necessary to protect such a connection.
Each case must be considered in relation to its own circumstances. An ordinary garage hand employed in manual work in a garage is not brought into such relation with customers as to make it possible to uphold a covenant restraining him from taking other similar employment after leaving an employer. But, when the employee is the foreman in charge of a repair shop, particularly at a country garage where the population is limited and the relations between the customers and persons with whom they deal are on a more personal basis than in the city, the position is very different.
In Bowler v. Lovegrove [1] , upon which the defendant relied, it was held that a covenant restraining an employee who was an outside canvasser for a firm of estate agents was invalid because it was wider than was reasonably necessary for the protection of the plaintiff's business and was accordingly contrary to public policy. It was pointed out, however, that although the defendant came into personal contact with the plaintiff's customers that fact "lost its significance" when the duties of the defendant in connection with the business were considered [2] . It was pointed out that in that case the plaintiff's customers with whom the defendant came into personal contact were not "the ordinary recurring customers such as exist in most other businesses". This was the point of distinction which prevented the covenant from being held to be valid. In the present case the plaintiffs' customers with whom the defendant came into personal contact were the ordinary recurring customers of the plaintiffs. In Putsman v. Taylor [1] the court considered a covenant by an employee of a tailor that he would not for five years be employed in any capacity with any tailor carrying on business in three areas—A or B or C. It was held that the restriction was valid as to A and should be enforced. The decision was founded upon the distinction between employees in general and an employee who is concerned with the management of a business in such a way as to bring him into direct relations with the customers of the business. Salter J. said [2] :—"The relation between a master and the servant who manages his business for him is highly confidential. During the service he is in constant contact with the master's customers, and cannot fail to learn their names and addresses, their likes and dislikes, and something of their financial credit. Such knowledge can be used with effect, after the determination of the service, to induce such customers to transfer their custom to a new employer. Certain conduct of this kind will be restrained, as being in breach of implied terms in the contract of service: Robb v. Green [3] , and Louis v. Smellie [4] . Other conduct of this kind, though injurious to the late employer, will not be restrained in the absence of express agreement. Such agreement need not take the form of a covenant against solicitation. Such a covenant is difficult to enforce; it is difficult to show breach and difficult to frame an injunction. The master is entitled to protect himself by a covenant against competition, provided that it is not wider than is reasonably necessary to safeguard his proprietary interest against unfair use by the former servant of information gained during the service: see the judgment of Lord Sterndale M.R. in Attwood v. Lamont [5] ". In my opinion these principles apply to the present case. The defendant managed the repair shop, which was a most important section of the plaintiffs' garage, and was brought into close and intimate relations with the customers in such a way that when he left the employment he would be in a position to take away some, and perhaps a great deal, of the plaintiffs' business. I am therefore of opinion that the covenant, in its relevant terms, did not exceed what was reasonably necessary for the protection of the plaintiffs' interest in its business and is valid.
1. (1921) 1 Ch. 642.
2. (1921) 1 Ch., at p. 652.
3. (1927) 1 K.B. 637.
4. (1927) 1 K.B., at pp. 641, 642.
5. (1895) 2 Q.B. 315.
6. (1895) 11 T.L.R. 515.
7. (1920) 3 K.B. 578.
It was argued that the area within which the covenant applied, namely Wirrabara as well as Crystal Brook, was too wide because the defendant in fact was employed only at the garage at Crystal Brook and not at the garage at Wirrabara. But this fact in my opinion cannot affect the validity of the covenant. The validity of the covenant must be determinable at the time when the contract is made. The defendant might consistently with the terms of the contract have been employed in work either at Crystal Brook or Wirrabara. I can see no reason for holding that the area of the restraint is too wide. A covenant in restraint of trade is not invalid by reason of the area to which it applies unless the area exceeds that "fairly covered by the business of the covenantee at the date of the agreement or which might at that date reasonably be expected to be covered by such business on the expiration of the agreement" (Brightman v. Lamson Paragon Ltd. [1] ). The two areas are about ten miles apart. In relation to a motor garage business in the country and in view of the great mobility of modern motor cars, the areas should in my opinion be regarded as being contiguous for all practical purposes. No attempt was made to show that at the time when the contract was made (which, as I have said, is the relevant time) no persons in the Wirrabara area went or were likely to go to Crystal Brook for service or vice versa. If such evidence had been tendered it would in my opinion have been irrelevant because the business of the plaintiff in which the defendant accepted employment was a business which extended to both Crystal Brook and Wirrabara and he might have worked at either place. The validity of the covenant cannot be affected by the fact that it happened that his services were used at Crystal Brook only. But, if for some reason the covenant is held to be invalid in respect of Wirrabara, that fact does not afford a reason for holding it to be invalid in respect of Crystal Brook. The covenant relates to two separate areas and may quite well be valid as to one and invalid as to the other: see Putsman v. Taylor [2] ; Marquett v. Walsh [3] ; S. V. Nevanas & Co. v. Walker & Foreman [4] .
1. (1913) 18 C.L.R. 331.
2. (1927) 1 K.B. 637.
3. (1929) 29 S.R. (N.S.W.) 298; 46 W.N. 71.
4. (1914) 1 Ch. 413.
The plaintiffs, therefore, in my opinion, were entitled to an injunction applying to the areas covered by the sales agreements with respect to Crystal Brook and Wirrabara, or at least to Crystal Brook. They have been content to accept an injunction limited to an area within five miles of the plaintiffs' premises at Crystal Brook.
In my opinion the decision of the learned Chief Justice was right and the appeal should be dismissed.
McTiernan J.
This is an appeal by special leave of this Court. The appeal arises out of an action in which the appellant was the defendant and the respondent the plaintiff.
It was an action instituted in the Supreme Court of South Australia to enforce restrictive covenants in an agreement made between the plaintiff and the defendant. The agreement was dated 10th August 1946 and signed on 11th August, 1946. The action was tried by Napier C.J., who made an order restraining the breach of one of the covenants in the agreement.
The plaintiff is a firm carrying on the business of garage proprietors motor and general engineers, distributors of and dealers in motor vehicles, spare parts and electrical goods. It carries on business in two townships, Crystal Brook and Wirrabara. These are thirty miles apart and are the centres of two districts with a total population of three thousand. The defendant had been employed in the plaintiff's workshop at Crystal Brook from 6th August 1946 until 4th February 1950. The defendant entered into the employment of a firm carrying on a business similar to the plaintiff's. This firm employed the defendant as a mechanic in its workshop at Crystal Brook. The plaintiff firm then brought the action.
The agreement upon which the action was based contains a covenant by the defendant that he would not while the plaintiff's employee and for a period of twelve months from the termination of the employment carry on or be an employee in a business similar to that of the plaintiff firm nor compete with it nor solicit its customers, nor use for the benefit of himself or any other person any information acquired in its employment: and another covenant not to divulge trade secrets and the like.
The geographical area encompassed by the restraint against carrying on or working in a rival business is indicated by the expression "the same area" which occurs in the contract. These words receive no other elucidation than that given by the statement which appears in the schedule to the agreement that it applies to the "sales territory for motor cars, trucks, tractors etc. of Murdock's Garage—Crystal Brook and Wirrabara". This "territory" is to be ascertained by reference to two agreements, each of which is called a "Direct Dealer's Sales Agreement". Under one of these the plaintiff firm was given by a company the right to sell its motor vehicles in a "territory" which is specified, and to sell spare parts "without territorial limitation"; and, under the other agreement the plaintiff firm was given by the same company the right to sell motor vehicles in another "territory". Consensus as to geographical area depends upon the defendant having covenanted with reference to those agreements. It is by no means clear that he knew in what localities the plaintiff enjoyed these franchises to sell the company's vehicles and spare parts.
The plaintiff firm brought the action to enforce the entire agreement. At the trial it claimed only an injunction to prevent the defendant from engaging as principal or employee in any business similar to its business at or within five miles from Crystal Brook. This was only a small part of its sales territory but the workshop of the rival firm who was employing the defendant was within it. The Court made an order restraining the defendant for a period of one year from being employed by any person or company in any business similar to that of the plaintiff firm within five miles from the plaintiff's business in Crystal Brook.
The agreement was in restraint of trade and was for that reason prima facie illegal. The onus was on the plaintiff firm to prove circumstances showing that the restriction on the defendant's freedom to work was reasonable. It was argued for the defendant that the restriction was not reasonable in reference to his interests and was not necessary for the protection of the plaintiff's interests. I agree with this argument.
The restriction against "using" information is not enforced by the judgment. This restriction extends to knowledge acquired in the course of the employment by means of directions and instructions received from the plaintiff firm and by the exercise of the defendant's mental powers on what he heard and saw in the employment. The restriction is significant because it tends to show what the plaintiff firm from the first desired. In Mason v. Provident Clothing & Supply Co. Ltd. [1] Lord Shaw said that the mental and manual equipment of a workman which he owes to the faithful and industrious exercise of his powers becomes part of himself, and that "its use for his own maintenance and advancement could not, except in rare and peculiar instances, be forbidden". This restriction is added to the restriction enforced by the judgment and to restrictions preventing competition, soliciting customers and divulging business secrets. The inclusion of this restriction on the use of the defendant's subjective knowledge tends to show that the plaintiff firm desired not only to protect its business connection and trade secrets but to sterilize the defendant's technical skill and knowledge for a period of twelve months if he lived within the geographical area encompassed by the restraint for a period of twelve months. The founder of the plaintiff firm, who made the agreement with the defendant, said in evidence that he told the defendant that "it prevented him from working for anybody else or against us in any shape or form for twelve months after leaving our employ".
1. (1913) A.C. 724, at pp. 740, 741.
At the time this agreement was made it was notorious that there was a shortage of workmen with mechanical skill and knowledge and there was a shortage of homes for workmen. The defendant and his wife and children lived at Crystal Brook. They moved there shortly after he entered into the plaintiff firm's service. He entered into its employment in consequence of replying to an advertisement issued by the plaintiff firm. The defendant then lived in another locality. It must have been obvious at the time the plaintiff firm exacted the covenants from him that it would be necessary for him to move from there to Crystal Brook in order to work for the plaintiff.
By reason of the notorious labour shortage and the economic situation it was detrimental to the interests of the public to restrain the defendant from working at his trade for a period of twelve months after the termination of the employment. The defendant was not employed for a fixed term. In view of the shortage of homes, it was not reasonable in reference to the defendant's interests to impose upon him a restraint which, whenever the employment was terminated, would force him to move his home beyond the geographical area of the restraint in order to earn his livelihood at his accustomed trade.
Lord Haldane noticed in Mason's Case [1] that both Lord Watson and Lord Macnaghten said in the Nordenfelt v. Maxim Nordenfelt Guns & Ammunition Co. Ltd. [2] , that "the standard of public policy must be the standard of the day". In Attwood v. Lamont [3] , Younger L.J. said that the branch of the law with which the Court was dealing has at all times been susceptible to influence from current views of public policy. There has been no development of public policy in Australia since that case which would incline the Court to regard with less jealousy covenants made by a workman in restraint of his freedom to work at his trade or to engage in employment.
1. (1913) A.C., at p. 733.
2. (1894) A.C. 535.
3. (1920) 3 K.B. 571, at p. 581.
There is not full scope for freedom of contract when an individual worker is making a contract of service with an employer. In the Nordenfelt Case [1] , Mason's Case [2] and Attwood v. Lamont [3] the worker was regarded as having the lesser bargaining power. In the first case, Lord Macnaghten said [4] "there is obviously more freedom of contract between buyer and seller than between master and servant or between an employer and a person seeking employment". In the second case, Lord Shaw of Dunfermline related this view to the matter of the difference between the validity of a seller's and a worker's restraint on his economic freedom. His Lordship said [5] "And in my opinion there is much greater room for allowing, as between buyer and seller, a larger scope for freedom of contract and a correspondingly large restraint in freedom of trade, than there is for allowing a restraint of the opportunity for labour in a contract between master and servant or an employer and an applicant for work". The tests propounded in those cases for determining the validity of a workman's restrictive covenant were moulded under the influence of that view. Current opinion on the relations between employer and employees has not moved away from that view. In Mitchel v. Reynolds [6] , Lord Macclesfield regarded such voluntary restraints with disfavour, because of the mischief that may arise from them, "1st, to the party, by the loss of his livelihood, and the subsistence of his family; 2ndly, the publick, by depriving it of an useful member".
1. (1894) A.C. 535.
2. (1913) A.C. 724.
3. (1920) 3 K.B. 571.
4. (1894) A.C., at p. 566.
5. (1913) A.C., at p. 738.
6. (1711) 1 P.Wm. 181, at p. 190 [ 24 E.R. 347, at p. 350].
A workman's covenant in restraint of employment is not valid unless it is reasonable. It is a question for the Court whether it is reasonable. The old rule was that the covenant was reasonable if it gave a fair protection to the interest of the employer and did not unduly interfere with the interests of the public. This rule lost its sway after the Nordenfelt Case [7] . In Mitchel v. Reynolds [8] , Lord Macclesfield took into account the interests of the covenantor as well as of the covenantee; and in Davies v. Davies [9] Fry L.J. did likewise. He said "that no contract in restraint of trade which is unreasonable, which is larger than is necessary to protect the interests of contracting parties, is good". The modern rule was stated by Lord Macnaghten in the Nordenfelt Case [10] . His Lordship there said "The true view at the present time I think, is this: The public have an interest in every person's carrying on his trade freely: so has the individual. All interference with individual liberty of action in trading, and all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void. That is the general rule. But there are exceptions: restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable—reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public".
1. (1894) A.C. 535.
2. (1711) 1 P.Wm. 181 [ 24 E.R. 347].
3. (1887) 36 Ch. D. 359, at p. 396.
4. (1894) A.C., at p. 565.
This doctrine was confirmed by Lord Atkinson in Herbert Morris Ltd. v. Saxelby [1] . In Attwood v. Lamont [2] , Younger L.J. said that the last mentioned case disposed of the "almost passionate protest of Neville J. in Leetham v. Johnstone-White [3] that no agreement was invalid, provided the restriction was reasonably necessary for the protection of the employer, however oppressive to the employee and fatal to his chance of obtaining his own living in this country it might be".
1. (1916) A.C. 688, at p. 700.
2. (1920) 3 K.B. 571, at p. 589.
3. (1907) 1 Ch. 189, 194.
The principles which support a covenant which the Court would regard as reasonable and enforceable were stated by Erle C.J. in Mumford v. Gething [4] . They are in this passage: "I entirely dissent from the notion thrown out by the defendant's counsel that agreements of this sort are to be discouraged as being contrary to public policy. On the contrary, I think that contracts in partial restraint of trade are beneficial to the public, as well as to the immediate parties; for, if the law discouraged such agreements as these, employers would be extremely scrupulous as to engaging servants in a confidential (the italics are mine) capacity, seeing that they would incur the risk of their taking advantage of the knowledge they acquired of their customers and their mode of conducting business, and then transferring their services to a rival trader. It appears to me to be highly important that persons like this defendant should be able to enter into contracts of this sort, which will afford some security to their employers that the knowledge acquired in their service will not be used to their prejudice".
1. (1859) 7 C.B. (N.S.) 305, at pp. 319, 320 [141 E.R. 834, at p. 840].
The agreement imposing the restraint, which is in question in the present case, was made about four days after the defendant entered into the plaintiff's employment. The plaintiff thereby agreed to employ him and he agreed to serve the plaintiff at a rate of remuneration "to be fixed between them from time to time but commencing at £7 per week of 48 hours". It is important to notice that the agreement does not mention the specific capacity in which the plaintiff agreed to employ the defendant. The agreement refers to him as "the workman". Another important fact is that the agreement does not fix any period of employment. It was a term of the agreement that either party could terminate the employment on giving twenty-one days' notice or paying or forfeiting twenty-one days' wages in lieu of notice. The restraint upon employment would operate even though the defendant served only for the minimum period for which the plaintiff was bound by the contract to employ him. If the plaintiff exercised his right to dismiss the defendant, with three weeks' wages, within a week from his entering the service or the defendant exercised his right to leave after three weeks, then, according to the terms of the restrictive provision which is in question, he was prevented for a period of twelve months from working whether as a mechanic, a labourer or at any other job in any motor garage in Crystal Brook and the district around it or in Wirrabara, which is thirty miles away, and the district around that town. The plaintiff exacted a covenant imposing a restraint which would operate for twelve months in that area even if the plaintiff exercised its right of dismissal or the defendant his right to retire before he was long enough in the employment to be acquainted with any of the plaintiff's customers or trade secrets. The plaintiff was not bound by the agreement to keep the defendant in any particular position in its workshop or to employ him in Crystal Brook rather than Wirrabara. If the defendant were disposed, in order to protect his own interests, to give notice of the termination of the employment, the restraint was likely to deter him from exercising his contractual right to give such notice. It could operate in terrorem. Fry J. said in De Francesco v. Barnum [1] , "I should be very unwilling to extend decisions the effect of which is to compel persons who are not desirous of maintaining continuous personal relations with one another to continue those personal relations I think the Courts are bound to be jealous, lest they should turn contracts of service into contracts of slavery".
1. (1890) 45 Ch. D. 430, at p. 438.
In Mason's Case [2] , Lord Shaw in speaking of a restraint, the burden of which bore no proper relation to the period of employment, said that it was "a thing under the guise of a contract which is not protection for the employer, but a means of coercing and punishing the workman and putting him under a tyrannous and, therefore, a legally indefensible restraint". "No workman", his Lordship added, "could have the freedom to dispose of his own labour, or risk a movement towards his own advancement, under what might turn out to be the cruel operation of such a clause".
1. (1913) A.C., at p. 741.
It is against the policy of the common law to enforce a restraint on the liberty of a man to earn his living or exercise his trade except in cases where there are special circumstances to justify it. The onus of proving the circumstances rests upon the party alleging this. It is a question of law for the Court whether the circumstances do or do not justify the restraint.
The plaintiff adduced evidence about the nature of the defendant's employment and its business in order to justify the restraint which it asked the Court to enforce. In Herbert Morris Ltd. v. Saxelby [1] Lord Parker said, "For a restraint to be reasonable in the interests of the parties it must afford no more than adequate protection to the party in whose favour it is imposed". A covenant in restraint of employment will not satisfy this test if it is imposed on the workman only to protect the employer against competition. In Herbert Morris Ltd. v. Saxelby [2] Lord Parker said "Wherever such covenants have been upheld it has been on the ground, not that the servant or apprentice would, by reason of his employment or training, obtain the skill and knowledge necessary to equip him as a possible competitor in the trade, but that he might obtain such personal knowledge of and influence over the customers of his employer, or such an acquaintance with his employer's trade secrets as would enable him, if competition were allowed, to take advantage of his employer's trade connection or utilize information confidentially obtained".
1. (1916) 1 A.C., at p. 707.
2. (1916) 1 A.C., at p. 709.
The danger against which the plaintiff desired to be protected was the enticing away of customers or the divulging or use of any trade secret. The plaintiff was entitled to take a covenant imposing a reasonable restraint on the defendant's liberty to work in a business similar to that of the plaintiff for the purpose of protecting itself against that danger. Such a restraint would not be permissible if the Court were unable to conclude that, by employing the defendant, the plaintiff had reasonable grounds for apprehending that the plaintiff exposed its business to such danger.
In fact, the defendant was given the position of "leading hand" in the plaintiff's workshop in Crystal Brook. The contract of service did not secure him against regression or removal to another position in either of the plaintiff's garages. While he was in the position of "leading hand" his duties were to attend to the repair of motor cars brought to the workshop by the plaintiff's customers, and to estimate the time which these jobs would take. The workshop was managed by the partners not by the defendant. He worked under their supervision. The defendant's duties were confined to the workshop. Customers who came to the garage to have any repairs done to their vehicles first spoke to a member of the firm: if it were necessary for the customer to go to the workshop, a member of the firm took him there. The customer's instructions were in this way given to the defendant. There is little or no evidence that he came into contact with any customer in the course of his employment in any other way. The evidence does not show that the defendant might gain any personal influence with any customers in the course of his employment. It shows only that he would meet customers. The evidence fails to show that through his acquaintance with them the defendant might be able to entice them from the plaintiff to a rival business.
The evidence is vague as to what were the trade secrets which the plaintiff desired to protect by imposing the restriction on the defendant's right to work when he left the employment.
If it had secret processes of manufacture or confidential documents the agreement expressly prevents the defendant from using or divulging them. There is no proof that the defendant has done or threatened either of these things.
The protection which the plaintiff claims against the employment of the defendant in the rival garage will not be given by enforcing the restraint on employment unless it is shown what are the interests of the plaintiff that are to be protected, and against what it is entitled to have them protected: See Herbert Morris Ltd. v. Saxelby [1] . The makers' instructions for servicing cars are not secret processes of the plaintiff. It is not shown that the matter contained in the documents in the plaintiff's office was of such a kind that it was possible for the defendant "to carry it away in his head". Compare Herbert Morris Ltd. v. Saxelby [2] .
1. (1916) 1 A.C., at p. 701.
2. (1916) 1 A.C., at pp. 703, 712.
The defendant may be putting to use in the workshop of the plaintiff's rival in Crystal Brook the skill and knowledge (the subjective knowledge) acquired in the plaintiff's workshop. The plaintiff is not entitled to be protected from all competition per se. An employer must be prepared to face the competition of a former employee if it comes.
The onus was on the plaintiff to prove that it was reasonable for its protection that the restraint should apply to so wide an area as the two "sales territories" combined. In cross-examination, the senior partner admitted that the firm would be given "a good deal of protection" by an injunction enforcing the restraint within a radius of five miles from the garage in Crystal Brook. He further said "I think it would give us sufficient protection to be fair". These admissions tend to prove that the covenant taken from the defendant encompassed an area that was wider than was reasonably necessary for the plaintiff's protection. Upon the whole of the evidence, I think it must be held that the area was unreasonably wide. For this reason also, the covenant was void. It cannot be saved by carving out of the area to which the parties agreed the restraint should apply, a smaller area within which it would be reasonable for the plaintiff to be protected (Mason's Case [1] per Lord Moulton).
1. (1913) A.C., at p. 745.
In my opinion the appeal should be allowed.
Webb J.
I agree with the statement of the law in the judgment of the Chief Justice and with his Honour's interpretation of the agreement. More particularly I agree that the words "in the same area" in clause 3 should, because of the provision in the schedule at the end of the agreement, be taken to mean the sales territory of Crystal Brook and Wirrabara. But this provision in the schedule is not applicable solely to clause 3: it is also applicable to clause 1 and delimits the area in which the appellant may be employed by the respondent i.e., the Crystal Brook and Wirrabara sales territory, which territory is in two parts.
As stated by the Chief Justice restraints of this kind are invalid, unless in the particular case the covenantee can show that the restraint is reasonably necessary for the protection of his business.
The towns of Crystal Brook and Wirrabara are thirty miles apart and the shortest distance between the two parts of the sales territory, of each of which parts one of these towns is a centre, is ten miles. For this reason I am unable to hold that it was reasonably necessary for the protection of the respondent's business that the appellant should be restrained as to both parts if, as proved to be the case, the appellant should be employed only in one part. The nature of the appellant's duties and the extent of his contact with customers of the respondent did not call for his restraint in a part of the territory in which he was not employed by the respondent. But the effect of the agreement when it was made was that the appellant could be restrained as to a part in which he was not employed by the respondent and its legality is to be tested as at the date it was made: Putsman v. Taylor [2] , per Salter J. To be legal it should have provided for a restraint in the part of the territory in which the appellant would be employed by the respondent, or in both parts if employed by the respondent in both. Legality cannot, I think, be given to the agreement merely by substituting for the words "the same area" in clause 3 the words in the schedule "the sales territory and Wirrabara", and by then striking out of the substituted words the two words "and Wirrabara", as constituting a separate and severable covenant in respect of the Wirrabara part of the sales territory. If that is done the agreement then purports to enable the appellant to be employed by the respondent in either or both parts of the sales territory, but to be restrained in the Crystal Brook part, even if he should not work there. This was not necessary for the protection of the respondent's business in the Crystal Brook part when the agreement was made.
1. (1927) 1 K.B. 637, at p. 643.
As I understand the position the remedy is not supplied in this case by striking out words as constituting a separate and severable covenant. Yet if the excess is to be removed in cases like this it can be done only by striking out words constituting such a covenant: it is not permissible under any circumstances to add words: see Attwood v. Lamont [1] , per Younger L.J.
1. (1920) 3 K.B. 571., at p. 593.
The words substituted in clause 3 cannot also be substituted in clause 1, and the words "and Wirrabara" then struck out so as to make both clauses cover the same area. Clause 1 is perfectly valid: no part is bad for excess. A new agreement confined wholly to Crystal Brook cannot be made for the parties. As already stated the legality of the agreement must be tested at the date it was made, without the assumption of any knowledge that the appellant would be employed only in Crystal Brook. If as at that date an excess appears, and it is the subject of a separate and severable covenant, it can be struck out; but that is as far as the Court can go.
I would allow the appeal.
Fullagar J.
In this case I agree with the judgment of the learned Chief Justice of South Australia.
The main argument before his Honour seems to have been based, as was the main argument before this Court, on certain passages in three of the leading cases which suggest that, in the case of an employee who is engaged to perform what may be called subordinate or merely mechanical functions, no covenant can be valid which, however narrow the limits of time and space, actually prohibits him within those limits from exercising a trade or calling. The argument began, of course, with the distinction which has been recognized for very many years between contracts of employment and contracts for the sale of a business. It emphasised the many statements which are to be found in the reports to the effect that an employer is not entitled to protect himself against the future competition in business of an employee whom he engages. And it proceeded to the conclusion that there is at least a certain class of case in which what is sometimes called an "area covenant" cannot validly be imposed at all. To that class it was said the present case belongs.
The passages on which reliance was mainly placed are the following. In Mason v. Provident Clothing & Supply Co. Ltd. [1] Lord Haldane L.C. said:—"Had they been content with asking him to bind himself not to canvass within the area where he had actually assisted in building up the goodwill of their business, or in an area restricted to places where the knowledge which he had acquired in his employment could obviously have been used to their prejudice, they might have secured a right to restrain him within these limits". In Herbert Morris Ltd. v. Saxelby [2] Lord Atkinson, referring to an employer, said: "He is undoubtedly entitled to have his interest in his trade secrets protected, such as secret processes of manufacture which may be of vast value. And that protection may be secured by restraining the employee from divulging these secrets or putting them to his own use. He is also entitled not to have his old customers by solicitation or such other means enticed away from him. But freedom from all competition per se apart from both these things, however lucrative it might be to him, he is not entitled to be protected against. He must be prepared to encounter that even at the hands of a former employee". And in Dewes v. Fitch [3] , Warrington L.J. said:—" the employer is not entitled to require protection against mere competition. What he is entitled to protection against is the use by the employee against him in his business of knowledge obtained by him of his employer's affairs and the influence acquired by him over his customers in the course of an ordinary trade, and, in the case of a professional man, over what is more commonly called his clients".
1. (1913) A.C. 724, at pp. 731, 732.
2. (1916) 1 A.C. 688, at p. 702.
3. (1920) 2 Ch. 159, at p. 181.
The passage in Mason's Case [4] is clearly explained by the fact that in that case the employee was employed in the capacity of a canvasser. And the other passages must clearly, I think, be read in the light of the facts of the particular cases. The reasonableness of a covenant in restraint of trade cannot be judged without considering, among other things, the nature of the interest which the employer has and which he may legitimately seek to protect. But the nature of the interest to be protected is one thing: the means by which it may be protected is another thing. The passages in question are, in my opinion, concerned with the former and not with the latter. The whole position is, I think, made clear by the passage which Napier C.J. quotes from the judgment of Lord Sterndale M.R. in Attwood v. Lamont [1] . Referring to the passages which I have quoted, his Lordship said:—"It was argued on behalf of the appellant that the result of these statements was that no restraint could be good unless it were specifically stated to be limited to the acts described. I do not agree with this contention. I think it may be necessary to have a general restraint against trading in a certain area in order to avoid such acts on the part of the servant without specifying in the covenant the particular acts against which it is directed". What is said by Salter J. in Putsman v. Taylor [2] is to the same effect and derives, I think, added force from the reasons for which the decision of the Divisional Court was upheld by the Court of Appeal: see [3] .
1. (1913) A.C. 724.
2. (1920) 3 K.B., at p. 578.
3. (1927) 1 K.B. 637, at pp. 641 642.
4. (1927) 1 K.B. 741.
I think it follows from what I have said that the main argument for the appellant fails. There may, of course, be cases in which the employer has no interest which can legitimately be protected by any covenant in restraint of an employee's trade. But, generally speaking, if there is an interest which may legitimately be protected—whether because the employee will learn trade secrets or because he will come into close relations with customers or for any other reason—that interest may be protected not merely by a covenant against the unfair use of an advantage as such but, within limits which will be jealously scanned to see that the restraint goes no further than is reasonably necessary, by a covenant restricting the actual carrying on of a trade or occupation.
With regard to the circumstances of this particular case, the effect of the evidence and the validity of the term of the contract which is in question I agree with Napier C.J. The only point which has caused me any difficulty is the fact that the contract of employment is made terminable on twenty-one days' notice on either side. That the period of the employment may be a relevant matter in such cases as the present can hardly, I think, be doubted, but there is authority for saying that what must be taken to have been actually contemplated by the parties may be taken into consideration along with the actual terms of the contract itself. Moreover, it must always be borne in mind that an injunction is a discretionary remedy. In Haynes v. Doman [1] , where the agreement was terminable by a fortnight's notice on either side, Lindley M.R. said: "Possible cases in which the the restriction would not be reasonable are suggested. One would have arisen if the defendant had left the plaintiff's employ within a very short time after entering it, and before the defendant could have acquired or carried away with him any knowledge of the plaintiff's mode of conducting his business. Such an event has not happened, and clearly was not contemplated. This objection, if sound, would invalidate all agreements of the sort determinable on short notice, unless some words were introduced excluding their application to cases never contemplated. Another case to which the restriction could not be reasonably applied would have arisen if the defendant had left business altogether, or had had no dealings with the plaintiff's rivals for twenty or thirty years, and had then resumed business and assisted them". Romer L.J. [2] agreed with the above observations of the Master of the Rolls. The case of Haynes v. Doman [3] was decided before Mason v. Provident Clothing & Supply Co. Ltd. [4] and Herbert Morris Ltd. v. Saxelby [5] but, when all the circumstances are regarded, I think that the decision is quite in line with Dewes v. Fitch [6] , which was decided after the two leading cases in the House of Lords and in which a very similar covenant was held valid. In McPherson v. Moiler [7] where the agreement was terminable by a month's notice on either side, Harvey J. said: "I cannot altogether put out of consideration the fact that on the face of the agreement there was no security of employment for more than from month to month, though exactly what weight has to be given to that it is not easy in the present state of judicial authority to pronounce with any definiteness. The judgment of Lindley L.J. in Haynes v. Doman [8] and the judgment of Eve J. in Dewes v. Fitch [6] both show that the Court may to a certain extent take into consideration what was probable as to the intention of the parties as to the length of the engagement Although the master has the power almost immediately to dismiss the employee, one has to look at the surrounding circumstances to see whether that was seriously in the contemplation of the parties as being likely to happen". It would not be right, I think, in this connection to overlook the notorious fact that the industrial situation in this country at this time is exactly the converse of that which is described by Younger L.J. in Dewes v. Fitch [1] where he refers to the respective bargaining positions of employer and employee. I do not think that the fact that the agreement in this case was terminable by twenty-one days' notice on either side affords any sufficient ground for differing from the view taken by Napier C.J.
1. (1899) 2 Ch. 13, at p. 26.
2. (1899) 2 Ch., at p. 30.
3. (1899) 2 Ch. 13.
4. (1913) A.C. 724.
5. (1916) 1 A.C. 688.
6. (1920) 2 Ch. 159.
7. (1920) 20 S.R. (N.S.W.) 535, at p. 541; 37 W.N. 162, at pp. 163, 164.
8. (1899) 2 Ch. 13.
9. (1920) 2 Ch. 159.
10. (1920) 2 Ch., at p. 186.
The contract is concerned with two areas which may be described respectively as the Crystal Brook area and the Wirrabara area. The two areas are separate and distinct in this sense—that there is no territory common to both. I think that the covenant is severable in the sense that it could be held valid as to either area, even if it must be held too wide regarded as applying to both areas. Having regard to the fact that it was almost certainly contemplated that the defendant would serve the plaintiff in both areas, the covenant is, in my opinion, valid in respect of both areas. Since, however, the defendant was never employed in the Wirrabara area, an injunction should not be granted except in respect of the Crystal Brook area. The plaintiff did not in fact ask for more than an injunction relating to the Crystal Brook area only, and the injunction granted by Napier C.J. related only to that area.
In my opinion this appeal should be dismissed.
Kitto J.
On 10th August 1946, the parties to this appeal entered into a written agreement for the employment of the appellant by the respondents. The respondents were at that time and still are carrying on business at Crystal Brook and Wirrabara, two towns in South Australia about thirty miles apart. The agreement described the appellant as a workman and the respondents as motor and general engineers. It did not state in what capacity or at which place the appellant was to be employed. In a schedule it provided that "this agreement shall apply to the sales territory for motor cars, trucks and tractors &c. of Murdock's Garage—Crystal Brook and Wirrabara"; and I shall assume that the evidence tendered for the purpose of identifying the sales territory referred to was sufficient to establish that, as the respondents contended, that territory consisted of two defined areas, one surrounding Crystal Brook and the other surrounding Wirrabara. It was conceded before this Court that the two areas were quite separate, their nearest points being not less than ten miles apart.
The employment was not for a fixed period but was made determinable by either party on giving twenty-one days' notice or paying or forfeiting twenty-one days' wages in lieu of notice.
The agreement contained a provision which, so far as material to this appeal, was in the following terms: "The workman will not during his employment or within one year from the termination thereof in any way carry on or be engaged concerned or interested either personally or as a partner or as a servant or employee of any other person or company in the business of garage proprietors, motor and general engineers, agents for the distribution of or dealers in motor accessories or in any other similar business now and hereafter carried on by the employers within the same area".
The question for decision on this appeal is whether the restrictive provision I have quoted should be held invalid as being in unlawful restraint of trade. Any contractual restraint of trade is prima facie unlawful and invalid. "It is not that such restraints must of themselves necessarily operate to the public injury, but that it is against the policy of the common law to enforce them except in cases where there are special circumstances to justify them. The onus of proving such special circumstances must, of course, rest on the party alleging them. When once they are proved, it is a question of law for the decision of the judge whether they do or do not justify the restraint. There is no question of onus one way or another": Herbert Morris Ltd. v. Saxelby [1] per Lord Parker of Waddington; Routh v. Jones [2] per Lord Greene M.R.
1. (1916) 1 A.C. 688, at pp. 706, 707.
2. (1947) 1 All E.R. 758, at p. 763.
The validity of the restraint must be decided as at the date of the agreement imposing it. "The question is not whether experience gained during the service has shown the restriction to have been excessive or insufficient. The question is whether the covenant was a reasonable one for the parties to agree to at the outset of the service on the best estimate which they could then make of the future": Putsman v. Taylor [3] .
1. (1927) 1 K.B. 637, at p. 643.
The work for which in fact the appellant was employed was variously described in the evidence as that of a mechanic, a mechanic in charge, a working foreman or a working head mechanic. His work might naturally be expected to bring him constantly into close touch with the respondents' customers who came to the place where he would be working from time to time, but it could not be expected to give him any association with or knowledge of the customers who attended only a place of business where he was not working.
In these circumstances it is necessary to consider what it was for which, and what it was against which, the respondents needed protection: Herbert Morris v. Saxelby [1] . The answer is that they needed protection for their business connection against the possibility of its being affected by the personal knowledge of and influence over the customers which the appellant might acquire in their employment [2] . (I put on one side the preservation of trade secrets because on the evidence I do not think that there were any trade secrets that required protection). To adapt the words of Lord Birkenhead in Fitch v. Dewes [3] , the respondents might claim for their protection that that business which was theirs, and to which they were admitting the appellant in the manner defined in the agreement, should continue to be theirs, and that if at any time the contract of employment between themselves and the appellant should come to an end, on such determination the latter should not be in a position to use "the intimacies and the knowledge" which he had acquired in the course of his employment in order to create or assist a competing business in the same area and by doing so undermine the business connection of the respondents. The knowledge referred to does not include the technical knowledge and skill which the appellant might acquire in the employment: Sir W. C. Leng & Co. Ltd. v. Andrews [4] ; Mason v. Provident Clothing & Supply Co. [5] ; Herbert Morris Ltd. v. Saxelby [6] ; for an employer cannot validly preclude his employee from competition per se, that is competition apart from the divulging or use of trade secrets and enticing away of old customers by solicitation or such other means: Herbert Morris Ltd. v. Saxelby [7] , per Lord Atkinson. The knowledge which, because its use may deprive the employer of the business connection which he is entitled to preserve as his own, he may require his employee to abstain from using, is objective knowledge of customers, their peculiarities, their credit and so forth: [8] ; cf. Routh v. Jones [9] . Against the prejudice likely to result from such "intimacies and knowledge" the respondents were entitled to protect their business by means of a contractual restraint of a width reasonable in reference to the interests of both parties: Attorney-General of the Commonwealth of Australia v. Adelaide Steamship Co. Ltd. [10] ; Herbert Morris Ltd. v. Saxelby [11] . But to be valid, such a restraint "must afford no more than adequate protection to the party in whose favour it is imposed": Herbert Morris Ltd. v. Saxelby [12] ; Mason v. Provident Clothing and Supply Co. [13] .
1. (1916) 1 A.C., at p. 708.
2. (1916) 1 A.C., at p. 709.
3. (1921) 2 A.C. 158, at p. 164.
4. (1909) 1 Ch. 763, at p. 773.
5. (1913) A.C. 724, at p. 740.
6. (1916) 1 A.C., at pp. 703, 705, 710, 711.
7. (1916) 1 A.C., at p. 702.
8. (1916) 1 A.C., at p. 714.
9. (1947) 1 All E.R., at p. 761.
10. (1913) A.C. 781, at p. 795.
11. (1916) 1 A.C., at p. 716.
12. (1916) 1 A.C., at p. 707.
13. (1913) A.C., at pp. 733, 742.
The provisions of the restrictive agreement which the respondents seek to enforce are not directed against the solicitation by the appellant of their customers with whom the appellant dealt while in their employment; other provisions of the agreement cover that and no breach of them is alleged to have been committed or to be feared. The provisions now in question are directed against what Lord Atkinson called enticing away old customers by "such other means"—an expression which may, I think, be explained in the language of the Full Court of Victoria in Woodmason's Melrose Dairy Pty. Ltd. v. Kimpton [1] : "There are many methods of enticing away customers beside the method of direct solicitation impossible of detection, and only known by results. But, apart altogether from any conscious exercise by the former employee of such knowledge and influence as he may have acquired in his former employment, the employer is entitled to protect himself against loss which may otherwise arise from the mere existence of a personal relation between his customers and his former servant. That relation, when resulting from the employment, is an advantage accruing to the employer and properly exercisable for his benefit so long as the service continues. The same relation would become a source of injury to the employer if the former servant were permitted to accept the custom which might voluntarily flow to him upon his opening an opposition business in the old locality. This danger is quite reasonably met, in our opinion, by a provision against serving the old customers for a limited period. The same reasoning is, we think, fully recognized by the common acceptation of a covenant against carrying on a rival business at all in a given locality. Such a covenant has been repeatedly held to be reasonable, though it obviously has nothing to do with solicitation".
1. (1924) V.L.R. 475, at pp. 480, 481.
But in order that a restraint may be made reasonable in reference to the interests of the parties by means of a geographical limitation, the limitation must, I think, be such as will fairly approximate to a limitation expressed by reference to the employer's customers of whom the employee is likely to acquire special knowledge or with whom the employee is likely to be brought into a personal relation while in the employment: cf. Coote v. Sproule [2] ; Empire Meat Co. Ltd. v. Patrick [3] . In Brightman v. Lamson Paragon Ltd. [4] , Rich J. said: "No restraint is excessive unless the area exceeds that fairly covered by the business of the covenantee at the date of the agreement or which might at that date reasonably be expected to be covered by such business on the expiration of the agreement". No doubt this proposition is accurate as applied to cases such as that with which his Honour was dealing, where the employment is to be co-extensive with the area of the employer's business, and the employee may be expected to form personal relationships with customers in all parts of that area; but it should not, I think, be accepted as accurate in relation to cases where the employer carries on business in several areas, and the employment may be confined to one or some only of the areas and is of such a character that the employee while working in one area is unlikely to be brought into any significant degree of contact with customers in the others. In such a case a restraint upon the employee's becoming connected with a rival business after he leaves the employment will give the employer's business reasonable protection against the effects of the intimacies and knowledge to which Lord Birkenhead referred, if it is limited to the area or areas in which the employee in fact works within a reasonable time before the termination of his employment; and a restraint which applies indiscriminately to all the areas in which the employer carries on business will exceed what is reasonably necessary to prevent the injury to his business against which he is justified in guarding.
1. (1929) 29 S.R. (N.S.W.) 578, at p. 580; 46 W.N. 180, at p. 181.
2. (1939) 2 All E.R. 85.
3. (1913) 18 C.L.R. 331, at p. 335.
The criticism to which I think, with all respect, that Rich J.'s proposition is open is that while it recognizes the limits of the subject of legitimate protection, it fails to take into account the limits of the danger against which protection is needed. In Mason's Case [1] Viscount Haldane said: "Had (the employers) been content with asking (the employee—a canvasser) to bind himself not to canvass within the area where he had actually assisted in building up the goodwill of their business, or in an area restricted to places where the knowledge which he had acquired in his employment could obviously have been used to their prejudice, they might have secured a right to restrain him within these limits". Lord Shaw of Dunfermline said in the same case [2] : "A very reasonable restriction of a canvasser in such circumstances as are here disclosed might no doubt have been that he should not canvass his old customers or in the limited locality of his former labour". Lord Moulton said [3] : "A small district in London was assigned to him, which he canvassed and in which he collected the payments due, and outside that small district he had no duties. His employment was therefore that of a local canvasser and debt collector, and nothing more. Such being the nature of the employment, it would be reasonable for the employer to protect himself against the danger of his former servant canvassing or collecting for a rival firm in the district in which he had been employed. If he were permitted to do so before the expiry of a reasonably long interval he would be in a position to give to his new employer all the advantages of that personal knowledge of the inhabitants of the locality, and more especially of his former customers, which he had acquired in the service of the respondents and at their expense. Against such a contingency the master might reasonably protect himself, but I can see no further or other protection which he could reasonably demand".
1. (1913) A.C., at pp. 731, 732.
2. (1913) A.C., at p. 741.
3. (1913) A.C., at p. 743.
Mason's Case [1] had not been long decided at the time of Brightman's Case [2] and the difference between a vendor and purchaser case and a master and servant case in relation to restraint of trade had yet to receive the emphasis which Herbert Morris Ltd. v. Saxelby [3] was to give it. Since the latter decision it is not possible, I think, to uphold a restraint upon an employee in respect of engaging in a rival business if the restraint extends beyond the area to which the customers belong with whom the employee is likely to be brought into touch during the employment. In that case the employers had a business ramified over the United Kingdom but a restraint of similar geographical extent was held invalid. Lord Parker of Waddington said [4] : "Had the restraint been confined to (the two places where the employee in fact worked) and a reasonable area round each of these centres, it might possibly have been supported as reasonably necessary to protect the plaintiff's connection, but a restraint extending over the United Kingdom was obviously too wide in this respect".
1. (1913) A.C. 724.
2. (1913) 18 C.L.R. 331.
3. (1916) 1 A.C. 688.
4. (1916) 1 A.C., at p. 711.
The case of Stephens v. Kuhnelle [5] may be referred to in this connection. That case had to do with a covenant restraining a breadcarter from serving any person within a defined area who was during the employment a customer of the employer. After referring to certain decisions of the Court of Appeal given before the law on the subject had been laid down by the House of Lords in Mason v. Provident Clothing & Supply Co. [1] and Herbert Morris Ltd. v. Saxelby [6] , Harvey C.J. in Eq. said: "The question, however, which I have to decide now, in view of the later decisions, is whether this agreement is more widely couched than is necessary for the protection of the employer against the knowledge which was acquired by the employee of his customers and of his master's trade while employed by him. In my opinion the agreement breaks down at the point where it restrains the employee from serving or causing to be served with bread or interfering with any customers of his employer who were customers during his employment. It may be that in some businesses and trades such an agreement would be proper where the knowledge of the employee did involve a knowledge of all his master's customers, or where he might possibly have had personal relations with all customers, such as in the case of some retail businesses; but in this case the evidence states, and it is uncontradicted, that each bread carter knows only the customers on his own run, and has no knowledge of the other customers and no dealings with them. There therefore can be no necessity to protect the employer against the employee soliciting or dealing with customers whom such employee is not serving".
1. (1926) 26 S.R. (N.S.W.) 327, at p. 328; 43 W.N. 67, at p. 67.
2. (1913) A.C. 724.
3. (1916) 1 A.C. 688.
In the present case the evidence did not establish that the appellant if working at Crystal Brook or at Wirrabara would not be brought into touch with customers from the area surrounding the other of those towns; but the onus lay upon the respondents to prove facts in the light of which it was reasonable for the parties, when framing the restrictive clause of the agreement, to expect that the appellant, if working in one area, would be likely to come into contact with customers of the respondents' business in the other area, and no such evidence was given. The probabilities, I should have thought, were all against such an expectation; in the ordinary course of events, persons whose vehicles require mechanical attention would be likely to take them to the nearer of the two towns. It is true that in evidence one of the respondents said, when describing what in fact occurred, that to a certain degree the appellant, who worked only at Crystal Brook, would know of the customers at Wirrabara, adding that at times they would come to Crystal Brook; but there was no evidence that this occurred to any substantial extent, or that it could be expected at the date of the agreement to occur to any substantial extent.
It is said that the restrictive clause should be regarded as combining two severable restrictions, one in respect of the Crystal Brook area and the other in respect of the Wirrabara area. But even if the clause had been confined to one of those areas, its validity would have had to be decided in the light of the fact that at the date of the agreement it was not known whether the appellant would be working in that area during such a period preceding the termination of his employment that his knowledge of and relation with customers in that area might, in the absence of a restraint, cause injury to the respondents' business. The service agreement did not specify where the appellant was to be employed. It was quite consistent with the agreement that he might be employed at Wirrabara, for instance, either during the whole term of his employment or during so long a period before its termination that any acquaintance he may have had with customers of the Crystal Brook business would be too remote in time to warrant any restriction in relation to the Crystal Brook area.
In my opinion, therefore, severance of the restrictive clause of the agreement does not save it. In order to be valid it should, I think, have been so limited in respect of each area as not to operate therein unless the appellant should be employed by the respondents in their business in that area within some specified reasonable period preceding the termination of his service. Not being so limited, the clause, even if free from objection in any other respect, appears to me to exceed what was reasonably required in order to obviate the danger from which the respondents were entitled to obtain protection. Accordingly I am of opinion that the restrictive clause should be held invalid as being in unlawful restraint of trade.
I would allow the appeal, discharge the order of the Supreme Court and dismiss the action. |
high_court_of_australia:/showbyHandle/1/10410 | decision | commonwealth | high_court_of_australia | text/html | null | Edmund T Lennon Pty Ltd v Commissioner of Road Transport [1957] HCA 51 | https://eresources.hcourt.gov.au/showbyHandle/1/10410 | 2024-09-13T22:54:01.456708+10:00 | High Court of Australia
Dixon C.J. McTiernan, Webb, Fullagar, Kitto and Taylor JJ.
Edmund T Lennon Pty Ltd v Commissioner of Road Transport
[1957] HCA 51
ORDER
Judgment in demurrer upon the first and second plea for the plaintiff with costs.
Cur. adv. vult.
The following written judgments were delivered:—
July 11
Dixon C.J.
The plaintiff demurs to two pleas in an action brought in the Supreme Court of New South Wales by writ of summons dated 14th January 1955. The demurrers were removed into this Court under s. 40 of the Judiciary Act 1903-1955 in order that it might be argued at the same time as Barton v. Commissioner for Motor Transport [2] and Shepherd v. State of New South Wales [1] . A consideration of the pleadings suggests that perhaps, before making that order, the Court should have insisted that they be put in better shape.
1. (1957) 97 C.L.R. 633.
2. (1957) 97 C.L.R. 673.
To begin with, what may be supposed to be the intended defendant is misnamed. The declaration contains one count. It is for money payable by the defendant to the plaintiff for money had and received by the defendant for the use of the plaintiff. There is nothing in either plea and there are no particulars under the declaration which would show by reason of what facts the plaintiff alleges the money to have been received to the use of the plaintiff. The first plea, however, states facts designed to bring the cause of action under ss. 2, 3 and 4 of the State Transport Co-ordination (Barring of Claims and Remedies) Act 1954. It is agreed that this plea cannot be supported now, by reason of the decision in Antill Ranger & Co. Pty. Ltd. v. Commissioner for Motor Transport [1] . It is the second plea which is in question. That plea is as follows: "And for a second plea the defendant says as to £28,464 16s. 11d. parcel of the money claimed that the alleged cause of action did not accrue within one year before action brought in accordance with the provisions of the Transport (Division of Functions) Act 1932-1952 and in particular s. 27 thereof." It is to be noticed that the Act is referred to in the plea as extending to 1952 not to 1956. That is because the plea was pleaded before Act No. 16 of 1956 came into force. In my reasons in Barton v. Commissioner for Motor Transport [2] I have expressed the view that so much of s. 27 as was added by the last-mentioned Act cannot validly apply to causes of action which accrued twelve months before its enactment, namely twelve months before 13th September 1956, in so far as such causes of action arise as a result of the operation of s. 92 of the Constitution on the provisions of the State Transport (Co-ordination) Acts.
1. (1955) 93 C.L.R. 83; (1956) 94 C.L.R. 177.
2. (1957) 97 C.L.R. 633.
As to so much of s. 27 as was enacted by Act No. 46 of 1940, the difficulty in this case is the inadequacy of the facts stated on the record. Everything must be spelt out of the expression used in the second plea "in accordance with the provisions of the Transport (Division of Functions) Act 1932-1952 and in particular s. 27 thereof." In my opinion enough is not stated in the plea to raise the question which it sought to litigate. It is, however, no doubt evident as a practical matter from the judgment prepared in Barton v. Commissioner for Motor Transport [2] what view I would take in the present case had the facts been adequately stated. As it is, I think that the demurrer must succeed against the second plea, simply because of the inadequacy of the plea to cover the cause of action.
1. (1957) 97 C.L.R. 633.
Accordingly, in my opinion, there should be judgment in the demurrer for the plaintiff in the case of both the first and the second plea.
McTiernan J.
I agree with the judgment and the reasons of the Chief Justice.
Webb J.
The plaintiff's demurrer to pleas in this action was removed from the Supreme Court into this Court under s. 40 of the Judiciary Act 1903-1955. The plaintiff's claim is for £73,270 3s. 10d., presumably being moneys paid for permits and licences to operate commercial goods vehicles in inter-State trade.
Assuming the material facts to be similar to those in Barton's Case [1] and Shepherd's Case [2] , I think there should be judgment in the demurrer for the plaintiff and for the reasons already given in those cases.
1. (1957) 97 C.L.R. 633.
2. (1957) 97 C.L.R. 673.
Fullagar J.
The writ of summons in this case was issued out of the Supreme Court of New South Wales on 14th January 1955. The plaintiff sued to recover from the defendant, a statutory corporation sole, a sum of £73,270 3s. 10d. as money had and received by the defendant to the use of the plaintiff. The moneys in question are moneys alleged to have been demanded by the defendant and received by it under the State Transport (Co-ordination) Act 1931 N.S.W. as amended from time to time. This Act (so far as material) was held by the Privy Council to be unconstitutional in Hughes and Vale Pty. Ltd. v. State of New South Wales [No. 1] [1] . The defendant delivered two pleas on 17th January 1956. By its first plea it relied on the State Transport Co-ordination (Barring of Claims and Remedies) Act 1954 N.S.W.. By its second plea it relied as to £28,464 16s. 11d., part of the money claimed, on s. 27 of the Transport (Division of Functions) Act 1932-1952 N.S.W.. The plaintiff on 2nd March 1956 demurred to both pleas. Since both demurrers raised constitutional questions, they were removed into this Court by order made under s. 40 of the Judiciary Act of the Commonwealth.
1. (1955) A.C. 241; (1954) 93 C.L.R. 1.
Since the filing of the demurrers the State Transport Co-ordination (Barring of Claims and Remedies) Act 1954 has been held to be unconstitutional. It follows that the demurrer to the first plea must be allowed.
So far as the demurrer to the second plea is concerned, the case does not differ in any material respect from Barton v. Commissioner for Motor Transport [1] . For the reasons which I have given in that case, I am of opinion that this demurrer should be overruled.
1. (1957) 97 C.L.R. 633.
Kitto J.
I agree in the judgment of the Chief Justice and have nothing to add.
Taylor J.
On the hearing of this matter it was conceded that the decision in Antill Ranger & Co. Pty. Ltd. v. Commissioner for Motor Transport [2] made it inevitable that the demurrer to the first plea should be allowed.
1. (1955) 93 C.L.R. 83; (1956) 94 C.L.R. 177.
The second plea, however, invokes the protection of the limitation prescribed by s. 27 of the Transport (Division of Functions) Act 1932-1952 but there is nothing in the declaration or the plea to show that the plaintiff's action is of the general character described by that section. No doubt the parties intended to raise for consideration questions similar to those which were discussed in Barton v. Commissioner for Road Transport [1] and Shepherd v. State of New South Wales [1] but the pleadings are defective for this purpose. The result is, of course, that the demurrer should be allowed though it would follow from the views to which I subscribed in the last-mentioned cases that, if the pleadings were in an appropriate form, I would think the contrary result should follow. But it is not open to us to deal with the demurrer by assuming the existence of facts which are not alleged and, accordingly, the demurrer should be allowed.
1. (1957) 97 C.L.R. 633.
2. (1957) 97 C.L.R. 673. |
high_court_of_australia:/showbyHandle/1/12343 | decision | commonwealth | high_court_of_australia | text/html | null | Commissioner of Taxation (Cth) v Peabody [1994] HCA 43 | https://eresources.hcourt.gov.au/showbyHandle/1/12343 | 2024-09-13T22:54:06.270479+10:00 | High Court of Australia
Mason C.J. Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ.
Commissioner of Taxation (Cth) v Peabody
[1994] HCA 43
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The Court delivered the following written judgment:—
1994, Sept. 28
Mason C.J.,Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ.
In 1981, Pt IVA was inserted in the Income Tax Assessment Act 1936 Cth ("the Act") to deal with schemes to reduce income tax. It replaced s. 260 which had proved to be somewhat ineffective as a measure to counter tax avoidance arrangements [33] . Part IVA comprises ss. 177A-177G of the Act. The Commissioner of Taxation ("the Commissioner"), having concluded that the respondent taxpayer, Mrs. Peabody, had obtained a tax benefit in connexion with a scheme to which Pt IVA applied, determined pursuant to s. 177F(1)(a) that the amount of the tax benefit, being an amount which was not included in Mrs. Peabody's assessable income for the year ended 30 June 1986, should be included in her assessable income for that year. The Commissioner issued an amended assessment accordingly and subsequently disallowed an objection by Mrs. Peabody to the amended assessment. She requested the Commissioner to refer the objection decision to the Federal Court. The appeal constituted by the reference was dismissed at first instance by O'Loughlin J. [1] but allowed on appeal to the Full Court of the Federal Court (Ryan, Hill and Cooper JJ.) [2] . The Commissioner appeals to this Court from the decision of the Full Court.
1. See Cridland v Federal Commissioner of Taxation (1977), 140 C.L.R. 330, at pp. 337-338, per Mason J.
2. (1992) 24 A.T.R. 58; 92 A.T.C. 4,585.
3. (1993) 40 F.C.R. 531.
Mrs. Peabody's husband, Terrence Elmore Peabody, had established in 1963 with his father and another partner a fly ash business. Fly ash is a light, powdery substance, also known as pozzolan, which is a by-product of coal burnt in power stations. When blended with cement, fly ash adds strength and durability to concrete and reduces its cost. The business successfully developed the process for the use of fly ash in structural concrete and in 1985 was owned as to 62 per cent by the Peabody interests and as to 38 per cent by a Mr. Ray Kleinschmidt or interests associated with him. The business comprised four main companies: Pozzolanic Enterprises Pty Ltd, Pozzolanic (Queensland) Pty Ltd, Pozzolanic Bulk Carriers (Queensland) Pty Ltd and Coastal Bulk Haulage Pty Ltd There were other companies but they were all subsidiaries of one or other of these companies which may be referred to as the Pozzolanic Group.
The shares in the Pozzolanic Group which were owned by the Peabody interests were held in the name of TEP Holdings Pty Ltd ("TEP Holdings"). That company held the shares as trustee of a discretionary trust known as the Peabody Family Trust. Mrs. Peabody and her two children were the beneficiaries under the trust and she and her husband were the only directors of TEP Holdings.
In 1985 Mr. Peabody formulated a plan, which he had been considering for some time, whereby TEP Holdings would acquire Mr. Kleinschmidt's interest in the Pozzolanic Group, publicly float 50 per cent of that group and retain control of the remaining 50 per cent. Mr. Peabody and Mr. Kleinschmidt reached an agreement that the latter would sell the whole of his interest in the group to the Peabody interests. Mr. Kleinschmidt did not want the price of his shares — which was some $8.6 million — to be disclosed publicly and Mr. Peabody agreed that there should be no public disclosure.
There was an expectation that the public float would be capitalized at a figure well in excess of the $24 million which was the basis of the price agreed for the purchase of the Kleinschmidt shares. It was anticipated that difficulties might arise if it became necessary to disclose in the prospectus for the float that the shares acquired by the Peabody interests from Mr. Kleinschmidt had been acquired a short time before at a figure substantially less than that for which they were offered to the public. Advice was obtained from senior counsel that disclosure was not required, but the advice was qualified.
Discussion between Mr. Peabody and his advisers revealed the possibility of the Peabody interests acquiring the Kleinschmidt shares and converting them to a different class with restricted rights which would render them almost worthless. The consequence of that would be that the shares held by TEP Holdings would increase in value by the amount shed by the Kleinschmidt shares. Mr. Peabody's solicitor pointed out that TEP Holdings could then sell the shares it had always owned to a public company formed for the purpose of the float for a price which reflected the increased value and so avoid the application of s. 26AAA of the Act which at that time included as assessable income any profit arising from the sale of property acquired within twelve months of the sale. No decision was made initially whether TEP Holdings or a separate company would be the purchaser of the Kleinschmidt shares.
There was further discussion about the method of financing the purchase of the Kleinschmidt shares. It became apparent that there were advantages if a financier, rather than simply lending the necessary money, were to subscribe for redeemable preference shares in the company which was to purchase the shares. By this method, the cost of the finance would be considerably reduced. The financier would receive dividends on the preference shares equal to the interest which it would have received under a conventional arrangement but less the tax which it would have paid on that interest. The financier would receive under s. 46 of the Act, as it then was, a rebate of 100 per cent of tax in respect of the dividends. Thus the financier would effectively receive a tax-free dividend equivalent to the after-tax interest. Once the dividends had been declared, the preference shares would be redeemed so that the financier would receive back an amount which would be the equivalent of the principal of a loan.
It was decided that TEP Holdings should acquire a shelf company, Loftway Pty Ltd ("Loftway"), to purchase the Kleinschmidt shares in the Pozzolanic Group. This was done and the shares in Loftway were held by TEP Holdings in its capacity as trustee of the Peabody Family Trust. Westpac Banking Corporation ("Westpac") became the financier. Loftway purchased the Kleinschmidt shares for the sum of $8,656,177. The money to pay for these shares was provided by Westpac subscribing for redeemable preference shares in Loftway. After the Kleinschmidt shares in the Pozzolanic Group had been acquired by Loftway, the four Pozzolanic companies each declared dividends which were paid to Loftway. With this money Loftway in turn declared the appropriate dividend to be paid to Westpac.
Each of the four companies in the Pozzolanic Group, with the consent of Loftway, passed special resolutions converting the shares which Loftway had purchased in them into "Z" class preference shares which carried restricted rights reducing their value from some $8.6 million to something less than $500. As a consequence, the shares in the Pozzolanic Group held by TEP Holdings, which previously represented only 62 per cent of the equity in the group, came to represent virtually 100 per cent of that equity. Thereafter, TEP Holdings (and Mr. Peabody in respect of a small number of shares in his name) agreed to sell the whole of the ordinary shares in the Pozzolanic Group to a company which eventually became Pozzolanic Industries Ltd. ("Pozzolanic Industries") for $30 million. The purchase price was payable partly in cash and partly in shares in Pozzolanic Industries with the result that TEP Holdings eventually held 50 per cent of the shares in Pozzolanic Industries. The remaining 50 per cent of the shares in Pozzolanic Industries were floated to the public. No mention was made in the prospectus for the float of the price paid for the purchase of the Kleinschmidt shares.
With money raised by the sale, TEP Holdings lent an amount to Loftway which enabled it to redeem the preference shares held by Westpac. It appears that eventually Loftway transferred the "Z" class shares in the Pozzolanic Group to TEP Holdings which then transferred them to Pozzolanic Industries either by way of gift or at par value. TEP Holdings forgave Loftway the debt arising out of the above-mentioned loan by TEP Holdings to Loftway.
The determination made by the Commissioner under s. 177F of the Act was that the sum of $888,005 should be included in the assessable income of Mrs. Peabody for the year ended 30 June 1986. This was done pursuant to s. 97 of the Act upon the basis that Mrs. Peabody was a beneficiary of a trust estate presently entitled to a share of the income of the trust estate. That figure represented one-third of the profit for the purposes of s. 26AAA which the Commissioner claims TEP Holdings would have realized if it had bought the Kleinschmidt shares and sold them within twelve months of their acquisition.
The trustees of the Peabody Family Trust had resolved to distribute the whole of the income of the trust estate (including specifically any amounts which the Commissioner should add as a result of amended assessments) equally among the three beneficiaries of whom Mrs. Peabody was one. As a result Mrs. Peabody was said by the Commissioner to have derived, by the application of s. 97, assessable income in the sum of $888,005.
The Commissioner's discretion to cancel a tax benefit under s. 177F is dependent upon a tax benefit having been obtained by a taxpayer in connexion with a scheme to which Pt IVA applies. "Scheme" is defined broadly in s. 177A(1) as meaning:
(a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; and
(b) any scheme, plan, proposal, action, course of action or course of conduct.
Under s. 177A(3) the scheme, plan, proposal, action, course of action or course of conduct may be unilateral. Section 177A(5) provides:
A reference in this Part to a scheme or a part of a scheme being entered into or carried out by a person for a particular purpose shall be read as including a reference to the scheme or the part of the scheme being entered into or carried out by the person for 2 or more purposes of which that particular purpose is the dominant purpose.
Under s. 177C(1)(a) a reference in Pt IVA to the obtaining of a tax benefit in connexion with a scheme is to be read relevantly as a reference to:
an amount not being 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.
Section 177D, so far as is relevant, provides that Pt IVA shall apply to a scheme, where:
(a) a taxpayer (in this section referred to as the "relevant taxpayer") has obtained, or would but for section 177F obtain, a tax benefit in connection with the scheme; and
(b) having regard to —
(i) the manner in which the scheme was entered into or carried out;
(ii) the form and substance of the scheme;
(iii) the time at which the scheme was entered into and the length of the period during which the scheme was carried out;
(iv) the result in relation to the operation of this Act that, but for this Part, would be achieved by the scheme;
(v) any change in the financial position of the relevant taxpayer that has resulted, will result, or may reasonably be expected to result, from the scheme;
(vi) any change in the financial position of any person who has, or has had, any connection (whether of a business, family or other nature) with the relevant taxpayer, being a change that has resulted, will result or may reasonably be expected to result, from the scheme;
(vii) any other consequence for the relevant taxpayer, or for any person referred to in sub-paragraph (vi), of the scheme having been entered into or carried out; and
(viii) the nature of any connection (whether of a business, family or other nature) between the relevant taxpayer and any person referred to in sub-paragraph (vi),
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 of enabling the relevant taxpayer and another taxpayer or other taxpayers each to obtain a tax benefit in connection with the scheme (whether or not that person who entered into or carried out the scheme or any part of the scheme is the relevant taxpayer or is the other taxpayer or one of the other taxpayers).
Where a tax benefit has been obtained, or would but for s. 177F be obtained, by a taxpayer in connexion with a scheme to which Pt IVA applies, the Commissioner may under s. 177F(1)(a) — "in the case of a tax benefit that 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 a part of that amount shall be included in the assessable income of the taxpayer of that year of income". The amount so determined shall, under s. 177F(2), be deemed to be included in the assessable income by virtue of such provision of the Act as the Commissioner determines.
The scheme in this case as originally identified by the Commissioner extended "to the conversion of the [Kleinschmidt shares] to "Z" class shares, with the result being that same were not subsequently sold to the newly-formed public company Pozzolanic Industries Ltd.". Subsequently, in the Federal Court proceedings, the Commissioner particularized the scheme as including the following steps:
(1) The purchase of all the shares of [the Pozzolanic Group] which were owned by R.T. Kleinschmidt by [Loftway];
(2) The issue of preference shares by [Loftway] to [Westpac];
(3) The conversion of shares in the [Pozzolanic Group] to "Z" class preference shares;
(4) The reduction in the considered value of the [Pozzolanic Group] shares by [Loftway];
(5) The special resolution by the [Pozzolanic Group] to remove the right of "Z" class preference shareholders to receive preferential dividends;
(6) The loan made by [TEP Holdings] which was the trustee of the Peabody Family Trust to [Loftway] and the terms and conditions of that loan;
(7) The public float of Pozzolanic Industries Ltd. which float excluded the "Z" class shares;
(8) The redemption of its preference shares in the target entities by [Loftway] from [Westpac];
(9) The sale of the [Pozzolanic Group] "Z" class shares by Loftway to [TEP Holdings] for a consideration of $476.00;
(10) The transfer of the shares by [TEP Holdings] as a gift or at par value to Pozzolanic Industries Ltd.
At first instance in the Federal Court, O'Loughlin J. took the view that Mr. Kleinschmidt's wish to keep confidential the price which was paid for his shares played no part in the decision to convert those shares into "Z" class shares. That conversion, he said, was implemented to avoid the provisions of s. 26AAA and was to be considered separately from the method adopted to finance the purchase of the Kleinschmidt shares, the purpose of which was plainly commercial. The relevant scheme might, O'Loughlin J. concluded, be confined to the conversion of the Kleinschmidt shares to "Z" class shares, but he was of the view that even if it extended to the issue of redeemable preference shares by Loftway as a means of obtaining cheap finance, the dominant purpose was still to avoid the application of s. 26AAA and so obtain a tax benefit.
The Full Court of the Federal Court took a different view. They pointed out that the scheme identified by the Commissioner comprised a series of steps, of which the conversion of the Kleinschmidt shares to "Z" class shares was only one. In their view it was not open to the Court to take one step and classify it as a scheme in itself. The discretion vested in the Commissioner to make a determination under s. 177F(1) was, the Full Court said, dependent upon the existence of a scheme to which Pt IVA applied in connexion with which a taxpayer obtained a tax benefit and it was not possible to substitute some other scheme for the scheme upon which the Commissioner exercised his discretion under that section. That discretion was exercisable by the Commissioner and not by the Court so that, in the view of the Full Court, it was not possible to support the validity of its exercise upon a basis other than that adopted by the Commissioner — that is to say, to do so by reference to a scheme other than that identified by the Commissioner.
The Full Court concluded, therefore, that the only relevant scheme was that identified by the Commissioner. The scheme identified was a course of action or conduct by Mr. Peabody commencing with the purchase of the Kleinschmidt shares and ending with the transfer of those shares to Pozzolanic Industries. The dominant purpose of Mr. Peabody in entering into or carrying out that scheme was, in the view of the Full Court, commercial, namely, the acquisition of the Kleinschmidt shares and the flotation of a public company. It was not, so the Full Court said, to enable the taxpayer, Mrs. Peabody, to obtain a tax benefit in connexion with the scheme.
The Full Court also concluded that, in any event, it was not reasonable to expect that, if the scheme had not been entered into or carried out, the assessable income of Mrs. Peabody would have included the amount in question. Such an expectation could only be based upon the view that TEP Holdings would have purchased the Kleinschmidt shares and that, in the view of the Full Court, was not a reasonable expectation.
Accordingly, the Full Court allowed the appeal and upheld Mrs. Peabody's objection to the amended assessment of income tax in respect of the year of income ended 30 June 1986.
Under s. 177F(1), the Commissioner's discretion to cancel a tax benefit extends only to a tax benefit obtained in connexion with a scheme to which Pt IVA applies. The existence of the discretion is not made to depend upon the Commissioner's opinion or satisfaction that there is a tax benefit or that, if there is a tax benefit, it was obtained in connexion with a Pt IVA scheme. Those are posited as objective facts [3] . The erroneous identification by the Commissioner of a scheme as being one to which Pt IVA applies or a misconception on his part as to the connexion of a tax benefit with such a scheme will result in the wrongful exercise of the discretion conferred by s. 177F(1) only if in the event the tax benefit which the Commissioner purports to cancel is not a tax benefit within the meaning of Pt IVA. That is unlikely to be the case if the error goes to the mere detail of a scheme relied upon by the Commissioner. An error of a more fundamental kind, however, may have that result — where, for example, it leads to the identification of the wrong taxpayer as the recipient of the tax benefit. But the question in every case must be whether a tax benefit which the Commissioner has purported to cancel is in fact a tax benefit obtained in connexion with a Pt IVA scheme and so susceptible to cancellation at the discretion of the Commissioner.
1. See McAndrew v Federal Commissioner of Taxation (1956), 98 C.L.R. 263, at pp. 276-277, per Kitto J.; cf. Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949), 78 C.L.R. 353, at p. 360, per Dixon J.
Of course, the Commissioner may be required to supply particulars of the scheme relied on [4] and in this case has supplied them in the form of the ten steps identified by the Commissioner. But the Commissioner is entitled to put his case in alternative ways. If, within a wider scheme which has been identified, the Commissioner seeks also to rely upon a narrower scheme as meeting the requirements of Pt IVA, then in our view there is no reason why the Commissioner should not be permitted to do so [5] , provided it causes no undue embarrassment or surprise to the other side. If it does, the situation may be cured by amendment, provided the interests of justice allow such a course [6] .
1. See Bailey v Federal Commissioner of Taxation (1977), 136 C.L.R. 214.
2. See XCO Pty Ltd v Federal Commissioner of Taxation (1971), 124 C.L.R. 343, at p. 349, per Gibbs J.
3. Bailey v Federal Commissioner of Taxation (1977), 136 C.L.R., at p. 219.
In this case, O'Loughlin J. at first instance took the view that the Commissioner had particularized the scheme too widely and that it should be confined to the devaluation of the Kleinschmidt shares and the subsequent disposal of them. He was not bound to accept the wider scheme advanced by the Commissioner before him and there was no unfairness to the taxpayer in his reaching the conclusion which he did, notwithstanding the apparent failure of the Commissioner to advance alternative schemes. The argument of the Commissioner plainly relied upon the devaluation of the Kleinschmidt shares as evidence of a dominant purpose on the part of Mr. Peabody to obtain a tax benefit, however widely the particulars were otherwise drawn. Before us the Commissioner sought to rely upon the narrower scheme identified by the judge at first instance and, in our view, he was entitled to do so.
However, the Full Court was of the view that the only scheme available to be considered in connexion with the tax benefit cancelled by the Commissioner was the whole scheme embraced by the particulars provided by the Commissioner. In relation to that scheme the Full Court concluded that the dominant purpose of Mr. Peabody — the only relevant person to enter into and carry out the scheme — was of a commercial nature and not to enable Mrs. Peabody to obtain a tax benefit. The Commissioner's answer to that was that the provisions of Pt IVA cover not only a scheme but any part of a scheme. That is to be seen, he said, in ss. 177D and 177A. In s. 177D it is contemplated that the person by reference to whose purpose the nature of the scheme is to be determined may be a person who enters into or carries out only part of the scheme. Section 177A(5) provides that it is the dominant purpose of a person entering into or carrying out part of a scheme which is relevant where that person has two or more purposes. The consequence, so the Commissioner argued, was that if Mr. Peabody's dominant purpose in carrying out that part of the scheme which consisted of the devaluation of the Kleinschmidt shares was to obtain a tax benefit, then any tax benefit obtained as a consequence was obtained in connexion with a scheme within the meaning of Pt IVA.
But Pt IVA does not provide that a scheme includes part of a scheme and it is possible, despite the very wide definition of a scheme, to conceive of a set of circumstances which constitutes only part of a scheme and not a scheme in itself. That will occur where the circumstances are incapable of standing on their own without being "robbed of all practical meaning" [7] . In that event, it is not possible in our view to say that those circumstances constitute a scheme rather than part of a scheme merely because of the provision made by ss. 177D and 177A. The fact that the relevant purpose under s. 177D may be the purpose or dominant purpose under s. 177A(5) of a person who carries out only part of the scheme is insufficient to enable part of a scheme to be regarded as a scheme on its own. That, of course, does not mean that if part of a scheme may be identified as a scheme in itself the Commissioner is precluded from relying upon it as well as the wider scheme.
1. See Inland Revenue Commissioners v Brebner , [1967] 2 A.C. 18, at p. 27.
The Commissioner also contested the alternative basis upon which the Full Court decided against him, namely, that any tax benefit was not obtained by Mrs. Peabody. He argued that, if the Kleinschmidt shares had not been converted to "Z" class preference shares, a proportion of the amount of profit which would have been derived from their sale, made necessary because of the float, might reasonably be expected to have been included in Mrs. Peabody's assessable income for the year ended 30 June 1986.
The difficulty faced by the Commissioner in making that submission was not in establishing that a tax benefit was obtained by reason of the conversion of the Kleinschmidt shares to "Z" class preference shares, but in establishing that the tax benefit was obtained by Mrs. Peabody in the relevant year of income. As O'Loughlin J. observed at first instance [8] :
The Peabody interests had negotiated the purchase of a large parcel of shares in the group based on the group having a net worth of about $24m. Within a period of twelve months of that purchase there was to be a public float based on the group having a net worth of $30m. Somebody (the particular taxpayer or taxpayers within the Peabody family who would purchase the Kleinschmidt shares) stood to make a capital gain that was equivalent to about 38 per cent of $6m. However that taxpayer or those taxpayers would be liable to tax on that capital gain unless some lawful avoidance measure could be implemented.
1. (1992) 24 A.T.R., at p. 67; 92 A.T.C., at p. 4,593.
The purchase of the Kleinschmidt shares was necessary for the purposes of the float. The actual purchaser of those shares was Loftway and it is apparent that Loftway, or some other company performing the same role, was required to be the purchaser in order to obtain the cheaper finance for the purchase, regardless of the subsequent devaluation of the shares. It was not contested by the Commissioner that the decision to finance the purchase of the Kleinschmidt shares through Loftway was other than a rational, commercial decision. The scheme for cheaper finance required both the purchaser of the Kleinschmidt shares and the financier holding the redeemable preference shares in the purchaser to be entitled to a rebate under s. 46 of the Act in respect of dividends received by them. The Commissioner contended that the purchaser might reasonably be expected to have been TEP Holdings had there been no devaluation of the Kleinschmidt shares. A reasonable expectation requires more than a possibility. It involves a prediction as to events which would have taken place if the relevant scheme had not been entered into or carried out and the prediction must be sufficiently reliable for it to be regarded as reasonable [9] .
1. See Dunn v Shapowloff , [1978] 2 N.S.W.L.R. 235, at p. 249, per Mahoney J.A.
There were difficulties in the way of TEP Holdings itself financing the purchase of the Kleinschmidt shares, regardless of any subsequent devaluation. Even if it had been possible for that company to issue and pay dividends upon redeemable preference shares having regard to its status as a trustee, it is far from clear that it could have established any entitlement to a rebate in respect of the dividends paid on the Kleinschmidt shares acquired by it. In order to establish an entitlement to a rebate, it would have been necessary for TEP Holdings, a trustee, to acquire the Kleinschmidt shares beneficially so that it was entitled beneficially to the dividends. If the shares were acquired by TEP Holdings on behalf of the trust, the dividends would not have been included in its taxable income [10] and there would have been no rebate in respect of them (s. 46(2)). Since the purchase of the Kleinschmidt shares had to be financed whether or not they were subsequently devalued, any uncertainty as to the entitlement of TEP Holdings to a rebate in respect of dividends upon those shares made it unlikely that TEP Holdings would have been chosen as the purchaser of the shares. The Full Court was correct in its conclusion that there was no reasonable expectation that TEP Holdings would have acquired the Kleinschmidt shares as part of the exercise involved in the float. It may be added that, in any event, even if TEP Holdings had been able to acquire the Kleinschmidt shares in its own right and not as trustee, it would appear that there would have been no present entitlement on Mrs. Peabody's part to any proportion of any profit arising from the sale of those shares.
1. See the Act, s. 96.
It necessarily follows that any profit obtained from the sale of those shares, had the devaluation not taken place, would have been obtained by Loftway so that any tax benefit in connexion with the devaluation and subsequent disposal of the Kleinschmidt shares was obtained by that company. There is no reason to suppose, and the Commissioner was unable to demonstrate, that, had the devaluation not taken place and had that profit been made by Loftway, it would have flowed, or could reasonably be expected to have flowed, to TEP Holdings and hence to Mrs. Peabody in the year ended 30 June 1986. In other words, and quite apart from any income tax which Loftway might have been liable to pay in respect of the profit, there was no reasonable expectation that Loftway would have declared dividends which would have reached the Peabody Family Trust in that year of income.
The Commissioner advanced examples in an effort to show that, even assuming that finance was raised by Loftway by the issue of preference shares, the acquisition and disposal of the Kleinschmidt shares might have taken place in a manner which would have resulted in Mrs. Peabody obtaining a tax benefit in the relevant year of income. But the method adopted by Loftway, apart from the devaluation of the Kleinschmidt shares, was found below to be entirely explicable upon a commercial basis and it could not be said of any of the examples advanced that, even if commercially possible, they would have been adopted in the absence of the devaluation as a matter of reasonable expectation.
For these reasons, it cannot be said that the amount which the Commissioner included in Mrs. Peabody's assessable income for the year ended 30 June 1986 was an amount which would have been included or might reasonably be expected to have been included in her assessable income for that year had the devaluation of the Kleinschmidt shares not taken place. Mrs. Peabody did not, therefore, obtain a tax benefit in connexion with a Pt IVA scheme and, accordingly, the appeal must be dismissed. |
high_court_of_australia:/showbyHandle/1/9348 | decision | commonwealth | high_court_of_australia | text/html | null | Gurnett v Macquarie Stevedoring Co Pty Ltd [1955] HCA 63 | https://eresources.hcourt.gov.au/showbyHandle/1/9348 | 2024-09-13T22:54:08.013832+10:00 | High Court of Australia
Dixon C.J. McTiernan, Williams, Webb and Taylor JJ.
Gurnett v Macquarie Stevedoring Co Pty Ltd
[1955] HCA 63
ORDER
Appeal allowed with costs. Order of the Full Court of the Supreme Court discharged. In lieu thereof order that the appeal to that court be allowed with costs, the verdict for the defendant be set aside and there be a new trial of the action and that the costs of the former trial abide the result.
Cur. adv. vult.
The following written judgments were delivered:—
Nov. 28
Dixon C.J., McTiernan, Williams and Webb JJ.
This is an appeal from an order of the Full Court of the Supreme Court of New South Wales dismissing an appeal from a verdict for the defendant which was found by direction at the end of the plaintiff's case. It is an action for personal injuries by a stevedore's labourer against a stevedoring company. The injuries were sustained during the discharge of the cargo in Sydney of the ship Duntroon. The plaintiff was at work upon a gantry at the ship's side. The cargo included cases of apples which were lifted by ship's gear from the hold to the gantry. The cases were placed upon a tray secured to the fall of the ship's derrick by means of a rope from each of the four corners of the tray terminating in a hook. When the tray was loaded the four ropes were hooked to a ring attached to the fall. But when the tray was returned empty from the gantry only two of the hooks were affixed to the ring at the end of the fall so that the tray was suspended vertically with the remaining hooks hanging down. The plaintiff was at work on the floor of the gantry unhooking the tray and removing cases of apples from it. He wore gauntlet gloves. As the tray was being returned empty one of the hanging hooks was caught in a glove. According to his evidence he had given the word for the tray to be hoisted away and as it went one of the tray "legs" (i.e., hooked ropes) caught him in the glove on the right hand and dragged him to the edge of the gantry. "It went", he says, "to such a point that I had to think twice about whether I would land on the wharf or make a dive for the ship. I went for the ship's side and I landed on my outstretched hands". By landing on his hands he suffered the injuries complained of. He sustained Colles' fractures in the region of the wrist joints of both forearms. The plaintiff was not asked the direct question as to why he jumped or what passed through his mind when he did jump, but he was cross-examined as to the circumstances and he gave the following answers:—
Q. Once the hook started, nobody stopped the winch? A. We sang out to him to stop, but it takes seconds before the winch can stop.
Q. You were dragged off the gantry by the hook catching in your glove? A. Yes.
Q. When you got to the edge of the gantry, you jumped; or did you fall on to the ship's side? A. I had to decide, by quick thinking, to either jump or fall straight down.
Q. At that stage, the hook had come clear of your glove? A. No.
Q. It was still in the glove? A. As I was going with it; then it came off.
Q. After you were off the gantry? A. As I was going with it, the glove came off.
Q. You were dragged off the gantry? A. It was not the matter of dragging; it was the quick thinking.
Q. Quick thinking did not get you off the gantry? A. Being caught in the glove, I did the quick thinking of making a dive for the side of the ship.
Q. Were you dragged off the gantry, still with your glove caught in the hook? A. It was dragging me off.
Q. Did it drag you off; or did you jump off? A. I did not jump. I was dragged, and I decided to jump to the side of the ship.
Q. Were you dragged off the gantry, or did you jump off the gantry? A. That is a point—I don't know whether you are trying to bamboozle me or not. It was just my quick thinking that I had to "go with it", and jump.
Q. Did you jump off the gantry, or were you dragged off, or don't you know? A. If I were to jump off the gantry, it would have been deliberate—which it was not. I went with the hook, and made for the side of the ship.
Q. You were dragged off the gantry and managed to get on to the side of the ship? A. I managed to make a dive for the side of the ship.
From this evidence, if accepted, it appears that the glove came off or gave way before the plaintiff actually fell on the ship's deck. He did not fall completely on the deck. The ship's rail was no doubt down and according to a witness the plaintiff's body fell outside the ship but so that part of his body was just hanging on to what the witness described as the lip of the side of the ship.
In the gap between such a gantry and the ship's side it is customary to stretch a net but no net was in fact stretched on that occasion. While the purpose of such a precaution may include the catching of falling goods, it is conceded that it is also to safeguard those working on the gantry. The distance between the ship's side and the gantry is stated to have been eight or ten feet and the level of the ship's deck was eight feet below the horizontal level of the gantry floor on which the plaintiff was working. The level of the concrete wharf was twenty feet below the floor of the gantry.
Myers J., before whom the action was tried, held at the end of the plaintiff's case that there was no evidence supporting the cause of action fit to be submitted to the jury and his Honour directed the jury to find a verdict for the defendant. This decision was affirmed by the Full Court, Street C.J. and Ferguson J., Roper C.J. in Eq. dissenting [1] .
1. (1955) 55 S.R. (N.S.W.) 243; 72 W.N. 261.
It is not disputed that failure to place a net to bridge the gap between the ship's side and the gantry is evidence of negligence which would give rise to liability to a workman of the defendant who sustained injuries owing to its absence. The question of fact upon which the plaintiff's case depended was whether the absence of the net was a material cause of the injury he in fact sustained. It was of course incumbent upon the plaintiff to adduce evidence from which it might reasonably be concluded that a material cause of his injuries was the absence of a net. But it would be open to the jury to find that the defendant's negligence in failing to stretch a net was a material cause of the plaintiff's injuries, if the jury were reasonably satisfied upon sufficient evidence that when his glove was caught by the hook the absence of the net exposed him to the danger of falling on the concrete floor of the wharf and that in an instinctive attempt to avoid so falling he took a course which, though not unreasonable in the emergency, caused him to fall upon the deck in a manner occasioning his injuries. The plaintiff's own evidence, if accepted, would, we think, suffice to enable the jury to find that he in fact jumped and thereby gave additional impetus to his passage from the gantry to the deck of the ship and that he did so through fear of falling upon the concrete floor of the wharf twenty feet below. The manner in which he fell upon the deck afforded evidence that, had he not imparted impetus to his passage from the gantry to the deck, he would have fallen upon the concrete wharf. For the whole of his body did not reach the deck.
The further question whether the plaintiff would have jumped in the same manner had a net been stretched is one which must necessarily depend upon inference. But having regard to what the plaintiff said in evidence, the jury might reasonably infer that had the net been in position he would not have taken the same course.
For these reasons we think that the case ought not to have been withdrawn from the jury and agree with the judgment of Roper C.J. in Eq. Accordingly the appeal should be allowed, the order of the Full Court set aside and in lieu thereof an order made that there should be a new trial of the action.
Taylor J.
I agree that this appeal should be allowed.
The appeal was conducted on the basis that there was abundant evidence upon which the jury could conclude not only that no safety net was provided between the ship's side and the gantry upon which the appellant was working immediately before his injury, but also that the omission to make such a provision constituted a breach of the respondent's duty to exercise due care with respect to the appellant. The matter in dispute between the parties was whether there was evidence upon which a jury could find that this breach of duty was a material cause of the appellant's injuries.
There is no question that if, after his glove had become caught by one of the tray "legs", the appellant had fallen to the wharf and thereby sustained injury the respondent's omission to provide a net would have constituted a ground upon which it might have been held liable in damages. And there can be no doubt that if the appellant sustained his injuries in taking or endeavouring to take some step, which was not unreasonable, to avoid the consequence of the respondent's omission the latter would, equally, be liable. This, of course, is how the appellant's case is put. It is said that there is sufficient in the evidence to establish that the appellant was aware that the safety net was not in position, that when his glove was caught by the tray "leg" the possibility that he might be precipitated on to the wharf was present to his mind, that, with this in mind, he made an attempt to hasten his lateral movement towards the ship's deck and that this action on his part resulted in his injuries being caused in precisely the manner deposed to.
The evidence in the case is meagre but there is sufficient to establish that the appellant was aware that the net was not in position and that, at the material time, the appellant appreciated that its absence exposed him to the risk of a fall of some twenty feet on to the wharf. There is also evidence which, if believed, would enable the jury to conclude that when he realised that he would be dragged from the gantry he "went for the ship's side" or that he "managed to make a dive for the side of the ship". To what extent he was in a position to influence or did, in fact, influence the course of events may, as a question of fact, be open to serious dispute but in my opinion there is just barely sufficient to entitle the jury, if it accepts the appellant's evidence, to say that he was able to accelerate his movement towards the ship's side and that, having regard to the manner and position in which he struck the deck, that this acceleration resulted in the injuries which he sustained. The last-mentioned point is that upon which I have felt difficulty but although the evidence is extremely thin there is, in my view, sufficient to entitle the appellant to have the questions of fact submitted to a jury. |
high_court_of_australia:/showbyHandle/1/9298 | decision | commonwealth | high_court_of_australia | text/html | null | S v The Queen [1989] HCA 66 | https://eresources.hcourt.gov.au/showbyHandle/1/9298 | 2024-09-13T22:54:15.925375+10:00 | High Court of Australia
Brennan, Dawson, Toohey, Gaudron and McHugh JJ.
S v The Queen
[1989] HCA 66
ORDER
Application for special leave to appeal granted. Appeal allowed. Set aside the orders of the Court of Criminal Appeal of Western Australia. In lieu thereof order that the appeal to that Court be allowed, that the convictions be quashed and that there be a new trial.
Cur. adv. vult.
The following written judgments were delivered:—
Dec. 21
Brennan J.
The applicant was convicted before the District Court of Western Australia on three counts of incest with his daughter. The daughter gave evidence that, from the age of nine or ten, her father had engaged in sexual acts with her and that, as she grew older, he went further until he had sexual intercourse with her when she was aged about fourteen. Her fourteenth birthday was in November 1979. She said that he had intercourse with her thereafter until she left home in February 1983, when she was aged seventeen. She described the initial act of a sexual kind which he committed with her and the first occasion when he had sexual intercourse with her. Her evidence of these events was given in general terms. After describing the first occasion when he had intercourse with her, her evidence continued:
After that first occasion, were there any further acts of intercourse? — Yes. There were further acts but I cannot remember all the details of them or when they were. I have blanked them out.
Is there any particular reason why you can't remember the exact details? — I have blanked them all out, tried to forget them.
But do you know over what period of time they continued? — They would have been over the next two years.
Until what age? — Until I left home at seventeen.
Are you able to tell the members of the jury how often during those years until you left home such acts occurred? — Actual sexual intercourse wasn't too often, but it was a couple of times.
A couple of times every how often? — Every couple of months for a year.
She also gave evidence that on some occasions her father used to put on her mother's underpants and slips and that the first occasion he did this was an occasion when he had intercourse with her.
The Crown presented an indictment in the District Court of Western Australia at Perth charging the applicant on three counts of incest: the first "[o]n a date unknown between the 1 January 1980 and the 31 December 1980", the second "on a date unknown between the 1 January 1981 and the 31 December 1981" and the third "on a date unknown between the 8 November 1981 and the 8 November 1982". Before the trial commenced counsel for the applicant sought particulars of the charge to which each count in the indictment related. The application was refused by the Crown and the trial judge declined to make any order. The Crown's position was stated by the prosecutor:
The Crown is alleging that in each of those three years there was one act of sexual intercourse by the accused with the girl in question which constitutes the alleged offence. It can't be particularised as to any particular month and that is why it is pleaded in each count on a date unknown between the beginning of the year and the end of the year. When Your Honour has regard to the fact that the defence has had available to it the full depositions which set out exactly the testimony which the girl is to give, Your Honour will observe that really the girl was quite young at the time; that she has recounted that there were continual acts of sexual intercourse over those three years and the Crown has elected to charge one in each year.
None of the counts was linked to either of the specific acts of intercourse mentioned by the daughter in evidence. The evidence was equivocal as to whether the first act of intercourse took place before or during the period mentioned in the first count in the indictment. The act which occurred when the applicant allegedly first donned women's clothes was not attributed to any one of the periods mentioned in the three counts in the indictment. The Crown case was simply that an incestuous relationship existed during each of the periods mentioned in the three counts, but the acts of intercourse constituting the alleged incestuous relationship were not distinguishable one from another save as to the different occasions of their occurrence. When the trial judge came to sum up he directed the jury: "You have to be satisfied beyond reasonable doubt that at least on one occasion during each of these years there was such penetration." The jury having convicted on all three counts, the applicant's appeal was dismissed by a majority of the Court of Criminal Appeal (Brinsden and Smith JJ., Kennedy J. dissenting).
The applicant's argument in support of the application for special leave to this Court rested on the proposition that, where a count in an indictment alleges one specific offence, it is not open to the Crown to lead evidence of a number of acts which amount to the actus reus and then to invite the jury to convict on any one of the acts led in evidence. Although each count in the indictment was regular on its face, it referred indifferently to a number of acts of intercourse indistinguishable one from another save as to the different occasions of their occurrence. The facts thus disclosed that, in each count, there was a latent ambiguity which was not removed by particulars, nor by an election by the prosecution to proceed on a particular act falling within the period specified in the count, nor by construing the count as relating to the first of the offences committed within the specified period (as Jacobs J. suggested in Mackay v. The Queen [1] ). To allow the trial to proceed without confining each count to a single act of intercourse was an error of law which, subject to the proviso in s. 689(1) of the Criminal Code W.A., entitled the applicant on appeal to an order quashing the conviction: Parker v. Sutherland [2] ; Johnson v. Miller [3] .
1. (1977) 136 C.L.R. 465, at p. 472.
2. (1917) 116 L.T. 820.
3. (1937) 59 C.L.R. 467.
However, the proviso to s. 689(1) authorizes the Court of Criminal Appeal not to make such an order where there has been no substantial miscarriage of justice. Whether there has been a substantial miscarriage depends on the actual circumstances of the case. In a case similar to the present, R. v. Thompson [4] , an enlarged bench of the Court of Criminal Appeal considered the problems of uncertainty and duplicity in an indictment charging a father with an act of incest with his daughter during two consecutive periods, one of twenty-one months, the other of twenty-nine months. Isaacs C.J., speaking for the Court, assumed that the appellant could have moved in arrest of judgment but nevertheless held that no substantial miscarriage of justice had occurred. His Lordship said [5] :
One of the objects of s. 4 [of the Criminal Appeal Act 1907 U.K.] was to prevent the quashing of a conviction upon a mere technicality which had caused no embarrassment or prejudice. Whilst giving the right of appeal upon any wrong decision of any question of law, the object of the Legislature was that justice should be done in spite of a wrong decision and that the Court should not interfere if it came to the conclusion that, notwithstanding the wrong decision, there had been no substantial miscarriage of justice.
The Court concluded that there was no substantial miscarriage of justice because the failure to identify a single act of intercourse as the act charged in the indictment caused no embarrassment or prejudice at the trial "inasmuch as in the depositions and during the trial offences were proved on specific dates of which the appellant had had ample notice, and for which the defence was fully prepared": [6] . In R. v. Conley [7] , the applicant in a Crown Case Reserved was convicted on an indictment charging unlawful carnal knowledge of a girl "in the month of July 1915", the evidence revealing four or five acts of intercourse during that month. The authority of the case on some points has been overtaken by the judgment of this Court in Johnson v. Miller but the Full Court, holding the proviso to be applicable to Crown Cases Reserved, noted that the applicant "was not embarrassed or prejudiced at the trial".
1. [1914] 2 K.B. 99; (1913) 9 Cr. App. R. 252.
2. [1914] 2 K.B., at p. 105; (1913) 9 Cr. App. R., at p. 260.
3. [1914] 2 K.B., at p. 103; (1913) 9 Cr. App. R., at p. 258.
4. [1916] V.L.R. 639.
In considering the application of the proviso, it is erroneous to conjure up fanciful possibilities of embarrassment or prejudice. The proviso prevents the frustration of the basic intent of the criminal appeal statute which, in the absence of the proviso, might plunge "the administration of the criminal law into outworn technicality": Driscoll v. The Queen [8] , per Barwick C.J. What embarrassment or prejudice resulted from the error of law in this case? It is not suggested that the applicant was not fully aware of the evidence to be called in the Crown case. There was no prejudice to be found in the admission of evidence. As in Thompson , evidence of the entire incestuous relationship was admissible on the trial whether the indictment charged one offence or several: R. v. Ball [9] ; Martin v. Osborne [10] . The applicant was not prejudiced in countering the allegations. Had the applicant wished to impugn the imprecise evidence of the daughter relating to any of the intermittent acts of intercourse of which she spoke, he could have done so with as much (or as little) effect whether or not each of the counts in the indictment had been confined to a single act. The artificiality of any suggestion of prejudice is apparent if one postulates the manner in which the Crown might have given particulars which would have confined each count to a single act. The particulars could not have furnished the date and time of the act selected; the particulars would have consisted in no more than a selection of the first act (or the second, third, fourth, fifth or sixth act) of intercourse within a relevant period. There was nothing distinctive about the evidence of any act by which to differentiate it from any other occurring within the periods specified in the indictment apart from the order of its occurrence. If there was embarrassment, it consisted in the lack of specificity in the evidence; not in the latent ambiguity or duplicity of the counts in the indictment. The case is not comparable with Johnson v. Miller where each set of facts to which the information in that case might have related opened the way to a distinct defence: see per Dixon J. [11] .
1. (1977) 137 C.L.R. 517, at p. 527.
2. [1911] A.C. 47.
3. (1936) 55 C.L.R. 367, at pp. 394-396.
4. (1937) 59 C.L.R., at p. 490.
It is, in my respectful view, fanciful to suggest that the verdict could have been returned because some jurors were satisfied that one act of intercourse occurred, others that another act occurred and others again that a third act occurred within a relevant period. The real choice for the jury was to be satisfied or not to be satisfied that the series of incestuous acts occurred. The jury could not have found that a particular act in the series occurred but another did not. There was nothing by which the jurors might have distinguished between one act and another. I am also unable to accept the suggestion that there is some prejudice to the applicant in his supposed inability to plead autrefois convict if he should be charged hereafter with an act of intercourse falling within a relevant period. The terms of the present conviction, if drawn up conformably with the indictment, would comprehend any act of intercourse committed within the relevant period. By proving that conviction, the applicant would discharge the evidentiary onus of proving the identity of any offence which might be charged in respect of a period with the offence of which he has now been convicted in respect of the same period and the Crown would have to show that the offence with which he is then charged is an offence other than the offence for which he has been convicted: R. v. Parry [12] . That would be an impossible onus for the Crown to discharge. If the Crown were hereafter to charge two offences within the same period — a course which is not realistically to be contemplated — it may be that the applicant could assign his conviction to whichever offence he chooses. In any event, there is no risk of a double conviction if only one act of intercourse occurred.
1. (1837) 7 C. & P. 836 [173 E.R. 364].
In these particular circumstances, though the point taken is good in law, the error in allowing the trial to proceed without particulars caused no substantial miscarriage of justice. As this was the only error relied on in this Court, it is impossible to say that the Court of Criminal Appeal ought to have allowed the appeal. We are not called on to consider whether the evidence was sufficient to support the verdict. I would grant special leave to appeal as the application of the proviso in a case to which Johnson v. Miller [13] applies is a question of some importance, but I would dismiss the appeal.
1. (1937) 59 C.L.R. 467.
Dawson J.
The indictment upon which the applicant was presented for trial contained three separate counts of incest. None of the counts specified the day upon which the act of incest was alleged to have occurred; in each instance the act was alleged to have taken place upon a date unknown during a twelve-month period. Thus the first count alleged one act of incest between 1 January 1980 and 31 December 1980, the second alleged one act between 1 January 1981 and 31 December 1981 and the third alleged one act between 8 November 1981 and 8 November 1982. This form of pleading is quite proper where the date is not an essential part of the alleged offence and, of itself, does not render a count bad for insufficiency of particulars.
However, before the applicant was arraigned, his counsel sought particulars of each of the three counts and sought an adjournment to enable those particulars to be supplied. In making his application, counsel for the applicant identified the problems which were likely to emerge, namely, that if the evidence called by the prosecution revealed more than one offence during each of the three years in question it would not be possible to say which of the offences was the one alleged. The learned trial judge, however, declined to order particulars and did not accede to the application for an adjournment.
The situation envisaged by counsel for the applicant was that which eventuated. The evidence of the applicant's daughter, who was the complainant, disclosed numerous acts of intercourse. She said that the first act of intercourse took place in "about 1979, '80" when she was fourteen years of age. The complainant was born on 8 November 1965. Thus the first act of intercourse which she alleged may or may not have taken place during the period of one year alleged in the first count. The complainant said that acts of intercourse continued over the next two years until she left home at the age of seventeen years. Her examination in chief continued:
Are you able to tell the members of the jury how often during those years until you left home such acts occurred? — Actual sexual intercourse wasn't too often, but it was a couple of times.
A couple of times every how often? — Every couple of months for a year.
By the last answer the complainant evidently meant that intercourse occurred every couple of months during each of the three years, but she was unable to be more specific than that. The only two acts of intercourse which the complainant was able to describe in more detail were the first, which, as I have said, may or may not have occurred during the first period of one year and another act, which the complainant could not ascribe to any period, which occurred when the applicant was alleged to have put on some of his wife's clothing.
Thus, notwithstanding that each count in the indictment charged the applicant with one offence only, the evidence revealed a multiplicity of offences with nothing to identify any one of them as the offence with which the applicant was charged in any particular count. No application was made that the prosecution be put to its election for the purpose of identifying the specific occasions upon which it relied as constituting the offences in question, nor did the trial judge put the prosecution to its election. Instead, he left it to the jury "to determine whether on the three occasions cited in the indictment, the accused did have carnal knowledge of his daughter ". The indictment, of course, did nothing to specify which of the multiple acts of intercourse were those alleged to constitute the offences with which the applicant was charged. The applicant was convicted upon all three counts.
As I have said, the three counts in the indictment were framed in a permissible way. Each charged only one offence and gave rise to no duplicity. Had the evidence revealed only one offence in each of the years in question, there could have been no complaint about the form of the indictment. But the evidence disclosed a number of offences during each of those years, any one of which fell within the description of the relevant count. Because of this there was what has been called a "latent ambiguity" in each of the counts: see Johnson v. Miller [14] , per Dixon J. That ambiguity required correction if the applicant was to have a fair trial.
1. (1937) 59 C.L.R. 467, at p. 486.
The material before us does not reveal whether the ambiguity was apparent by reference to the depositions at the time that the applicant made application for particulars. If it was, it may have been appropriate for the trial judge to have ordered that particulars be given identifying the offences charged, if not by reference to time, by reference to other distinguishing features. If at that stage such a course was inappropriate and it was necessary for the prosecution to call its evidence for the precise nature of the defect in the proceedings to emerge, the prosecution ought to have been required as soon as the defect became apparent to elect by indicating which of the offences revealed by the evidence were the offences charged. In some cases (although not, it would seem, the present one) the ambiguity may be removed by an amendment of the indictment splitting a count into several counts or by adding further counts so as to distinguish the separate occasions alleged. Such an amendment may only be allowed if it does not cause injustice or prejudice to the accused and that generally means that it cannot be made during the course of a trial: Radley [15] . The power of a court to impose the appropriate requirement in order to secure a fair trial and protect its process from abuse will ordinarily be either implied or inherent: see Tucker v. Noblet [16] ; Johnson v. Miller [17] ; Grassby v. The Queen [18] .
1. (1973) 58 Cr. App. R. 394, at p. 403.
2. [1924] S.A.S.R. 326, at p. 340.
3. (1937) 59 C.L.R., at pp. 488-489.
4. (1989) 168 C.L.R. 1, at pp. 15-19.
There was, I think, obvious embarrassment to the applicant in having to defend himself in relation to an indeterminate number of occasions, unspecified in all but two instances, any one of which might, if it occurred in one of the relevant years, constitute one of the offences charged. There was the additional embarrassment that the years in the second and third counts overlapped so that if an occasion fell within the overlapping period it was not possible to determine whether it was an offence charged by count two or by count three.
The occasions upon which the offences alleged took place were unidentified and the applicant was, in effect, reduced to a general denial in pleading his defence. He was precluded from raising more specific and, therefore, more effective defences, such as the defence of alibi. Because the occasions on which he was alleged to have committed the offences charged were unspecified, he was unable to know how he might have answered them had they been specified. It is not to the point that the prosecution may have found it difficult or even impossible to make an election because of the generally unsatisfactory evidence of the complainant. An accused is not to be prejudiced in his defence by the inability of the prosecution to observe the rules of procedural fairness.
Not only was the applicant embarrassed in putting his defence, but as the prosecution was not put to its election, the trial proceeded in a manner which made it impossible to deal with questions of the admissibility of similar fact evidence: see Johnson v. Miller [19] ; Parker v. Sutherland [20] . True it is that evidence of acts of intercourse other than those charged may have been admissible as similar facts of sufficient probative force to warrant their admission in evidence. I attempted to explain in Harriman v. The Queen [21] that when such evidence is admitted in a case of this kind its relevance is said to lie in establishing the relationship between the two persons involved in the commission of the offence, or the guilty passion existing between them, but it is in truth nothing more than evidence of a propensity on the part of the accused of a sufficiently high degree of relevance as to justify its admission. Cf. R. v. Ball [22] . Obviously that high degree of relevance can only occur where the evidence of propensity is related to a specific offence upon an identified occasion. If no occasion is identified, the necessary relationship cannot exist. In this case, where there was a failure to identify the occasions upon which the offences charged took place, the whole of the evidence was, in effect, evidence of propensity which could not be related to the offences charged because of the lack of identification of those offences. In other words, the prosecution case sought to go no further than to establish that an incestuous relationship existed between the applicant and his daughter — which is to do no more than establish a particular kind of propensity — and to assert the guilt of the applicant upon three unspecified occasions during the existence of, and upon the basis of, that relationship. Far from establishing the necessary high degree of relevance, to proceed in this way was to obtain the conviction of the applicant upon evidence of propensity unrelated to a specific offence upon an identified occasion. Such a course was clearly objectionable.
1. (1937) 59 C.L.R., at pp. 489-490.
2. (1917) 86 L.J.K.B. 1052, at p. 1054.
3. (1989) 167 C.L.R. 590.
4. [1911] A.C. 47.
The case having proceeded as it did, it is theoretically possible that individual jurors identified different occasions as constituting the relevant offences so that there was no unanimity in relation to their verdict. That, of course, would be unacceptable, but it is more likely that the jury reached their verdict without identifying any particular occasions. Indeed, that is virtually inevitable because no means were afforded the jury whereby they could identify specific occasions. As I have indicated, such a result is tantamount to their having convicted the applicant, not in relation to identifiable offences, but only upon the basis of a general disposition on his part to commit offences of the kind charged.
Moreover, the law requires that there be certainty as to the particular offence of which an accused is charged, if for no other reason than that he should, if charged with the same offence a second time, be able to plead autrefois convict or autrefois acquit. It was submitted that s. 17 of the Criminal Code W.A. would enable the applicant to plead autrefois convict in relation to any offence which might have been taken by the jury to be one of the three offences specified in the three counts. Section 17 provides:
It is a defence to a charge of any offence to show that the accused person has already been tried, and convicted or acquitted upon an indictment on which he might have been convicted of the offence with which he is charged, or has already been acquitted upon indictment, or has already been convicted, of an offence of which he might be convicted upon the indictment or complaint on which he is charged.
As I understand the submission, it is that, because the applicant may have been convicted in relation to any one of a number of occasions within each of the three periods referred to in the three counts, if he were subsequently charged with an offence constituted by one of those occasions, he would be able to plead that it was an offence of which he might have been convicted upon the indictment in question in this case. The relevant purpose of s. 17 is, however, to cover alternative verdicts available at common law or by statute: see O'Halloran v. O'Byrne [23] . It is not intended to apply in the circumstances of this case. Nor would it do so. If the applicant were simply to be charged with another offence of carnal knowledge of the complainant within one of the periods specified in the indictment upon which he was convicted, uncertainty might exist whether the offence charged was the same as one of the offences of which he was convicted. But that uncertainty would be removed, if by no other means, by charging him with an offence expressed to be other than the one of which he was convicted. The defect of ambiguity in the present case would be continued in the subsequent proceedings and a plea in bar would be no answer.
1. [1974] W.A.R. 45, at p. 47.
There have been cases in which it has been held that latent ambiguity or even duplicity in an indictment does not necessarily lead to a substantial miscarriage of justice: see R. v. Thompson [24] ; R. v. Smythe & Blanton [25] ; R. v. Conley [26] ; Coleman and Del Carlo v. The Queen [27] . But in those cases either no embarrassment or prejudice was alleged or no point was taken at the trial. In any event, the earlier cases must be read subject to the decision of this Court in Johnson v. Miller in which it was held that a complaint was rightly dismissed because of the failure of the prosecution to cure a latent ambiguity by identifying the one transaction out of a number upon which it relied. The offence in that case was a summary offence, but the observations of Dixon J. [28] , are of general application. He said:
In my opinion he [the prosecutor] clearly should be required to identify the transaction on which he relies and he should be so required as soon as it appears that his complaint, in spite of its apparent particularity, is equally capable of referring to a number of occurrences each of which constitutes the offence the legal nature of which is described in the complaint. For a defendant is entitled to be apprised not only of the legal nature of the offence with which he is charged but also of the particular act, matter or thing alleged as the foundation of the charge. The court hearing a complaint or information for an offence must have before it a means of identifying with the matter or transaction alleged in the document the matter or transaction appearing in evidence.
1. [1914] 2 K.B. 99.
2. (1912) 8 Tas. L.R. 28.
3. [1916] V.L.R. 639.
4. [1988] W.A.R. 196.
5. (1937) 59 C.L.R., at p. 489.
At all events, where there is real ambiguity and the point is taken, as it was in this case, failure to correct the ambiguity means that the accused has not had a proper trial and there is, for that reason, a substantial miscarriage of justice which precludes the application of the proviso contained in s. 689 of the Code. It is, therefore, unnecessary to consider whether, had the applicant been properly tried, he would inevitably have been convicted. He was entitled to a fair trial and his conviction in proceedings which were fundamentally flawed cannot be sustained: Wilde v. The Queen [29] .
1. (1988) 164 C.L.R. 365, at pp. 372-373.
I would grant special leave, allow the appeal, quash the convictions and order a retrial.
Toohey J.
The circumstances giving rise to this appeal are set out in the judgments of other members of the Court. There is no need to repeat in any detail what is said there.
Before us, counsel for the applicant made it clear that there was no attack on the indictment; in particular, it was not contended that the indictment was bad for duplicity. There were three counts. Each alleged an act of carnal knowledge "on a date unknown", "at Balcatta". The first count referred to the period between 1 January and 31 December 1980, the second between 1 January and 31 December 1981, and the third between 8 November 1981 and 8 November 1982. It will be seen that there was an overlap of nearly two months between the periods specified in the second and third counts.
Section 582 of the Criminal Code W.A. requires an indictment to "set forth the offence with which the accused person is charged in such a manner and with such particulars as to the alleged time and place of committing the offence as may be necessary to inform the accused person of the nature of the charge". In Reg. v. Phil Maria [30] , Stanley J. said of the Queensland counterpart of s. 582: "In my opinion, the Code aims at continuing the common law practice — one charge, known to the accused, with particulars if needed, giving every fair opportunity to prepare his defence to what is charged and particularised against him."
1. [1957] St. R. Qd 512, at p. 523.
The Crown declined to furnish particulars of the charges against the applicant. An application for particulars to the trial judge was refused, his Honour accepting the argument of the Crown that no better particulars could be furnished. Before the committal proceedings, the applicant knew little more of what was alleged against him than that on an unspecified occasion in each of the twelve-monthly periods identified he had carnal knowledge of his daughter. At trial, he was of course somewhat better informed by reason of the committal proceedings, at which the complainant gave evidence.
Nevertheless, as already mentioned, the applicant's argument in this Court was not directed to the indictment. The argument was that each count alleged a separate offence but that the Crown was permitted to lead evidence of a number of acts, each of carnal knowledge of the complainant, and that the jury were invited to convict the applicant so long as they found proved any act of carnal knowledge within the period specified. Thus the argument focused on the manner in which the trial was conducted.
In her evidence the complainant identified two specific acts of intercourse with the applicant, one being the "first occasion" such an act occurred, which was when the complainant was at high school, and the other being the initial occasion of several when the applicant put on his wife's underclothing. The first occasion was identified, by reference to the complainant's schooling, as having occurred in 1979 or 1980. The other occasion was not identified, even as to year. The complainant also gave evidence of other acts of sexual intercourse on unspecified occasions, including "Every couple of months for a year." The closest the complainant came to identifying times was after she described the "first occasion" and then said, in regard to other acts of intercourse, "They would have been over the next two years."
Objection was taken at trial to evidence concerning other acts of an indecent nature, but not to the generalized evidence of intercourse between the applicant and complainant. Therefore it is not possible to identify with certainty the basis on which the latter evidence was admitted. While evidence of similar facts ordinarily involves conduct relating to persons other than the complainant, it is not necessarily so confined. In R. v. Ball [31] where a brother and sister were each charged with counts of incest, evidence was admitted to show that they had previously lived together as husband and wife and that the female defendant had given birth to a child which she registered, describing herself as the mother and the male defendant as the father. Lord Loreburn L.C., with whom the other members of the House of Lords agreed, applied Makin v. Attorney-General (N.S.W.) [32] in upholding the admissibility of the evidence of the earlier relationship. However, evidence which bears on the relationship between an accused and a complainant over a period of time may not in truth be similar fact evidence where it is admitted, not to show propensity but rather the relationship between the parties: see the discussion by McHugh J. in Harriman v. The Queen [33] .
1. [1911] A.C. 47.
2. [1894] A.C. 57.
3. (1989) 167 C.L.R. 590.
In the present case, the real difficulty with treating the generalized evidence as evidence of similar facts or relationship is the problem of identifying the alleged offence on which the similar conduct or relationship is said to bear. As the evidence unfolded at trial, there was nothing to indicate that, in respect of each year, the Crown relied upon a particular act which was the culmination of other such acts. In that sense there was no chronology of events. It is true that a particular occasion was identified by the complainant, if only as the first time intercourse occurred. But while that act of intercourse may have occurred within the period identified in the first count, on the complainant's testimony it may equally have occurred in 1979. And it is not possible to say of the other specific act identified by the complainant (the first occasion when the applicant had carnal knowledge of her while dressed in his wife's underclothing) that it occurred in any, and if so which, of the three periods specified in the indictment. Nor is it possible to fit any of the other occasions mentioned by the complainant within a specific time frame referred to in the indictment.
In the course of his direction to the jury, the trial judge said:
you have to view the three charges as three separate trials and you must come to a separate finding in relation to each of the three charges You must give consideration to each separate charge and come to a separate verdict on each charge.
Later his Honour referred to "a lack of specificity as to dates" and the length of each period involved, commenting, "the Crown says there were acts, at least one act, in each of those periods. You must be satisfied to that."
At the end of his summing up his Honour repeated the need for the jury "to determine whether on the three occasions cited in the indictment, the accused did have carnal knowledge of his daughter". His Honour did not say what the three occasions were or what they might be and, of course, the Crown had consistently declined to identify those occasions. Earlier the trial judge had told the jury that they had to be "satisfied beyond reasonable doubt that at least on one occasion during each of these years there was such penetration", a reference to the penetration necessary to constitute carnal knowledge, but again without attempting to identify any of those occasions. No redirection was sought by the applicant's then counsel.
The indictment was not open to challenge on the ground of duplicity in the ordinary sense of that term. It did not offend against the proscription, as expressed in Archbold, Pleading, Evidence and Practice in Criminal Cases, 43rd ed. (1988), p. 46, that "no one count of the indictment should charge the defendant with having committed two or more separate offences". Nor, subject to the question of particulars, was it in breach of s. 582 of the Code.
The objection in cases such as the present one is that the accused does not know with any certainty the charge he has to meet. The problem was recognized as early as 1735 in R. v. Robe [34] "and for this fault the judgment was arrested" [35] . See also Davy v. Baker [36] ; Young v. The King [37] and generally Chitty's Criminal Law, 2nd ed. (1826), vol. 1, pp. 168-169. The problem was adverted to again in Parker v. Sutherland [38] , though emphasis was placed on the difficulty of pleading autrefois convict because of doubt as to the particular offence of which the offender had been convicted: see Viscount Reading C.J. [39] , and Avory J. [40] . I do not think that such a difficulty truly arises in the present case. Section 17 of the Code reads:
It is a defence to a charge of any offence to show that the accused person has already been tried, and convicted upon an indictment on which he might have been convicted of the offence with which he is charged, or has already been convicted, of an offence of which he might be convicted upon the indictment on which he is charged.
1. (1735) 2 Str. 999 [93 E.R. 993].
2. (1735) 2 Str., at p. 999 [93 E.R., at p. 994].
3. (1769) 4 Burr. 2471 [98 E.R. 295].
4. (1789) 3 T.R. 98, at p. 100 [100 E.R. 475, at p. 477].
5. (1917) 86 L.J.K.B. 1052.
6. (1917) 86 L.J.K.B., at p. 1054.
7. (1917) 86 L.J.K.B., at pp. 1054-1055.
The operation of s. 17 was discussed by Wickham J. in O'Halloran v. O'Byrne [41] . The applicant has been convicted of the offence that he "carnally knew" his daughter at Balcatta on an occasion during each of the periods specified in the indictment. If he were later charged with an offence of carnally knowing his daughter at Balcatta during any one of those periods, the very absence of specificity in the indictment would ensure that the concluding words of s. 17 would support a plea of autrefois convict: cf. Jones v. The Queen [42] . This would be so even if the applicant were later charged with two or more counts in any of the periods identified in the original indictment.
1. [1974] W.A.R. 45, at pp. 51-53.
2. [1980] W.A.R. 203, at p. 204.
But the problem of uncertainty in knowing the charge to be met still remains. This issue was considered by Dixon J. in Johnson v. Miller [43] , when his Honour said:
the question is whether the prosecutor should not be required to identify one of a number of sets of facts, each amounting to the commission of the same offence as that on which the charge is based. In my opinion he clearly should be required to identify the transaction on which he relies and he should be so required as soon as it appears that his complaint, in spite of its apparent particularity, is equally capable of referring to a number of occurrences each of which constitutes the offence the legal nature of which is described in the complaint. For a defendant is entitled to be apprised not only of the legal nature of the offence with which he is charged but also of the particular act, matter or thing alleged as the foundation of the charge.
1. (1937) 59 C.L.R. 467, at p. 489.
Of course this does not mean that the prosecution must specify a particular date as the occasion on which it relies. But it does mean that, as soon as it appears that a count in the indictment is equally capable of referring to a number of occasions, each of which constitutes the offence the legal nature of which is described in the count, the prosecution should identify the occasion which is said to give rise to the offence charged. This did not happen in the present case nor did the trial judge adequately convey to the jury the difficulties facing the applicant by reason of the failure to do so. The matter was left to the jury on the basis that so long as they were satisfied an act of carnal knowledge occurred during a period specified in a count in the indictment, they could convict the applicant on that count. The trial miscarried for that reason.
Nevertheless, the question remains whether, in the language of s. 689 of the Code, the appeal to the Court of Criminal Appeal should have been dismissed because the Court should have concluded that "no substantial miscarriage of justice has actually occurred". It may be argued, indeed was argued by the Crown, that had one particular act of carnal knowledge been identified by the Crown prosecutor in respect of each count, the applicant would have been no better off than he was at the trial. He would still have been faced with evidence of continuing acts of intercourse over a period of some years and his denial would still have been of a general nature as it was at trial. There is some force in this submission but it is not enough to justify a conclusion that no miscarriage of justice actually occurred.
This Court said in Wilde v. The Queen [44] : "It is one thing to apply the proviso to prevent the administration of the criminal law from being "plunged into outworn technicality" ; it is another to uphold a conviction after a proceeding which is fundamentally flawed, merely because the appeal court is of the opinion that on a proper trial the appellant would inevitably have been convicted."
1. (1988) 164 C.L.R. 365, at p. 373.
This trial was fundamentally flawed in that the jury were invited to convict the applicant so long as they were satisfied that within any of the periods specified in the indictment the applicant "carnally knew" the complainant. Put that way, the acts of intercourse described in the generalized evidence were available, not merely as going to prove any of the offences charged against the applicant but as the offences themselves. In respect of each count, the jury were not required to direct their attention to any particular occasion and to satisfy themselves, beyond reasonable doubt, that there was such an occasion and that it occurred within the period specified in the count. There was a real likelihood that they would convict the applicant on the basis that since acts of carnal knowledge were frequent, an act must have occurred during each of the periods mentioned in the indictment.
In those circumstances it is inappropriate to apply the proviso. There should be special leave to appeal and the appeal allowed. There should be an order for a new trial though the Crown will have to consider whether, in all the circumstances, there can be a new trial which will not miscarry as this trial miscarried.
Gaudron and McHugh JJ.
The applicant (referred to as "S." in order to protect the identity of the complainant) seeks special leave to appeal from a decision of the Court of Criminal Appeal of the Supreme Court of Western Australia dismissing his appeal against convictions on three counts of carnal knowledge of his daughter ("J.").
The counts upon which the applicant was convicted each charged one act of carnal knowledge on a date unknown within a specified period of twelve months. The periods specified were those between 1 January 1980 and 31 December 1980, between 1 January 1981 and 31 December 1981, and between 8 November 1981 and 8 November 1982. An application by counsel for S. for an adjournment pending the supply of further and better particulars was rejected by the trial judge. An application that the prosecutor nominate or identify the acts the subject of the counts in the indictment was also unsuccessful.
The apprehended difficulties which, presumably, led to the unsuccessful applications that the acts charged be particularized or identified became apparent in the course of J.'s evidence in the trial. She gave evidence of two specific acts of sexual intercourse. However, there was no evidence to link either act to any one of the specified periods. In this Court, it was conceded by counsel for the Crown that one such act may have taken place prior to 1 January 1980. Apart from these two acts, the evidence of the complainant was to the effect that sexual intercourse occurred over a period of two years until she left home at the age of seventeen. She could not remember details or frequency other than that it occurred "[e]very couple of months for a year". The complainant turned seventeen on 8 November 1982.
Although other issues were raised in the Court of Criminal Appeal, the present application is made by reference to the matters above outlined. Those matters reveal a problem which, by reason of its similarity with the problem involved when a count in an indictment charges two or more separate offences, has sometimes been referred to as "latent duplicity". See, e.g., Hunter, Prosecutors' Pleadings and the Rule Against Duplicity, University of New South Wales Law Journal, vol. 3 (1980) 248, at pp. 271-273 .
The rule against duplicitous counts in an indictment originated as early as the seventeenth century. See, e.g., Smith v. Mall [45] ; R. v. Stocker [46] . It may be, as suggested by Salhany in Duplicity — Is the Rule Still Necessary?, Criminal Law Quarterly, vol. 6 (1963) 205, at pp. 206-207 , that the rule grew out of the strict formalities associated with criminal pleadings at a time when the difference between misdemeanour and felony was the difference between life and death. However, the rule against duplicitous counts has, for a very long time, rested on other considerations. One important consideration is the orderly administration of criminal justice. There are a number of aspects to this consideration: a court must know what charge it is entertaining in order to ensure that evidence is properly admitted, and in order to instruct the jury properly as to the law to be applied; in the event of conviction, a court must know the offence for which the defendant is to be punished; and the record must show of what offence a person has been acquitted or convicted in order for that person to avail himself or herself, if the need should arise, of a plea of autrefois acquit or autrefois convict. See, generally, R. v. Sadler [47] ; R. v. Hollond [48] , per Lord Kenyon C.J. See, as to the need for distinct consideration in relation to penalty, R. v. Stocker; R. v. Sadler; R. v. Morley [49] ; Cotterill v. Lempriere [50] , per Lord Coleridge C.J. See, as to the availability of a plea in bar, R. v. Robe [51] ; Davy v. Baker [52] ; R. v. Wells; Ex parte Clifford [53] ; R. v. Surrey Justices; Ex parte Witherick [54] .
1. (1623) 2 Rolle 263 [ 81 E.R. 788].
2. (1696) 5 Mod. 137 [87 E.R. 568].
3. (1787) 2 Chit. 519.
4. (1794) 5 T.R. 607, at p. 623 [101 E.R. 340, at p. 348].
5. (1827) 1 Y. & J. 221 [148 E.R. 653].
6. (1890) 24 Q.B.D. 634, at p. 637.
7. (1735) 2 Str. 999 [93 E.R. 993].
8. (1769) 4 Burr. 2471 [98 E.R. 295].
9. (1904) 91 L.T. 98.
10. [1932] 1 K.B. 450.
The rule against duplicitous counts has also long rested upon a basic consideration of fairness, namely, that an accused should know what case he or she has to meet. See, e.g., R. v. Robe [5] where it was said "this is so general a charge, that it is impossible any man can prepare to defend himself on this prosecution " See also R. v. Hollond [6] , per Lord Kenyon C.J.; R. v. North [7] ; R. v. Morley [8] ; and Cotterill v. Lempriere [9] , per Lord Esher M.R. Of course, the degree of unfairness or prejudice involved will vary from case to case, and it may be, as suggested by Professor Glanville Williams in The Count System and the Duplicity Rule [1966] Criminal Law Review 255, at p. 264 , that on occasions the uncertainty is not "such as to disable the defendant from meeting the charge".
1. (1735) 2 Str., at p. 999 [93 E.R., at p. 994].
2. (1794) 5 T.R., at p. 623 [101 E.R., at p. 348].
3. (1825) 6 Dowl. & Ry. 143, at p. 146 [28 R.R. 538, at p. 541].
4. (1827) 1 Y. & J., at pp. 224-225 [148 E.R., at p. 654].
5. (1890) 24 Q.B.D., at p. 639.
The matters which go to the orderly administration of justice are not unrelated to the consideration that a duplicitous count may be productive of prejudice. If the matter proceeds to trial, there is the possibility that evidence will be wrongly admitted or that incorrect directions will be given to the jury. There is also the possibility that a jury, no matter how carefully directed, may reason from the number of offences charged that the accused must be guilty of at least one. However, it may be going too far to equate prejudice with the difficulty of raising a defence of autrefois acquit or autrefois convict, and, in any event, such problems as there are in that area may be of less significance in those jurisdictions where the criminal law is codified than in common law jurisdictions. See, in relation to s. 17 of the Criminal Code W.A. ("the Code"), O'Halloran v. O'Byrne, especially per Wickham J. [10] .
1. [1974] W.A.R. 45, at pp. 52-53.
The problems which attend duplicitous counts also attend proceedings in which the prosecution seeks to lead evidence of multiple offences answering the description of the offence or offences charged. Two such problems were made explicit in Johnson v. Miller [11] . In that case one offence was charged, but the prosecution announced its intention of calling evidence of some thirty possible offences. Dixon J. pointed out that, unless similar fact evidence were admissible, the admission of "evidence of thirty distinct offences would be contrary to law, and the fact that each satisfied the description contained in the complaint could afford no justification for such a breach of so important a rule" [12] . The second problem identified in that case concerned the different defences that might be available to the different offences in respect of which it was proposed to call evidence. In relation to that problem Evatt J. said that the course proposed by the prosecution would convert "a strictly judicial function — that of determining guilt or innocence of a single offence — into an administrative commission of inquiry into the question whether when there were thirty possible occasions when an offence might have been committed, the defendant could exculpate himself in respect of all thirty occasions" [13] .
1. (1937) 59 C.L.R. 467.
2. (1937) 59 C.L.R., at p. 487.
3. (1937) 59 C.L.R., at p. 495.
The Court of Criminal Appeal dismissed the applicant's appeal, so far as it concerned the failure to particularize or identify the act the subject of each charge, on the basis that the applicant was not prejudiced in his defence. It seems that that conclusion rested on the view that the applicant was not deprived of a real opportunity to call alibi evidence, it being said by Brinsden J. (with whom Smith J. agreed) that the applicant "did not suggest that there was any period of time during the three years when he was away from the matrimonial home for any lengthy period of time and it would have had to be lengthy to have afforded a defence since the allegation against him was that acts of unlawful carnal knowledge took place every couple of months".
The question of prejudice goes somewhat deeper than the question whether there was an effective denial of an opportunity to call alibi evidence. The evidence of a number of offences said to have been repeated at two-monthly intervals over a period of one year (which period might fall anywhere within a period of almost three years) had the same practical effect that was noted by Evatt J. in relation to the course proposed in Johnson v. Miller. Effectively, the applicant was required to defend himself in respect of each occasion when an offence might have been committed. Additionally, by reason that the offences were neither particularized nor identified, the accused was effectively denied an opportunity to test the credit of the complainant by reference to surrounding circumstances such as would exist if the acts charged had been identified in relation to some more precise time or by reference to some other event or surrounding circumstance.
Prejudice is the focus of consideration when the question is whether some order should be made as to the conduct of the trial to avoid difficulties which may be occasioned by reason of uncertainty as to what precisely is charged. Ordinarily, those difficulties will be averted by ordering particulars, by amending the indictment, or by putting the prosecution to its election and appropriately confining the evidence to the offences charged. See Johnson v. Miller [14] . However, when a trial proceeds without an order averting those difficulties, the question is whether there has been a blemish on the trial amounting to a substantial miscarriage of justice. See s. 689(1) of the Code.
1. (1937) 59 C.L.R., at pp. 480-481, 486, 497-498, 501.
The trial of the applicant was fundamentally flawed by the admission of evidence of multiple acts of carnal knowledge and by the way in which such evidence was left to the jury. The rule as to the admissibility of evidence of offences, not being the offences charged, is clear. Such evidence, whether identified as similar fact evidence or by some other description, is only admissible if it has probative value such that it raises the objective improbability of some event having occurred other than as alleged by the prosecution. See Hoch v. The Queen [15] . It is unnecessary to consider whether, on this basis, evidence of other acts of carnal knowledge might have been admissible at the trial. At the very least, as Dixon J. observed in Johnson v. Miller [16] , it would have been necessary for it to have been made clear what acts were said to be the offences charged and what acts were said to be similar facts. Without that, it would be impossible to instruct the jury as to the use properly to be made of the evidence of other offences. More significantly in the present case, evidence of other acts of carnal knowledge was not left to the jury on the basis that such acts might prove the offences charged, but on the basis that the jury might be satisfied that one act of carnal knowledge occurred within each of the periods specified in the indictment.
1. (1988) 165 C.L.R. 292, at p. 294.
2. (1937) 59 C.L.R., at p. 490.
The basis upon which the evidence was left to the jury illustrates a fundamental problem which is addressed by the requirement for certainty as to the offence charged, which requirement also underlies the rule against duplicitous counts. Even leaving aside the problem referable to the overlapping of the second and third periods specified in the indictment, the basis upon which the evidence was left to the jury allowed for the real possibility that different jurors might have different acts in mind when they came to consider each of the verdicts. Indeed, in view of the way the matter was left to the jury, it might even be possible that, in relation to one or all of the counts, individual jurors had no specific act in mind, but simply reasoned from the evidence as to frequency that the applicant committed one such act within each of the specified periods. In these circumstances, it is impossible to say, in relation to any one count in the indictment, that the jury as a whole was satisfied as to the applicant's guilt of an individual act answering to the description of the offence charged. Assuming the verdicts returned by the jury to constitute verdicts in the accepted sense, it is impossible to say that, had the jury been directed to consider the guilt of the accused of specific acts identified as the offences charged, the verdicts of guilty "would plainly have been the same". See Van der Meer v. The Queen [17] , per Deane J. That being so, it cannot be said that there was no substantial miscarriage of justice.
1. (1988) 62 A.L.J.R. 656, at p. 668.
In the course of argument it was stated by counsel for the Crown that it was impossible to particularize or identify any individual act as the offence the subject of any count in the indictment. Accordingly, it was said, unless the case could be left to the jury on the basis allowed by the trial judge, no case could be prosecuted. While the evidence as given by J. at the trial suggests that there may be practical difficulties in particularizing or identifying one or all of the offences charged, it is not obvious that it is wholly impossible so to do. Whatever practical difficulties may exist, those difficulties (even if amounting to an impossibility) cannot justify a criminal trial attended with such uncertainty that the verdict or verdicts must also be seen as uncertain.
Special leave to appeal should be granted. The appeal should be allowed and the convictions quashed. Because there may be some means of overcoming some or all of the difficulties which attended the trial of the applicant, a new trial should be ordered. |
high_court_of_australia:/showbyHandle/1/11462 | decision | commonwealth | high_court_of_australia | text/html | null | R v Ross-Jones; Ex parte Beaumont [1979] HCA 5 | https://eresources.hcourt.gov.au/showbyHandle/1/11462 | 2024-09-13T22:54:20.477752+10:00 | High Court of Australia
Gibbs, Stephen, Jacobs, Murphy and Aickin JJ.
R v Ross-Jones; Ex parte Beaumont
[1979] HCA 5
ORDER
Order nisi discharged. No order as to costs.
Cur. adv. vult.
The following written judgments were delivered:—
1979, Feb. 20
Gibbs J.
The second respondent (to whom I shall refer as "the respondent") and the prosecutrix were husband and wife. Both are medical practitioners. On the 15th April 1976 they entered into articles of partnership in respect of the two medical practices which they conducted at Macquarie Street, Sydney, and at Balmain. Under the articles the respondent and the prosecutrix were to share equally the net profits of the partnership. The partnership commenced on the 1st July 1975 and was to continue until the 30th June 1978 and thereafter at will. Later, differences arose between the spouses and they separated. In February 1978 the respondent applied to the Family Court of Australia for dissolution of the marriage. While this application was pending the prosecutrix made application, on the 8th March 1978, to the Family Court in the following terms:
1. Starlette Anne Beaumont applies for the following declarations:
(a) That the Partnership between the Applicant and the Respondent, the terms of which are contained in Articles of Partnership dated 15th April 1976 exists.
(b) That the said partnership has not yet been determined.
2. Starlette Anne Beaumont applies for the following orders:
(a) That Mr. John Edward Walker, Official Liquidator, be appointed Receiver of the said partnership.
(b) That the books of account and assets of the said partnership be handed to the Receiver so appointed.
(c) That the Receiver prepare partnership accounts.
(d) That the Respondent pay the Applicant's costs.
(e) That Paul Thomas Cambage Wenham and Thomas Henry Waters be removed as Trustees of the Trust created by Deed dated 2nd February 1976.
(f) That the Trustees within 14 days from the Order of the Court prepare Balance Sheets, Profit and Loss Accounts and prepare all books and records of the Trust and that the same be handed over within this time to the new Trustee appointed by the Court.
Paragraphs (e) and (f) of cl. 2, which relate to a trust deed executed on the 2nd February 1976 in favour of the spouses and their children, do not concern us in the present case. When the application of 8th March 1978 came before the Family Court, counsel for the respondent submitted that the Court had no jurisdiction to hear it. No transcript of the proceedings before the Family Court has been included in the papers placed before us, and it does not appear whether at that stage the submission was limited to the hearing of the application so far as it related to cl. 1 and pars. (a) to (d) of cl. 2, but no question is now raised as to the jurisdiction of the Family Court to entertain an application for the orders sought by pars. (e) and (f). During the proceedings in the Family Court, counsel for the prosecutrix applied orally to amend the application to seek, if necessary, the appointment of a trustee of the partnership and to confer additional powers on any receiver or trustee who might be appointed. After some argument counsel for both parties invited the judge of the Family Court to make a formal finding that the Family Court had no jurisdiction, so that the matter might be tested in this Court. The judge acceded to the request and made a formal decree that the Court had no jurisdiction to hear the application. Thereafter the judge proceeded to hear the respondent's application for dissolution of the marriage and pronounced a decree nisi. The prosecutrix has obtained from this Court an order nisi for a writ of mandamus commanding the judge to hear the application of the prosecutrix for the declarations and for an order for the appointment of a receiver and for other orders consequential upon such appointment. Since the grant of the order nisi, the prosecutrix has filed in the Family Court an amended application by which she seeks, in addition to the declaration and orders formerly sought, orders that the respondent be ordered to settle a sum of money upon her and to transfer to her his interest in certain property.
Jurisdiction is conferred on the Family Court by s. 31 of the Family Law Act 1975 Cth, as amended ("the Act"). So far as is relevant for present purposes, that court has jurisdiction in matrimonial causes instituted under the Act: s. 31 (1) (a). The expression "matrimonial cause" is defined in s. 4 (1) of the Act to include—
(ca) proceedings between the parties to a marriage with respect to the property of the parties to the marriage or of either of them, being proceedings in relation to concurrent, pending or completed proceedings for principal relief between those parties.
In addition jurisdiction is conferred on the Court by s. 33 which provides as follows—
To the extent that the Constitution permits, jurisdiction is conferred on the Court in respect of matters not otherwise within the jurisdiction expressed by this Act or any law to be conferred on the Court that are associated with matters (including matters before the Court upon an appeal) in which the jurisdiction of the Court is invoked or that arise in proceedings (including proceedings upon an appeal) before the Court.
The effect of this section is far from clear. It cannot be intended to mean, and would not be constitutionally valid if it did mean, that if the jurisdiction of the Court is unsuccessfully invoked it nevertheless has jurisdiction in associated matters. The section can only apply if the Court already has jurisdiction; its jurisdiction is then extended, so far as is constitutionally permissible, to associated matters. There appears to be a distinction between the jurisdiction conferred by s. 31 (1) (a) and that conferred by s. 33. By s. 8 (1) of the Act proceedings by way of a matrimonial cause shall not be instituted except under the Act, or in other words, only in a court specified in s. 39. Now that a proclamation has been made under s. 40, a matrimonial cause may not be instituted in a Supreme Court of a State. If, however, by reason of the operation of s. 33, a Family Court has jurisdiction in respect of an associated matter that is not itself a matrimonial cause, the provisions of s. 8 (1) do not apply, and other courts are not deprived of jurisdiction in respect of the associated matter. However, s. 33 appears to be of no practical importance in the present case.
Once a proceeding is within the jurisdiction of the Family Court, the power of that Court to make suitable orders for the disposition of the matter is very wide. It is hardly an exaggeration to say that if the Court has jurisdiction in the present case, it can make whatever orders it regards as appropriate: see s. 34 (1) and s. 80 (k). Of course the fact that a court has wide powers when exercising its jurisdiction does not mean that its jurisdiction is wide. Nevertheless the nature of the powers of a court may sometimes provide a clue to the extent of its jurisdiction. By s. 78, in proceedings between the parties to a marriage with respect to existing title or rights in respect of property, the Court may declare the title or rights, if any, that a party has in respect of the property, and may make consequential orders. Section 78 (3) provides as follows: "An order under this section is binding on the parties to the marriage but not on any other person." By s. 79 in proceedings with respect to the property of the parties to a marriage or either of them, the Court may make an order altering the interests of the parties in the property, including an order for a settlement of property or a transfer of property. By s. 80 the Court, in exercising its powers under Pt VIII (which deals with maintenance and property), may appoint or remove trustees (par. (e)), and may "make any other order which it thinks it is necessary to make to do justice" (par. (k)). In proceedings under Pt VIII, other than proceedings under s. 78 or proceedings with respect to maintenance payable during the subsistence of a marriage, the Court is required, so far as practicable, to "make such orders as will finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them" (s. 81).
These sections are expressed to confer powers which the court may exercise if it has jurisdiction, rather than to confer or expand jurisdiction, and I do not regard them as throwing any light on the extent of the Court's jurisdiction. Before the powers which they grant may be exercised there must be a "matrimonial cause" within par. (ca) of the definition. Before that definition was inserted by the Family Law Amendment Act 1976 Cth it had been held in Russell v. Russell [1] that s. 78 was only valid in so far as the proceedings were brought to obtain relief as ancillary to proceedings of the kinds referred to in pars. (a) and (b) of the definition of "matrimonial cause". The amendment achieves a similar result. The proceedings which the judge declined to entertain in the present case were within the jurisdiction of the Family Court only if they came within par. (ca) of the definition, or, in other words, if they were proceedings (i) between the parties to a marriage (which includes the parties to a marriage that has been dissolved—s. 4 (2) of the Act); (ii) with respect to the property of the parties to the marriage or of either of them; and (iii) in relation to concurrent, pending or completed proceedings for principal relief (which includes proceedings for a decree of dissolution of the marriage) between the parties. This latter requirement imports that the proceedings in question must bear an appropriate relationship to the proceedings for principal relief, that is to say, the proceedings with respect to property must be such as can fairly be said to be incidental to the relief obtainable or already obtained in the divorce proceedings: cf. Lansell v. Lansell per Taylor J. [2] .
1. (1976) 134 C.L.R. 495.
2. (1964) 110 C.L.R. 353, at p. 367.
It is quite clear that the Family Court has jurisdiction to entertain the proceedings resulting from the amended application that has been filed. By that application the prosecutrix seeks a settlement upon and transfer to her of certain property of the respondent. The proceedings are between the parties to a marriage and with respect to the property of the respondent. They are proceedings in relation to the completed proceedings for principal relief (that is, for a divorce). An application by a divorced wife under s. 79 of the Act for a settlement and transfer of property is an application to the court to make such financial readjustments as may be rendered appropriate by the dissolution of the marriage; it is an application for an order consequential on the dissolution of the marriage, and can properly be said to be incidental to the decree of dissolution that has been obtained: cf. Lansell v. Lansell [3] . The proceedings therefore are a "matrimonial cause" within par. (ca).
1. (1964) 110 C.L.R., at pp. 361-362, 367.
Moreover, once there exists a matrimonial cause within par. (ca) of the definition, the Court has power to grant relief of the kind sought by the original application (except by pars. (e) and (f) of cl. 2 with which we are not concerned and as to which I say nothing). Before the Court can determine what order should properly be made under s. 79, it must in most cases determine what interests in property the parties already have, and where that question arises the court has power to determine it. A similar view was taken of comparable provisions of the Matrimonial Causes Act 1959 Cth, as amended, in Horne v. Horne [4] . Since the Court can inquire and decide what interests in property the respective parties possess, there is no reason in principle why in an appropriate case it should not also make a declaration as to the rights of the parties or an order for the taking of accounts. For the purposes of ensuring that an order made or proposed under s. 79 is not evaded or frustrated, it may be necessary to make an order appointing a receiver of property, and such an order would also be within power. In Jones v. Jones [5] , it was held that the Court had power under s. 87 (1) (l) of the Matrimonial Causes Act 1959 (which corresponded to the provisions of s. 80 (k) of the Act) to appoint a receiver and manager of a business conducted by a husband and wife in partnership and to make an order for the taking of partnership accounts. In Dimov v. Dimov [6] and Anderson v. Anderson [7] it was held that the Court had power under s. 87 (1) (l) of that Act to make an order for the winding up of a partnership between the parties to a marriage. There was a difference of opinion between Burt J. in the former case and Joske J. in the latter as to whether the court could make an order directly bearing upon any particular partnership asset; Burt J. held that it could not. The decision reached in these cases, that where there was a partnership of which a husband and his wife were the sole members the court had power, in appropriate circumstances, to appoint a receiver of the partnership business, to order the taking of partnership accounts, and to make an order for the winding up of the partnership, was, subject to the qualifications which I am about to state, correct and applicable to the provisions of the present Act. As to the matter on which Burt J. and Joske J. differed, it seems to me that the court, in making an order under s. 79, could affect the beneficial interests of the partners in a particular item of partnership property, provided that the interests of creditors were not affected. What is important, however, is that an order for the winding up of a partnership between the parties to a marriage, or for the taking of partnership accounts, or for the appointment of a receiver, can be made by the Family Court only in a matrimonial cause of the kind defined in par. (ca) of the definition, and only in aid of the jurisdiction exercised by the Court in those proceedings: cf. Dimov v. Dimov [8] . To be specific, the Family Court could make any such order only as a step towards making an order for a settlement or transfer of property under s. 79, but could not make such an order for its own sake. Moreover, as Jacobs J. points out in his judgment in the present case which I have had the advantage of reading, the Family Court has no powers in respect of the law of partnership as such. I agree with the view of Jacobs J. that the Family Court cannot dissolve a partnership with the consequences attendant upon such a dissolution in the way in which the Supreme Court of a State can do so; although it could appoint a receiver of that property of the parties to a marriage which they, and they alone, hold as partners, it cannot appoint a receiver of the assets of a partnership as such; although it could order accounts of the property of the parties to a marriage with particular reference to an account of their property as partners, it cannot order partnership accounts as such. Since orders of this kind may tend to be misleading in form, the greatest restraint should be exercised in making them.
1. [1963] S.R. (N.S.W.) 121, at p. 134.
2. (1967) 10 F.L.R. 493; [1968] 1 N.S.W.L.R. 206.
3. (1970) 17 F.L.R. 462; [1971] W.A.R. 113.
4. (1972) 19 F.L.R. 480.
5. (1970) 17 F.L.R., at p. 466.
The proceeding now pending in the Family Court, in which all the relief sought by the application of 8th March 1978 is sought again, is one which the Family Court has jurisdiction to determine. The powers of the Family Court are wide enough to enable it to grant the relief sought if the evidence shows that it is appropriate to do so. In these circumstances it is unnecessary to consider whether that Court had jurisdiction to hear, and power to grant, the application of 8th March 1978. There is nothing on the face of that application to show that the proceedings were of the kind to which par. (ca) of the definition of "matrimonial cause" refers, and the form of the application suggests that the declarations and orders were sought as an end in themselves. It would however be quite academic to pursue that question further. Moreover, the learned judge made his finding that he had no jurisdiction only because counsel for both parties joined in asking him to do so. In a case of this kind the grant of mandamus is a matter for the discretion of the Court. For the reasons I have given, I would refuse mandamus in the exercise of our discretion.
I would discharge the order nisi, but would make no order as to costs.
Stephen J.
My brother Jacobs has stated one sufficient reason why this Court should refuse mandamus: to it my brother Aickin has added a second, concerned with the circumstances in which the order of the Family Court came to be made. For each of these reasons I would in this case discharge the order nisi for mandamus.
There is but little which I wish to say about the Family Court's jurisdiction to make the declarations and orders sought of it. I do not doubt that that Court would have jurisdiction, if it saw fit, to make the two declarations in question but I have reservations concerning three of the four orders which have been sought. These ask for the appointment of a receiver of a partnership, the delivery over to him of partnership books of account and assets and the preparation by him of partnership accounts. If these prayers for relief mean what they say, they ask the Family Court to exercise a jurisdiction which it does not possess; my brother Aickin has explained that want of jurisdiction. If they do not, and are instead intended to mean something else, not being concerned with any winding up of a partnership but only with the disposition of the interests of husband and wife as partners in that partnership, then not only are they misleading in form but might prove inexpedient in their intended operation, and this for the reasons explained by Jacobs J.
The order nisi should be discharged.
Jacobs J.
This is an application to make absolute an order nisi for mandamus directed to the Family Court of Australia (Ross-Jones J.) requiring him to hear and determine an application by the applicant Starlette Anne Beaumont. In February 1978 Paul Ernest Beaumont filed an application in the Family Court of Australia for dissolution of his marriage with the applicant. Thereafter the applicant applied to the Family Court for the following declarations:
(a) That the Partnership between the Applicant and the Respondent, the terms of which are contained in Articles of Partnership dated 15th April 1976 exists.
(b) That the said partnership has not yet been determined.
and for the following orders:
(a) That Mr. John Edward Walker, Official Liquidator, be appointed Receiver of the said partnership.
(b) That the books of account and assets of the said partnership be handed to the Receiver so appointed.
(c) That the Receiver prepare partnership accounts.
(d) That the Respondent pay the Applicant's costs.
(e) That Paul Thomas Cambage Wenham and Thomas Henry Waters be removed as Trustees of the Trust created by Deed dated 2nd February 1976.
(f) That the Trustees within 14 days from the Order of the Court prepare Balance Sheets, Profit and Loss Accounts and prepare all books and records of the Trust and that the same be handed over within this time to the new Trustee appointed by the Court.
The Court was not asked to deal with the question of jurisdiction to make the orders in 2 (e) and (f) so no further attention need be given to these paragraphs.
This application and the application for dissolution of the marriage came before Ross-Jones J. on 10th March 1978. Counsel for each party requested the Court by consent to make a formal finding that the Family Court of Australia had no jurisdiction to hear the wife's application. The purpose of the request was in order to have this question of jurisdiction determined in this Court. Ross-Jones J. acceded to the application and made the finding with consequential order. He then dealt with the application for dissolution of the marriage and pronounced a decree nisi. An order nisi for mandamus directed to Ross-Jones J. was made on 21st March 1978.
The jurisdiction of this Court to grant mandamus cannot be doubted but it would have been preferable if the available procedures of appeal under the Family Law Act ss. 94 and 95 had been utilised. It should not be assumed that this Court will exercise its supervisory jurisdiction under s. 75 (v.) of the Constitution when there are available appellate procedures. When the application to make absolute the order nisi came before this Court counsel for the respondent husband appeared to inform the Court that the respondent did not wish to argue the matter and submitted to such order as the Court might see fit to make.
The source of jurisdiction in the Family Court to make the declarations and orders is claimed to flow from s. 31 which gives jurisdiction in matrimonial causes and par. (ca) of the definition of matrimonial cause in s. 4 (1) which is as follows:
(ca) proceedings between the parties to a marriage with respect to the property of the parties to the marriage or of either of them, being proceedings in relation to concurrent, pending or completed proceedings for principal relief between those parties;
It is necessary to refer also to certain other sections. Sections 33 and 34 are as follows:
33. To the extent that the Constitution permits, jurisdiction is conferred on the Court in respect of matters not otherwise within the jurisdiction expressed by this Act or any law to be conferred on the Court that are associated with matters (including matters before the Court upon an appeal) in which the jurisdiction of the Court is invoked or that arise in proceedings (including proceedings upon an appeal) before the Court.
34.
(1) The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate.
(2) Without limiting the generality of sub-section (1) the Court may issue, or direct the issue of, writs and orders of such kinds as are prescribed.
Section 78 provides:
(1) In proceedings between the parties to a marriage with respect to existing title or rights in respect of property, the Court may declare the title or rights, if any, that a party has in respect of the property.
(2) Where a court makes a declaration under sub-section (1), it may make consequential orders to give effect to the declaration, including orders as to sale or partition and interim or permanent orders as to possession.
(3) An order under this section is binding on the parties to the marriage but not on any other person.
Section 79 (1) provides:
In proceedings with respect to the property of the parties to a marriage or either of them, the Court may make such order as it thinks fit altering the interests of the parties in the property, including an order for a settlement of property in substitution for any interest in the property and including an order requiring either or both of the parties to make, for the benefit of either or both of the parties or a child of the marriage, such settlement or transfer of property as the Court determines.
Section 80, which is the section dealing with the general powers of the Family Court, provides in par. (k) that the Court, in exercising its powers under Pt VIII—Maintenance and Property may make "any other order (whether or not of the same nature as those mentioned in the preceding paragraphs of this section), which it thinks it is necessary to make to do justice".
Section 81 provides:
In proceedings under this Part, other than proceedings under section 78 or proceedings with respect to maintenance payable during the subsistence of a marriage, the Court shall, as far as practicable, make such orders as will finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them.
It is well to make it clear at the outset that the Family Court has not, and is not suggested to have, any powers in respect of the law of partnership as such. The relevant law of partnership is that of New South Wales. The Family Court cannot dissolve a partnership with the consequences attendant upon such a dissolution in the way in which the Supreme Court of a State can do so. However, for its own purposes, it can recognize a partnership existing under the law of New South Wales and the interest of the parties to a marriage (or either of them) in such a partnership. For those purposes it can ascertain the terms of that partnership. By s. 78 (3) its order in these respects would be binding on the parties to the marriage and on no other person. I can therefore see no jurisdictional objection to the declarations sought in the application to the Family Court. If that Court proposed to exercise its powers under s. 79 to alter the interests of the parties to the marriage in that part of their property which is represented by their interests in the partnership it would need to be satisfied that there was a partnership and up to what date the partnership subsisted or whether it still subsists. Whether or not a declaration would be necessary is a different question, but I can see no objection to the making of the declaration between the parties to the marriage if the Family Court sees fit to do so. A disquiet at the thought of making the declarations in the form in which they are sought flows from the fact that superficially they are similar to declarations made by a court exercising jurisdiction in that branch of the law which governs the affairs of partners as such. But the declarations would have no such purpose or effect in the Family Court, being no more than declarations between the parties to the marriage as to existing rights or titles in respect of property.
The orders sought likewise bear the same kind of unfortunate resemblance to the kinds of orders which a court would make if it were exercising jurisdiction in the matter of partnership affairs as such. Nevertheless it is necessary to look beneath this form to the substance of the orders in the circumstances of the case. It happens that the only persons having interests as partners in the property of the partnership are in this case the parties to a marriage. If the Family Court proposed to alter the property interests pursuant to s. 79 it would need to know the extent of the respective interests of the parties to the marriage in respect of the property in which they alone have partnership interests. Further, it would be open to the Family Court to make orders by way of injunction or appointment of a receiver in order to protect those interests in property in respect of which it has made, or proposes to make, or even contemplates making, orders under s. 78 or s. 79.
Taking each of the three orders in turn, there is first an application for an order that Mr. John Edward Walker be appointed receiver of the partnership. To make an order in that form would be most confusing, almost deceptive. The Family Court cannot appoint a receiver of the assets of a partnership as such. However, in this case it could appoint a receiver of that property of the parties to a marriage which they, and they alone, hold as partners. Likewise the Family Court cannot order partnership accounts as such but it can order accounts of the property of the parties to the marriage with particular reference to an account of their property as partners. So also it could order that books of account and assets of the parties to a marriage be handed over to a named person so that he may act as receiver. Whether it would see fit to do so is a different question, particularly as such a receiver would be in a quite different position to a receiver appointed by a court to wind up the affairs of a partnership. He would have no right to determine claims against the partnership or anything of that kind. If a receiver were appointed by a court to wind up the affairs of the partnership, he would be concerned with those matters. He and the Court which appointed him might be vastly incommoded by the fact that for a quite different purpose the Family Court had "frozen" the books of account and the assets by placing them with a receiver appointed by it. However, such a consideration does not go to jurisdiction; it only goes to the way in which the jurisdiction should be exercised.
Thus I return to the unsatisfactory nature of the course which was here adopted of seeking relief by way of mandamus rather than appeal. On the latter, both matters, namely jurisdiction to make the orders and the appropriateness of the orders, could have been litigated. On the question of jurisdiction, and ignoring the misleading implications in the form of the orders sought, I am of the opinion that the Family Court could between these parties, since they are the only persons who are alleged to be partners, make such orders for its own limited purposes. However, I am of the opinion that mandamus ought not to be granted because I am not satisfied that the remedy by way of appeal under the Family Law Act was any less convenient, beneficial and effective. For the reasons which I have stated I think that the remedy by way of appeal was in the circumstances more convenient, beneficial and effective. The order nisi should therefore be discharged, but I would make no order as to costs.
Murphy J.
This application to make an order absolute for mandamus raises the question of the power of the Family Court of Australia to make declarations and orders with respect to the property of the parties to a marriage.
The Family Law Act 1975, as amended, provides:
31. (1) The Family Court has jurisdiction in—
(a) matrimonial causes instituted or continued under this Act;
8. (1) After the commencement of this Act—
(a) proceedings by way of a matrimonial cause shall not be instituted except under this Act.
4. (1) In this Act, unless the contrary intention appears—"matrimonial cause" means—
(ca) proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them, being proceedings in relation to concurrent, pending or completed proceedings for principal relief between those parties.
Section 33 provides:
To the extent that the Constitution permits, jurisdiction is conferred on the Court in respect of matters not otherwise within the jurisdiction expressed by this Act or any law to be conferred on the Court that are associated with matters (including matters before the Court upon an appeal) in which the jurisdiction of the Court is invoked or that arise in proceedings (including proceedings upon an appeal) before the Court.
Although a matrimonial cause may not be instituted in the Supreme Court of a State in respect of which a proclamation has been made under s. 40, s. 8 does not extend to those proceedings in which the Family Court has jurisdiction only by virtue of s. 33. The Court has wide powers in respect of the property interests of the parties. It may declare the existing interests of the parties so as to bind them, but not any other person (s. 78); it may (where it is just and equitable to do so) alter the interests of the parties in any property (s. 79); in exercising these powers, it may make various orders specified in s. 80, or make orders and issue writs of such kinds as it thinks appropriate under the general powers in s. 84. In proceedings other than for principal relief, any person may apply for leave to intervene and the court may allow intervention (s. 92).
Section 81 provides:
In proceedings under this Part, other than proceedings under s. 78 or proceedings with respect to maintenance payable during the subsistence of a marriage, the court shall, as far as practicable, make such orders as will finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them.
Marriage is an economic as well as a social institution. The power of Parliament under s. 51 (xxi) of the Constitution to make laws in respect of marriage extends to laws respecting the property of the parties to a marriage. The law on property of the parties to a marriage has for centuries been regarded as part of the law of marriage. The laws which used to transfer the wife's property to the husband and virtually treat her as his property were part of the laws of marriage (see Family Law in Australia, 2nd ed. (1978), by Professor H. A. Finlay, pp. 108-111). The Married Women's Property Acts were laws with respect to marriage.
In my opinion, Parliament is not constitutionally confined to legislation dealing with property of the parties only when a divorce or other matrimonial cause is instituted; it may deal directly with the property interests or confer jurisdiction on a court to deal with those interests according to criteria sufficiently precise or ascertainable to amount to an exercise of judicial power. Under the marriage power, Parliament could, for example, enact that upon marriage (or five years after marriage, or on the birth of the first child of the marriage, or immediately before termination of marriage by divorce or death), all (or some) of the property of the parties becomes communal property of the spouses.
In legislating under the marriage power, in regard to the property interests of the parties, Parliament is not confined to the interstices of State law. There may be a variety of arrangements under which parties to a marriage have property interests in respect of which third parties are concerned. In a sense, all property consists of sets of rights and obligations affecting others. There is nothing sacrosanct about the law of partnership which puts a partnership between the parties outside the marriage power.
Parliament has conferred very wide powers on the Family Court to declare or alter the property interests of the parties. Its powers under s. 80 extend to the appointment of a receiver of a partnership business (see Horne v. Horne [9] ) and to winding up a partnership. In some cases this may be the appropriate way of carrying out the Court's duty under s. 81. In my opinion, the Court is not limited to making such an order as a step towards a settlement or transfer of property only under s. 79. Provided its jurisdiction is properly invoked, it could make such an order, at least under s. 33, so as to end as far as practicable the financial relations between the parties and avoid further proceedings between them in conformity with s. 81.
1. [1963] S.R. (N.S.W.) 121.
The proceedings on the amended application filed by the wife since the order nisi are a matrimonial cause (within par. (ca) of the definition in s. 4). The Court has power to grant relief of the kind sought which is appointment of a receiver, that the books of account and assets be handed to the receiver, that the receiver prepare partnership accounts and for the costs of the application. Its power to grant certain other relief which was sought is not in issue.
The Family Court has jurisdiction to deal with the application now before it. The course taken by the primary judge in deciding by consent that he had no jurisdiction was erroneous. Because he did not refuse to exercise jurisdiction, mandamus should be refused.
Aickin J.
This is an application to make absolute an order nisi for a writ of mandamus granted by Gibbs J. and sought to be directed to Ross-Jones J., a judge of the Family Court of Australia and to Paul Ernest Beaumont.
The facts out of which this application arises may be shortly stated. The applicant is one Starlette Anne Beaumont and the second respondent to the application is her husband. A decree nisi for the dissolution of the marriage was granted by Ross-Jones J. on 10th March 1978. It will nonetheless be convenient for present purposes to describe them as husband and wife. Both are medical practitioners and on 15th April 1976 they entered into a partnership agreement relating to their medical practices. By that deed the partnership was expressed to commence on 1st July 1975 and was to continue until 30th June 1978 and thereafter at will.
Differences between the wife and her husband in relation to their marriage arose in the latter part of 1976 and they separated on 5th February 1977. In February 1978 the husband applied to the Family Court for dissolution of the marriage and on 8th March 1978 the wife applied to the Family Court for certain declarations and orders in relation to the partnership, but at the hearing the application was amended to seek additional orders that the husband settle a sum of money on the wife and transfer to her certain property.
The application initially made by the wife was for a declaration that the partnership existed and had not been determined, and for orders that a named person, being an official liquidator, be appointed receiver of the partnership and that the books of account and assets of the partnership be handed to the receiver and that he prepare partnership accounts. The amended application sought, in addition to orders for settlement of a sum of money and transfers of certain property, orders (inter alia) that the receiver should have power to conduct the partnership practices and to make "all payments and receipts in respect of the conduct of the practices as appear to the "Trustee" " [receiver] "to be necessary or desirable" and out of the net proceeds of the practices to pay each week to the husband and wife the sum of $500.00.
When the matter came on before Ross-Jones J. the husband's counsel submitted that the Family Court had no jurisdiction to hear the original application and the wife's counsel opposed that submission. The affidavit of the wife in support of the application for the order nisi stated that "After a brief adjournment my senior counsel and Mr. Lockhart of senior counsel for the respondent/husband announced to the Court that both parties would desire to test the question of jurisdiction in the High Court of Australia and both counsel invited the Court by consent to make a formal finding that the Family Court of Australia had no jurisdiction to hear the application so that the question of jurisdiction could be tested in the High Court". The affidavit goes on to say, "In response to the invitation of counsel His Honour Mr. Justice B. E. Ross-Jones made a formal decree but without any finding on the merits of the application, that the Court had no jurisdiction to hear the said application."
The formal order made by Ross-Jones J. is not included in the papers before the Court and it does not appear whether any formal order was in fact taken out.
The argument before us was primarily directed to the question whether the Family Law Court had power to appoint a receiver and make consequential orders of the kind sought. An appearance was announced by counsel on behalf of the husband, but he said that he did not propose to address any argument and his client would submit to any order the Court might make. He was given leave to withdraw.
It is well settled that mandamus is a discretionary remedy and that it does not go either as of right or as of course. In the present case mandamus is sought to command a judge to hear or further hear the application made by the wife for declarations and orders as sought in the original application. There are, in my opinion, two substantial reasons why mandamus should be refused as a matter of discretion.
The first is that an appeal lies as of right from a single judge of the Family Court to the Full Court of the Family Court, pursuant to s. 94 of the Family Law Act 1975. There is in these circumstances no apparent reason why an appeal should not have been taken to the Full Court of the Family Court after a decision by Ross-Jones J. The second reason why a writ of mandamus should not be issued is that the order made by the Family Court judge was made by consent of both the parties expressed through senior counsel acting on their behalf. I can see no basis upon which this Court should direct a writ of mandamus to a judge who has made an order by consent of the parties. If they have other remedies available by which to challenge that which was done by their consent, no doubt they can be pursued.
The reasons which I have set out above are sufficient to require the conclusion that the order nisi for a mandamus should be discharged and in the particular circumstances of this case without any order as to costs.
However, in view of the fact that other members of the Court have expressed their opinion on the extent of the jurisdiction of the Family Court to make orders of the kind initially sought in these proceedings, it is I think desirable that I should express my own view on those matters. In my opinion the Family Court has no power or jurisdiction to make an order that a receiver be appointed of the "partnership", or an order that the books of account and the assets of the partnership be handed to the receiver. Equally I am satisfied that the Family Court has no jurisdiction to order that the receiver shall have the powers referred to in pars. (a) and (b) of the amended relief as sought orally in the hearing before Ross-Jones J., namely, an order that the receiver conduct the partnership practices and make "all payments and receipts in respect of the conduct of the practices as appear to the "Trustee" " [receiver] "to be necessary or desirable". The difficulties inherent in a receiver, who is not a qualified medical practitioner, conducting a medical practice need only be mentioned to appear overwhelming, but that may not be a matter of jurisdiction. In my opinion the nature of the orders sought overlooks the difference between the assets of the partners and the assets of the partnership. It may well be that there would be jurisdiction to appoint a person to receive or collect the assets of the parties to the marriage with a view to facilitating the making of some order for the adjustment of property matters pursuant to s. 78 and s. 79. It is trite law that the interest of a partner in a partnership and in the partnership assets is a very different one from mere co-ownership of the relevant assets. The interest of a partner in a partnership is in truth his proportionate share of the assets of the partnership after their realization and conversion into money and after the payment of partnership debts. It is convenient to explain the nature of a partner's interest by quoting the observations of Kitto J. in Livingston v. Commissioner of Stamp Duties (Q.) [10] :
An analogy may be seen also in the case of a partner's interest in the partnership assets. That he has a beneficial interest, which the law will recognize and enforce, in every piece of property which belongs to the partnership is clearly established: In re Holland; Brettell v. Holland [11] ; Manley v. Sartori [12] ; In re Fuller's Contract [13] ; and none the less so because the nature of the interest is peculiar in that his share in the partnership, by virtue of which the interest in a given asset exists while the asset belongs to the partnership, consists not of a title to specific property but of a right to a proportion of the surplus after the realization of the assets and payment of the debts and liabilities of the partnership: In re Ritson; Ritson v. Ritson [14] ; Bakewell v. Deputy Federal Commissioner of Taxation [15] ; that is to say, not a "definite" share or interest in a particular asset, no "right to any part" of it, but an interest which "can be finally ascertained only when the liquidation has been completed, and consists of his share of the surplus": Rodriguez v. Speyer Brothers [16] .
In so far as the Family Court may have power to appoint a receiver as part of the exercise of its powers under ss. 78 and 79, its orders can only affect the interest of a husband or wife in the partnership and will not extend to orders with respect to partnership assets properly so called. If the partnership is to be dissolved it must be dissolved in accordance with the law relating to partnerships and not otherwise. An order that the books of account and the assets of the partnership be handed to a receiver, in the circumstances in which the receiver could have no power to wind up the affairs of the partnership or pay its debts, would in my opinion be beyond the jurisdiction of the Family Court, even though the only partners may be husband and wife. Before they could be said to be entitled in any real sense to their proportion of the partnership assets or the proceeds of their realization, all the creditors of the partnership would have to be paid and, in the absence of some agreement to the contrary, all its assets realized. In the absence of some agreement in the course of the winding up of the partnership, arrangements would have to be made for dealing with the goodwill of the partnership if it be regarded as a saleable asset.
1. (1960) 107 C.L.R. 411, at p. 453.
2. [1907] 2 Ch. 88, at p. 91.
3. [1927] 1 Ch. 157, at pp. 163-164.
4. [1933] Ch. 652, at p. 656.
5. [1898] 1 Ch. 667; [1899] 1 Ch. 128.
6. (1937) 58 C.L.R. 743, at p. 770.
7. [1919] A.C. 59, at p. 68.
I respectfully agree that to make an order appointing a receiver of the assets of the partnership would be confusing and misleading, as well as beyond the jurisdiction of the Family Court. It would be another matter to appoint some person to receive and hold, pending some further order of the Family Court, the share to which each partner would become entitled upon the completion of the winding up of the affairs of the partnership. That presumably would be permissible, but to describe that person as a receiver of the partnership or of the partnership assets would be misleading. If the Family Court thought it appropriate that the partnership should be wound up to facilitate a property settlement it could presumably direct either or both parties to give an appropriate notice so as to terminate the partnership which, as it is now a partnership at will, could be done by a simple signed instrument delivered by one partner to the other. That course would allow the partnership assets to be realized and the interests of the respective partners to be ascertained and paid or transferred to them or to some designated person to receive them on behalf of each of the parties to await such disposition as the Family Court might order.
We were referred to Jones v. Jones [17] ; Dimov v. Dimov [18] and Anderson v. Anderson [19] which were decided under the Matrimonial Causes Act 1959 which contained a provision in similar terms to s. 80 (k) of the Family Law Act. In so far as those cases decided that the Matrimonial Causes Act itself conferred on courts exercising the jurisdiction conferred by that Act a power to appoint a receiver of a partnership or directly to order its winding up, they were in my opinion wrongly decided.
1. (1967) 10 F.L.R. 493; [1968] 1 N.S.W.L.R. 206.
2. (1970) 17 F.L.R. 462; [1971] W.A.R. 113.
3. (1972) 19 F.L.R. 480.
I agree with the view expressed by my brother Jacobs that the Family Court could in the exercise of powers with respect to property settlements make declarations as to the respective existing interests of parties in particular property and make orders requiring the transfer of interests in property (including an interest in a partnership) from one party to another, and in appropriate cases for the appointment of a receiver to preserve or protect particular items of property of either party. In my opinion, however, what is sought in this application goes far beyond that. The Family Court has been asked to appoint a receiver of the partnership (not of the interests of the partners therein) and to deal with the partnership property as such. That, in my opinion, it has no jurisdiction to do.
Accordingly I am of opinion that, even if there were not what I regard as compelling reasons for declining as a matter of discretion to make absolute the order nisi for a mandamus, the application should be refused because the Family Court had no jurisdiction to make the orders referred to in the order nisi.
I would therefore discharge the order nisi and make no order as to costs. |
high_court_of_australia:/showbyHandle/1/10119 | decision | commonwealth | high_court_of_australia | text/html | null | Koop v Bebb [1951] HCA 77 | https://eresources.hcourt.gov.au/showbyHandle/1/10119 | 2024-09-13T22:54:22.022963+10:00 | High Court of Australia
Dixon, McTiernan, Williams, Fullagar and Kitto JJ.
Koop v Bebb
[1951] HCA 77
ORDER
Appeal allowed with costs. Order of the Supreme Court dated 11th May 1951 discharged. In lieu thereof declare that the allegations contained in pars. 1 to 6 inclusive of the statement of claim disclose a cause of action by the plaintiffs against the defendant and that the costs of the argument of the points of law which the order of the Supreme Court dated 15th March 1951 directed to be set down to be argued be paid by the defendant (the respondent in this Court).
Cur. adv. vult.
The following written judgments were delivered:—
Dec. 20
Dixon, Williams, Fullagar and Kitto JJ.
The appellants in this case are the plaintiffs in an action in the Supreme Court of Victoria, in which two claims for damages against the respondent (the defendant) are made. The first is a claim by both plaintiffs for damages in respect of the death of their father, and the second is a claim by the male plaintiff alone for damages in respect of personal injuries sustained by him. By their statement of claim the plaintiffs allege that the defendant was guilty of negligence while driving a motor truck, in which the father was a passenger, at the intersection of the Tocumwal-Barooga Road and the Mulwala Road, and that by reason of the defendant's negligence the truck was overturned, with the result that the father received injuries of which he died in a hospital in Victoria. The plaintiffs allege that there is no executor or administrator of the estate of their father, that they were dependent upon their father for their support, and that by reason of his death they have been wholly deprived of support and have thereby suffered damage. The statement of claim also alleges that the male plaintiff was a passenger in the motor truck, and that as a result of the accident be sustained physical injuries and suffered damage.
The defendant apparently resides in New South Wales. It does not appear whether the writ in this action was served upon him in Victoria, but he entered an appearance in the action and by so doing he submitted to the jurisdiction of the court. He filed a defence putting in issue the allegation of negligence and certain other allegations in the statement of claim, and setting up that the intersection of the Tocumwal-Barooga Road and the Mulwala Road is in the State of New South Wales, and that if he was negligent his negligence took place in New South Wales. He objected, as a matter of law, that in these circumstances the facts alleged in the statement of claim did not constitute any cause of action by the plaintiffs against him which is recognized by or enforceable in or within the jurisdiction of the Supreme Court of Victoria.
The points of law raised by this objection were ordered to be set down for hearing and disposed of before the trial of the issues of fact, and they were argued before Dean J. His Honour held that the objection was a complete answer to the action so far as relief was claimed by both plaintiffs in respect of the death of their father, and he made an order dismissing the action to that extent. From that order the plaintiffs appeal to this Court.
The plaintiffs rely upon Part III. of the Wrongs Act 1928 Vict., which in substance repeats the provisions enacted in England by Lord Campbell's Act (9 & 10 Vict. c. 93). The leading provision is contained in s. 15, which is in the following terms:—
15. Whensoever the death of a person is caused by a wrongful act neglect or default and the act neglect or default is such as would (if death had not ensued) have entitled the party injured to maintain an action and recover damages in respect thereof, then and in every such case the person who would have been liable if death had not ensued shall be liable to an action for damages not-withstanding the death of the person injured and although the death has been caused under such circumstances as amount in law to felony.
Every such action is to be for the benefit of the wife, husband, parent and child of the person whose death has been so caused; such damages may be given as the jury or the court think proportional to the injury resulting from such death to the parties respectively for whom and for whose benefit such action is brought; and the amount so recovered after deducting the costs not recovered from the defendant is to be divided amongst the before-mentioned parties in such shares as the jury or the court by their or its verdict find and direct (s. 16). The action is to be brought in the name of the executor or administrator of the person deceased (s. 16); but where there is no executor or administrator, or no action is brought by the executor or administrator within six months after the death, it may be brought by all or any of the persons for whose benefit such action would have been (s. 17).
The question raised by the defendant's objection and answered in his favour by the learned Judge below is whether, having regard to these provisions, the children of a person whose death resulted from an act of negligence committed in New South Wales can maintain an action in Victoria for damages against the wrongdoer. His Honour observed that, read literally, s. 15 is free of all territorial limitation; and, because the Victorian Parliament has power, under s. I. of the Constitution Act (Schedule (I.) of the Imperial Act 18 & 19 Vict. c. 55), to make laws "in and for Victoria" only, his Honour treated the question before him as depending for its answer upon the selection of an appropriate point at which to read into the section the words "within Victoria". His Honour considered that three choices were open to him, namely, to insert the restrictive words either after "the death of a person", or after "maintain an action", or after "a wrongful act neglect or default"; and he decided in favour of the last after weighing the consequences which would flow from the adoption of each, and considering which of them was the most likely to have been intended by the legislature.
It is true that Part III. contains no words expressly confining its operation to Victoria, and it is also true that its provisions cannot operate, and should not be construed as operating, beyond the borders of the State. But it does not follow that restrictive words should be imported by implication into the text of the section. It is sometimes necessary to imply such words into an enactment passed by a Parliament whose powers are defined by reference to area, in order that the seeming generality of its terms may not lead to the conclusion that the enactment is invalid as being in excess of power. The enactment considered by the Privy Council in Macleod v. Attorney-General (N.S.W.) [1] is a familiar example. In such cases the warrant for the implication lies in the presumption that the Parliament intended not to overpass the limits of its authority. In a second class of enactments effect may be given to a restriction which, though unexpressed, exists by necessary implication from the apparent object of the enactment itself. Thus in Mynott v. Barnard [2] the Workers' Compensation Act 1928 Vict. was held to apply only (according to one view) in respect of personal injury by accident in Victoria arising out of and in the course of employment, or (according to another view) in respect of personal injury by accident arising out of and in the course of employment in Victoria. Part III. of the Wrongs Act, however, belongs to neither of these categories. There is no need to imply words into s. 15 in order that its operation may not transcend the limits of legislative power or fail to conform to the apparent object of the legislation. The connection of its operation with the State of Victoria is inherent in its nature; for, taken as it stands, it purports only to enact a rule to form part of the general body of the law of Victoria relating to civil liability for wrongful acts, neglects and defaults: cf. Washington v. The Commonwealth [1] .
1. (1891) A.C. 455.
2. (1939) 62 C.L.R. 68.
3. (1939) 39 S.R. (N.S.W.) 133, at p. 139; 56 W.N. 60, at p. 61.
The legislation produces the same effect upon the law of Victoria as its prototype produced upon the law of England. In each country the principles of the common law gave a remedy in damages in respect of wrongful acts, neglects and defaults causing damage; but those principles had no application where the damage flowed from the death of a human being. Lord Campbell's Act described in a recital the situation to which it was addressed: "Whereas no Action by Law is now maintainable against a Person who by his wrongful Act, Neglect, or Default may have caused the Death of another Person, and it is oftentimes right and expedient that the Wrongdoer in such Case should be answerable in Damages for the Injury so caused by him." The mischief of the Act was thus revealed as a lacuna in the law of liability for wrongs. As Lord Sumner pointed out in Admiralty Commissioners v. S.S. Amerika [2] , Scotland was excluded from the operation of the Act because the lacuna did not exist in Scottish law. Existing in the common law, it was filled for England by Lord Campbell's Act, and it was filled for Victoria by the provisions now contained in Part III. of the Wrongs Act, by creating in favour of certain relatives of the deceased person a right to complain of his death as an injury to themselves: cf. Woolworths Ltd. v. Crotty [3] .
1. (1917) A.C. 38, at pp. 51, 52.
2. (1942) 66 C.L.R. 603, at pp. 611 618.
Section 15 should therefore be considered as enacting a rule of the law of Victoria, to be applied in the Victorian courts, and to be applied as it stands, without textual emendation. Its effect in relation to a case which includes an extra-Victorian element depends upon the application of the rules of private international law which form part of the law in Victoria. The section may be considered as simply creating an addition to the category of actionable wrongs by reference to which, in a case involving a foreign element, the rules of private international law give a right of action in Victoria in conditions which they define. Alternatively the section may be regarded as giving a right of action in Victoria whenever the condition is fulfilled that the deceased person (if he had survived) would have been entitled by the law of Victoria, including its rules of private international law, to recover damages for the act, neglect, or default which caused his death. If the first view be accepted, the question in the present case is whether the rules of Victorian private international law operate to give the plaintiffs a right of action against the defendant in Victoria, having regard to the fact that they would have had a right of action against him under Part III. of the Wrongs Act if his negligence had been committed in Victoria. On the other hand, if the second view be accepted, the question is only whether the rules of private international law would have given the plaintiffs' father, if he had survived, a right of action in Victoria against the defendant for his negligence committed in New South Wales.
Whichever of these views be adopted, it is necessary to ascertain the rule of private international law which defines the conditions of civil liability in Victoria for an act done in New South Wales. In the present state of authority it must be accepted that an action of tort will lie in one State for a wrong alleged to have been committed in another State, if two conditions are fulfilled: first, the wrong must be of such a character that it would have been actionable if it had been committed in the State in which the action is brought; and secondly, it must not have been justifiable by the law of the State where it was done: Walpole v. Canadian Northern Railway Co. [1] ; McMillan v. Canadian Northern Railway Co. [2] .
1. (1923) A.C. 113, at p. 119.
2. (1923) A.C. 120, at pp. 123, 124.
The language in which these conditions are expressed is that of Willes J. in Phillips v. Eyre [3] . For his statement of the first condition, his Lordship relied upon the decision in Liverpool, Brazil, and River Plate Steam Navigation Co. Ltd. v. Benham ("The Halley") [4] , although (it may be remarked) in that case the Privy Council decided that the defendant was not liable in England for an act done abroad by another person, not because of the character of the act according to English law, but because the person who did it was not one for whose defaults the defendant was responsible according to English law. At least the first condition is free from ambiguity. The second is not. It was interpreted by a Court of Appeal consisting of Lopes and Rigby L.JJ. in Machado v. Fontes [5] as meaning that the act complained of must not have been "innocent" in the country where it was done. Their Lordships held that if the act was contrary in any respect to the law of that country, then, although it gave rise to no civil liability there, it was not "justifiable" there, and the second condition was therefore fulfilled. No previous decision had gone so far. The statement that the act must not have been justifiable by the law of the place where it was done was framed by Willes J. for the purposes of a judgment directed to the effect to be conceded in an action in England to a statute of indemnity, which had been passed in the country where the act was committed and which had the effect of curing retrospectively the wrongfulness of the act in that country. The statement of the condition does not in terms deny that the act complained of must be of a character which attracts civil liability in the country where it was done; and it would be difficult to reconcile such a denial with the principle which Willes J. had previously stated [1] , that "the civil liability arising out of a wrong derives its birth from the law of the place, and its character is determined by that law". The learned Lords Justices in Machado v. Fontes [2] relied also upon the judgments in "The M. Moxham" [3] , which was the converse of "The Halley" [4] , in the sense that the question was whether liability for an act of negligence in another country could be imposed in England upon a person who, according to the law of that other country, was not responsible for the fault of the person who did the act, and it was decided that it could not. The judgments fall short of supporting the doctrine of Machado v. Fontes [2] . That case has been dissented from in Naftalin v. London Midland and Scottish Railway Co. [5] , and has been much criticized by text writers. (See further, M'Elroy v. M'Allister [6] .) Its correctness was questioned and left undecided by the Privy Council in Canadian Pacific Railway Co. v. Parent [7] . In the judgment of Cussen J. in Varawa v. Howard Smith Co. Ltd. [No. 2] [8] will be found a critical analysis of the case and of the authorities which it purported to apply. It seems clear that the last word has not been said on the subject, and it may be the true view that an act done in another country should be held to be an actionable wrong in Victoria if, first, it was of such a character that it would have been actionable if it had been committed in Victoria, and, secondly, it was such as to give rise to a civil liability by the law of the place where it was done. Such a rule would appear to be consonant with all the English decisions before Machado v. Fontes [2] and with the later Privy Council decisions. It may be added that, however the rule should be stated, courts applying the English rules of private international law do not accept the theory propounded by Holmes J. in Slater v. Mexican National Railroad Co. [9] (see also New York Central Railroad Co. v. Chisholm [1] ), when he said:—"The theory of the foreign suit is that although the act complained of was subject to no law having force in the forum, it gave rise to an obligation, an obligatio, which, like other obligations, follows the person, and may be enforced wherever the person may be found But as the only source of this obligation is the law of the place of the act, it follows that that law determines not merely the existence of the obligation, but equally determines its extent." English law as the lex fori enforces an obligation of its own creation in respect of an act done in another country which would be a tort if done in England, but refrains from doing so unless the act has a particular character according to the lex loci actus. Uncertainty exists only as to what that character must be.
1. (1870) L.R. 6 Q.B. 1, at pp. 28, 29.
2. (1868) L.R. 2 P.C. 193.
3. (1897) 2 Q.B. 231.
4. (1870) L.R. 6 Q.B., at p. 28.
5. (1897) 2 Q.B. 231.
6. (1876) 1 P.D. 107.
7. (1868) L.R. 2 P.C. 193.
8. (1897) 2 Q.B. 231.
9. (1933) S.C. 259, at pp. 274, 275.
10. (1949) S.C. 110.
11. (1917) A.C. 195, at p. 205.
12. (1910) V.L.R. 509.
13. (1897) 2 Q.B. 231.
14. (1904) 194 U.S. 120 [48 Law. Ed. 900].
15. (1925) 268 U.S. 29, at p. 32 [69 Law. Ed. 828, at p. 832].
There is no necessity to express a concluded opinion upon the controversy which surrounds Machado v. Fontes [2] . It is enough that, on any view, an act, which would have been actionable in Victoria if committed there, is actionable in Victoria though committed in New South Wales if it is actionable in New South Wales. If the defendant in this case is guilty of the negligence alleged against him, his negligence was, when the action was commenced, actionable in New South Wales at the suit of the plaintiffs, and would have been actionable in New South Wales at the suit of their father if he had survived. This is so because the law of New South Wales includes both the Compensation to Relatives Act, 1897-1946, which enacts provisions not differing in any relevant respect from those of Part III. of the Victorian Wrongs Act, and also the rules of the common law with respect to liability for negligence. The plaintiffs are therefore entitled to maintain their present action, either because the coexistence of Part III. of the Wrongs Act and the Compensation to Relatives Act N.S.W. gives them under the rule of private international law above discussed, a right of action against the defendants for causing the death of their father by negligence in New South Wales, or because Part III. of the Wrongs Act applies to this case of its own force, the condition that their father would have been entitled to sue the defendant in Victoria for injuring him by negligence in New South Wales being satisfied by the application of the same rule of private international law.
1. (1897) 2 Q.B. 231.
One matter remains to be mentioned. It was objected on behalf of the defendant that it is not open to the plaintiffs to rely for any purpose upon New South Wales law, because the content of that law is in Victoria a question of fact and the statement of claim contains no allegation as to the law of New South Wales. This objection should not be sustained. The Supreme Court of Victoria takes judicial notice of the provision made by the Imperial Act, 9 Geo. IV. c. 83, s. 24, whereby all laws and statutes in force in England at the time of the passing of that Act (1828) were made applicable in the administration of justice in the courts of New South Wales so far as the same could be applied within that colony. The Victorian court also takes judicial notice of all statutes of New South Wales, being required so to do by s. 3 of the State and Territorial Laws and Records Recognition Act 1901-1950: cf. s. 70 of the Evidence Act 1928 Vict.. It is therefore within its judicial cognizance that the Compensation to Relatives Act of New South Wales entitled the plaintiffs to sue in that State for damages in respect of the death of their father, and also that, by the principles of the common law, applicable in New South Wales under 9 Geo. IV. c. 83 and unaffected by statutes enacted in that State since 1828, the conduct of the defendant alleged in the statement of claim amounted to a wrong which would have been actionable in New South Wales at the suit of the plaintiffs' father if he had survived.
The appeal should therefore be allowed, the order appealed from should be discharged, and in lieu thereof it should be declared that the allegations contained in pars. 1 to 6 inclusive of the statement of claim disclose a cause of action by the plaintiffs against the defendant.
McTiernan J.
This action was brought in the Supreme Court of Victoria. It consisted of two counts. The first was a claim for compensation for the pecuniary loss suffered by the plaintiffs in consequence of their father's death, which they alleged was caused by the defendant's negligence. The second count was for damages for physical injury and damage sustained by one of the plaintiffs in consequence of the same negligence. This appeal is concerned only with the first count. The question is whether or not that claim can be enforced by an action brought in the Supreme Court of Victoria. It appeared that the alleged negligence took place on 3rd September 1949 in New South Wales and caused physical injury to the plaintiff's father, from which he died in Victoria on 7th September 1949. No executor or administrator of his estate was appointed. The plaintiffs, a daughter and a son, brought the action for their own benefit: being infants, they sued by their next friend. The first count is contained in pars. 1 to 6 inclusive of the statement of claim and the second count in the seventh paragraph. To the first count there are appended (citing the words which describe them): "Particulars under the Wrongs Act 1928 ". This heading refers to Part III. of the Wrongs Act 1928 Vict.. This part of the Act follows the pattern of Lord Campbell's Act Imp. (9 & 10 Vict. c. 93). Section 15, which is in Part III., creates a right of action for a wrongful act, neglect or default causing death, subject to the conditions which are usual in legislation of which Lord Campbell's Act is the model.
The defendant set up as a defence to the claim set forth in pars. 1 to 6 inclusive of the statement of claim the fact that the alleged negligence took place in New South Wales. Upon that the defendant submitted that as a matter of law the facts alleged in those paragraphs do not constitute any cause of action under the Wrongs Act of Victoria or any cause of action enforceable in the Supreme Court of Victoria. In an interlocutory proceeding Dean J. upheld this submission and gave judgment dismissing the cause of action set forth in pars. 1 to 6 inclusive of the statement of claim.
In s. 15 of the Wrongs Act the legislature has used the general words "a wrongful act neglect or default". Literally, these words apply to an act neglect or default which falls within the scope of the words of the section, wherever it was committed. Read without any limitation, the effect of the section is to create a civil liability for such an act neglect or default whether it was committed in Victoria or in another part of Australia or in any other place. James L.J. said in Niboyet v. Niboyet [1] : "It is always to be understood and implied that the legislature of a country is not intending to deal with persons or matters over which, according to the comity of nations, the jurisdiction properly belongs to some other sovereign or State". This rule of construction was applied in Barcelo v. Electrolytic Zinc Co. of Australasia Ltd. [2] . Dixon J. said [3] that the object of this rule of construction is to confine the operation of general language in a statute to a subject matter "under the effective control of the legislature". Turner L.J. said in Cope v. Doherty [4] : "It is not because general words are used in an Act of Parliament every case which falls within the words is to be governed by the Act. It is the duty of the Courts of Justice so to construe the words as to carry into effect the meaning and intention of the Legislature". The legislature did not expressly declare that it was dealing with wrongful acts, neglects, or defaults, whether they took place within or beyond Victoria. The proper construction to place upon s. 15 is that Parliament intended to deal only with such persons or things as are within the general words of the section and also "within its proper justification" (Colquhoun v. Heddon [1] , per Lord Esher). It is clearly within the proper jurisdiction of the legislature to impose civil liability for a wrongful act, neglect or default having the consequences described in s. 15, if it takes place in Victoria. As regards any extra-territorial wrongful act, neglect or default falling within the general words of the section, it is difficult to affirm that it is a thing within the "proper" jurisdiction of the legislature of Victoria. The legislature has no power to make its laws apply extra-territorially but the present question is not strictly one as to the extent of its legislative jurisdiction: it is rather whether the Court ought to attribute to the legislature the intention that the general words should apply to an extra-territorial wrongful act, neglect or default. A matter which is of importance is that the legislature contemplated that a wrongful act, neglect or default which falls within the general words of s. 15 may be a felony. The section expressly says that a right of action is created in respect of such a wrongful act, neglect or default, even although the death has been caused under such circumstances as amount to a felony. Locality is an appropriate criterion having regard to the subject matter, for limiting the general words "a wrongful act, neglect or default" in s. 15. See American Banana Co. v. United Fruit Co. [2] ; New York Central Railroad Company v. Chisholm [3] . In my opinion the intention ought not to be attributed to the legislature of dealing with extra-territorial wrongful acts, neglects or defaults. Upon the true construction of s. 15 it is, in my opinion, limited to a wrongful act, neglect or default which is committed in Victoria. The negligence alleged in the statement of claim took place in New South Wales. It follows that the cause of action set forth in pars. 1 to 6 inclusive cannot stand upon Part III. of the Wrongs Act 1928 of Victoria.
1. (1878) 4 P.D. 1, at p. 7.
2. (1932) 48 C.L.R. 391, at pp. 423, 425, 443-447.
3. (1932) 48 C.L.R., at p. 423.
4. (1858) 2 De G. & J. 614, at pp. 623, 624 [44 E.R. 1127, at p. 1131].
5. (1890) 25 Q.B.D. 129, at pp. 134, 135.
6. (1909) 213 U.S. 347, at p. 356 [53 Law. Ed. 827, at p. 832].
7. (1925) 268 U.S. 29, at pp. 31, 32 [69 Law. Ed. 828, at pp. 831, 832].
The Compensation to Relatives Act, 1897-1946 N.S.W. is, essentially similar to Part III. of the above-mentioned Wrongs Act. Section 3 of the Compensation to Relatives Act applies to the negligence alleged in the present case because it was a wrongful act, neglect or default which took place in New South Wales. The death of the plaintiffs' father, however, occurred in Victoria. In the case of the Compensation to Relatives Act of New South Wales the death of the injured person is essential to give the right of action created by the Act. This element is common, of course, to all Acts based upon the pattern of Lord Campbell's Act. It has been held that under such provisions the relatives of the injured man would have no cause of action, if before his death from the injury caused by a wrongful act, neglect or default, he had sued the tortfeasor and recovered damages. This result followed because the statutory right of action created by the Act is to an extent identified with the common-law right which accrued to the injured person upon the happening of the wrongful act, neglect or default (Read v. Great Eastern Railway Co. [1] ; Griffiths v. Earl of Dudley [2] ). The statutory right of action given to the relatives is nevertheless a "new action" (Seward v. Owners of the "Vera Cruz" [3] ). It is an action for the wrong for which the injured person could have brought an action against the wrongdoer, had the wrong not caused death. The plaintiffs' father could have brought an action for the negligence alleged in the statement of claim if he had survived; upon his death another right of action for compensation for the pecuniary loss accrued under the Compensation to Relatives Act of New South Wales to the plaintiff's dependent children. Du Parcq L.J. said in George Monro Ltd. v. American Cyanamid & Chemical Corporation [4] : "The question is: Where was the wrongful act, from which the damage flows, in fact done? The question is not where was the damage suffered, even though damage may be of the gist of the action". In the present case the locus delicti commissi was in New South Wales. The plaintiffs could, within twelve months from the death of their father, the period limited by s. 5 of the Compensation to Relatives Act, have brought an action under that Act in the Supreme Court of New South Wales. As there is no executor or administrator of their father, the plaintiffs would have been entitled under s. 6B to bring the action within the abovementioned period, but as that period has elapsed the plaintiffs would be met by s. 5 if they sued in the Supreme Court of New South Wales under the Compensation to Relatives Act of that State.
1. (1868) L.R. 3 Q.B. 555.
2. (1882) 9 Q.B.D. 357.
3. (1884) 10 App. Cas. 59.
4. (1944) K.B. 432, at p. 441.
The right of action given by this Act to the relatives of the deceased is statutory, but it is a right to bring an action of tort. The action is essentially different from a claim under a Workers' Compensation Act; such a claim does not "properly arise ex delicto ": Dicey's Conflict of Laws, 6th ed. (1949), at p. 801. Mynott v. Barnard [1] , a case involving the construction of the Workers' Compensation Act 1928 Vict. is not parallel with the present case. An Act of the type of the Compensation to Relatives Act of New South Wales or of Part III. of the Wrongs Act of Victoria or any Act fashioned after Lord Campbell's Act makes "a statutory addition" to the common law of the State which enacts such an Act. In Davidsson v. Hill [2] an action under the Fatal Accidents Act (Lord Campbell's Act) was described by Kennedy J. as "an action in tort". Phillimore J. said [3] : " The Fatal Accidents Act is a statutory addition to the common law of England". Kennedy J. made in the last-mentioned case this observation [4] : "The basis of the claim to which they" (the Fatal Accidents Act) "give statutory authority is negligence causing injury, and that is a wrong which I believe the law of every civilized country treats as an actionable wrong the purpose and effect of the legislation is to extend the area of reparation for a wrong which civilized nations treat as an actionable wrong". The negligence alleged in the statement of claim was actionable by the law of Victoria, where the action was brought, and by the law of New South Wales, where it was committed. It is a clear case of a tort committed beyond the territorial jurisdiction of the Supreme Court of Victoria for which an action may be brought in that court. The Compensation to Relatives Act of New South Wales created the civil liability for the negligence because it was committed in New South Wales. The remedy is statutory and, as the locus delicti commissi was New South Wales, the action which could be brought in Victoria was under the Compensation to Relatives Act, not under Part III. of the Wrongs Act: see New York Central Railroad Co. v. Chisholm [5] . The action is accessory to the civil liability created by the Compensation to Relatives Act of New South Wales. Willes J. said in Phillips v. Eyre [6] : "A right of action, whether it arise from contract governed by the law of the place or wrong, is equally the creature of the law of the place and subordinate thereto in like manner the civil liability arising out of a wrong derives its birth from the law of the place, and its character is determined by that law". Section 5 of the Compensation to Relatives Act bars the right of action given by this Act unless the action is commenced within twelve months after the death in respect of which it is given. It follows that the plaintiffs have lost their right of action under the Compensation to Relatives Act of New South Wales if the action which they brought in the Supreme Court of Victoria cannot be treated as an action under the Compensation to Relatives Act of New South Wales. Section 6 of this Act and s. 20 of the Wrongs Act provide for the delivery of particulars with the statement of claim (which in the former case is a "declaration") of the persons for whom the action is brought and of the nature of the claim in respect of which damages are claimed. In the present case the plaintiffs entitled the particulars " Under the Wrongs Act ". Part III. does not require that the particulars should be so entitled. The heading " Under the Wrongs Act " distinguished the particulars under pars. 1 to 6 of the statement of claim, from the particulars under the count for damages, which it also contains, for the physical injury and damage alleged to have been caused to one of the plaintiffs. The proof, which was given in the interlocutory proceeding, that the negligence was committed in New South Wales stamps the action as one which is authorized by the Compensation to Relatives Act of New South Wales. The heading " Under the Wrongs Act " is not an essential part of the statement of claim. It is a false description of the Act which sanctioned the action and directed the particulars to be furnished. Having regard to the substance of the matters pleaded in pars. 1 to 6 and the substance of the particulars referring to those paragraphs, I am not prepared to decide that the plaintiffs did not, in accordance with s. 5 of the Compensation to Relatives Act, 1897-1946, of New South Wales, take proceedings within twelve months of their father's death to enforce the right of action which arose under that Act upon his death.
1. (1939) 62 C.L.R. 68.
2. (1901) 2 K.B. 606, at p. 609.
3. (1901) 2 K.B., at p. 619.
4. (1901) 2 K.B., at p. 614.
5. (1925) 268 U.S. 29 [69 Law. Ed. 828].
6. (1870) L.R. 6 Q.B. 1, at p. 28.
The Supreme Court of Victoria is bound by the Federal Act, the State and Territorial Laws and Records Recognition Act 1901-1950, s. 3, to take judicial notice of the Compensation to Relatives Act, 1897-1946, of New South Wales. This Act is the correct law for the Supreme Court of Victoria to apply in so far as it governs the civil liability which the plaintiffs brought this action to enforce: but the law of the forum governs all matters of procedure in connection with the action.
The defence set up by the defendant that pars. 1 to 6 inclusive do not plead a cause of action which is enforceable in the Supreme Court of Victoria should not, in my opinion, be sustained.
Litigation involving questions like those in this appeal may increase with the growth of travel between the States and the Territories of the Commonwealth. It seems desirable for the States and the Commonwealth to take any action which is within their constitutional powers to prevent the recurrence of like questions in such litigation.
I should allow the appeal. |
high_court_of_australia:/showbyHandle/1/11761 | decision | commonwealth | high_court_of_australia | text/html | null | Alexandra Private Geriatric Hospital Pty Ltd v The Commonwealth [1987] HCA 6 | https://eresources.hcourt.gov.au/showbyHandle/1/11761 | 2024-09-13T22:54:22.049526+10:00 | High Court of Australia
Mason A.C.J. Wilson, Brennan, Deane and Dawson JJ.
Alexandra Private Geriatric Hospital Pty Ltd v The Commonwealth
[1987] HCA 6
ORDER
Demurrer allowed. Judgment for the defendants in the action with costs.
Cur. adv. vult.
The Court delivered the following written judgment:—
1987, March 10
Mason A.C.J., Wilson, Brennan, Deane and Dawson JJ.
The first, second, third and fourth plaintiffs are each involved, as proprietors, in the business of providing nursing home care in Victoria. The fifth plaintiff is a registered nurse employed by the fourth plaintiff. These proceedings require the determination of a demurrer entered by the defendants to the claim by the plaintiffs for a declaration that the provisions of the National Health Act 1953 Cth, as amended ("the Act") with respect to approved nursing homes are beyond the legislative power of the Commonwealth and invalid. The provisions in question are found in Pts V, VA and VC of the Act. The challenge extends also to the principles formulated respectively by the Minister in accordance with ss. 39A(6), 40AA(3C) and 40AA(7) of the Act.
The plaintiffs' attack is directed to the general conception and essential provisions of the legislative scheme rather than to any particular aspect of it. It is argued that the collective effect of the detailed regulation and control imposed on the management of a private nursing home stamps the law with the character of a law with respect to private nursing homes and that this is sufficient to place the law beyond power. Alternatively, it is pleaded in the statement of claim, although the argument was not pursued at the hearing, that the effect of the scheme is to impose a form of civil conscription on the management of a private nursing home and that this in itself is sufficient to bring down the law. On the other hand, the Commonwealth, in support of its demurrer, relies on the legislative power conferred by s. 51(xxiiiA) of the Constitution (supplemented, if necessary, by s. 51(xxxix)) to make laws for the peace, order and good government of the Commonwealth with respect to "the provision of sickness and hospital benefits".
Before 1972 the Commonwealth's involvement with nursing homes was comparatively slight. A moderate subsidy was paid to approved nursing homes and a degree of supervision instituted to monitor the payments. However, in that year the subsidy was increased substantially and major amendments were made to the Act. A new section, s. 40AA, provided for the approval of premises as a nursing home, for limiting the number of approved homes, for approving the number of beds in a home and the admission thereto of qualified nursing home patients and finally, for the determination by the Director-General of the maximum fees that could be charged in respect of the nursing home care of the patient. In determining the fees, the Director-General was required to have regard to costs necessarily incurred in providing nursing home care. The Director-General was also empowered to attach any other conditions to the approval of a nursing home for the purpose of ensuring that "the needs of qualified nursing home patients in the nursing home are satisfactorily provided for".
It will be seen that the amendment to the Act in 1972 brought into being the features of the scheme upon which the plaintiffs rely to establish their case. However, the picture is incomplete without a reference to later developments. The scheme came under scrutiny in one case in this Court and in a number of cases in the Federal Court: Re Hunt; Ex parte Sean Investments Pty. Ltd. [1] ; Nagrad Nominees Pty. Ltd. v. Howells [2] ; Sean Investments Pty. Ltd. v. MacKellar [3] ; Croft v. MacKellar [4] . Those cases were not, however, concerned with constitutional validity. Their present relevance is essentially historical in that some of them led to the further amendments that were made to the Act in 1983.
1. (1979) 53 A.L.J.R. 552; 25 A.L.R. 497.
2. (1981) 54 F.L.R. 170; 38 A.L.R. 145; on appeal (1982) 66 F.L.R. 169; 43 A.L.R. 283.
3. (1981) 38 A.L.R. 363; on appeal (1982) 42 A.L.R. 676.
4. (1983) 66 F.L.R. 196; 45 A.L.R. 449.
In the Parliament, when introducing the amendments to s. 40AA of the Act which became part of amending Act No. 35 of 1983, the Minister, after referring to two Federal Court judgments, said (House of Representatives, Parliamentary Debates, vol. 131, 11 May 1983, p. 403, at pp. 404-405):
The practical effect of the judgments is that the continued application of the policies and practices currently used in the determination of fees for nursing homes would result in many determinations being set aside, if challenged, as being made contrary to law. Costs which previously were not allowed for the purpose of setting fees now have to be given consideration possibly resulting in significant fee increases contrary to Government policy. This would lead to higher benefits and therefore increased Government expenditure.
Within the protected environment of the nursing home industry, there is very little incentive to constrain costs given the cost-based nature of fees determination and the high occupancy rates resulting from Government controls on new beds .
There are indications that the effect of the Federal Court judgments could be an eventual increase in government expenditure on benefits of the possible order of $50m per annum. In a program which is expected to cost more than $600m for benefits alone in 1983-84, it is imperative that consistent and effective controls be exercised on costs which may have an inflationary effect on approved fees.
The amending Act omitted the provision which had required the Permanent Head when determining a scale of fees to have regard to costs necessarily incurred in providing nursing home care in the home (s. 40AA(7)) and substituted a provision empowering the Minister to formulate principles in accordance with which scales of fees were to be determined. It was expressly provided that the principles might specify matters of a kind that were to be taken into account and matters of a kind that were to be disregarded in determining a scale of fees. The principles might also specify criteria for assessing, in relation to matters of a kind that might be taken into account, the amounts that were to be so taken. It was also provided that, in formulating any principles under the section, the Minister shall have regard to:
(a) the need to ensure that nursing homes are efficiently and economically operated;
(b) the need to ensure that the cost to nursing home patients of nursing home care is not excessive or unreasonable; and
(c) any other matters the Minister considers to be relevant: s. 40AA(7B).
Any principles that were formulated in accordance with these provisions were to be tabled in the Parliament and be subject to disallowance in all respects as if they were regulations.
Later in 1983 further amendments were effected to the general scheme. By amending Act No. 139 of 1983 a new section — s. 39A — was enacted, prescribing a detailed procedure whereby a person could obtain approval in principle for a nursing home. Provision was made for the grant of a certificate of approval setting out any specifications with which the premises must comply and indicating the minimum number of beds that would be approved for the home. Section 39A(6) authorized the Minister to formulate principles to be complied with by him with respect to the exercise of any of his powers under the section. In formulating those principles the Minister must have regard to, inter alia, the suitability of an applicant, the need to control unnecessary growth in the number of approved nursing homes and the availability of forms of care other than nursing home care. The same amending Act inserted in s. 40AA similar provisions with respect to the formulation of principles and the criteria to be observed in the process relating to his powers under s. 40AA(3A) to refuse an application for approval of premises as an approved nursing home.
A number of other provisions go to complete the scheme. They include provisions that permit reviews by the Minister of decisions made in administering the scheme and the inspection of premises, and require the keeping of records and the submission of audited accounts. It is unnecessary, having regard to the general nature of the challenge made by the plaintiffs, to examine those provisions in detail. However, it may be helpful to allude briefly to the principles. As we have mentioned, the Minister has exercised the power to formulate principles under ss. 39A(6), 40AA(3C) and 40AA(7). Those formulated under the two sub-sections first mentioned each provide guidelines of a similar kind to be observed by the Minister in relation to the provisional approval or approval of a nursing home. The grant of approval is clearly intended to be dependent upon a demonstrated need for the additional services. For example, an application for approval shall be refused if:
(a) the nursing home care that would be provided in the nursing home if the approval were granted is not likely to satisfy the needs of the designated area in which the premises are situated as effectively as the provision of some other form of community care;
(b) there is adequate provision in the designated area in which the premises are situated for the nursing home care that would be provided in the nursing home if the approval were granted; or
(c) any perceived need for nursing home care in the designated area in which the premises are situated can be satisfied through a re-organization of the care or accommodation provided by existing nursing homes in the area: Principles Under Sub-Section 40aa(3c), par. 3, Commonwealth of Australia Gazette , No. S195, 30 May 1984.
Both sets of principles include a paragraph which states that in considering an application for the approval of premises as an approved nursing home, without limiting the generality of the matters that may be considered, the following matters shall be taken into consideration:
(a) the criteria to be applied in relation to the admission of patients to the nursing home;
(b) the proposals contained in the application in respect of—
(i) the provision of appropriate care and accommodation for patients with special needs; and
(ii) the provision of rehabilitation and assessment services for the benefit of patients of the nursing home;
(c) the necessity of encouraging the provision in nursing homes of advanced forms of care relevant to the needs of geriatric patients;
(d) [in the case of an application in relation to the approval of premises as a nursing home (Principles Under Sub-s. 39a(6))] the economic viability of the proposed undertaking: Principles Under Sub-Section 40aa(3c), par. 9 and Principles Under Sub-Section 39a(6), par. 11, Commonwealth of Australia Gazette , No. S195, 30 May 1984.
The principles that have been formulated in accordance with s. 40AA(7) provide a detailed and extensive prescription of the matters that are to guide the Secretary in determining the scales of fees for the purposes of s. 40AA(6)(c)(i) of the Act. It is clearly the purpose of the principles to impose strict limits on the charges made by management in conducting a nursing home, no doubt for the reasons spelt out by the Minister in his speech on the second reading of the Bill. Paragraph 2(4) provides a general guideline in the following terms:
The Secretary shall, in exercising any discretion permitted in these principles in determining a scale of fees, have regard to:
(a) the desirability of ensuring the financial viability of nursing homes generally;
(b) the need to ensure that nursing homes are efficiently and economically operated;
(c) the need to ensure that the cost to nursing home patients of nursing home care is not excessive or unreasonable;
(d) the need to ensure that public moneys are being economically and properly expended; and
(e) the need for consistent and fair administration of Part V of the Act: Nursing Homes Fees Determination Principles 1984, as amended, Commonwealth of Australia Gazette , No. S166, 9 May 1984.
In the event that the application of the principles leads the Secretary to determine a scale of fees for a particular nursing home which threatens the economic viability of the home, the proprietor may resort to his right of appeal to the Minister. In dealing with an appeal, the Minister is not bound by the principles. Furthermore, his decision may be reviewed, albeit not on the merits, on application to the Federal Court in accordance with the provisions of the Administrative Decisions (Judicial Review) Act 1977 Cth, as amended.
The plaintiffs argue that this statutory scheme lies well outside the limits of any law which may properly be characterized as a law with respect to the provision of sickness or hospital benefits. It is said that as a matter of practical reality it confers on the Commonwealth power to assume control of the entire nursing home industry including the number of premises, the number of beds, the selection of patients, the number of nurses and the wages paid to them, the quality and nature of the services provided, the gross fees that may be charged and the book-keeping arrangements.
As a matter of practical reality, it may be true to say that the Commonwealth has this degree of control over the industry because there would be few proprietors who would find it profitable to conduct a nursing home without the benefit of the very substantial government subsidy. But as a matter of law, the point must be made that it is only if and when the proprietor of a nursing home obtains approval of his premises as such that he becomes subject to the provisions of the Act. True it is, his freedom from control must be purchased at the price of the benefit that would otherwise be payable in respect of each patient under his care, for the benefit is payable only in respect of qualified nursing home patients occupying a bed in an approved home. Nevertheless, his participation in the scheme is ultimately a matter of his own choice.
A further point that must be made with respect to the argument for the plaintiffs is that a conclusion that the law is properly characterized as a law with respect to nursing homes, a subject-matter upon which the Parliament is not empowered to legislate, does not necessarily determine the matter in their favour. A single law can possess more than one character and it suffices for constitutional validity if any one or more of those characters fairly falls within a head of Commonwealth legislative power: see generally, Murphyores Incorporated Pty. Ltd. v. The Commonwealth [5] ; Actors and Announcers Equity Association of Australia v. Fontana Films Pty. Ltd. [6] ; The Commonwealth v. Tasmania ("the Tasmanian Dam Case ") [7] . The fact that an obvious or even primary characterization of the provisions under challenge is that of a law or laws with respect to approved nursing homes is a factor to be taken into consideration in determining whether all or some of those provisions are within Commonwealth legislative power in that they can also properly be characterized as a law or laws with respect to the provision of hospital or sickness benefits. The former characterization, however, does not preclude the latter.
1. (1976) 136 C.L.R. 1, at p. 22.
2. (1982) 150 C.L.R. 169, at pp. 184, 193-194.
3. (1983) 158 C.L.R. 1, at pp. 151, 270.
A number of matters touching the meaning to be given to the words "the provision of sickness and hospital benefits" in their context in s. 51(xxiiiA) of the Constitution may be taken as settled. First, the reference to "the provision" of the relevant benefits is to be confined to the provision of benefits by the Commonwealth: British Medical Association v. The Commonwealth ("the B.M.A. Case ") [8] . Secondly, the prohibition contained in the words "but not so as to authorize any form of civil conscription" in s. 51(xxiiiA) applies only to the reference in the paragraph to the provision of "medical and dental services". The words of that prohibition, however, are not irrelevant to the scope of the other matters described in the paragraph at least to the extent that whenever medical or dental services are provided pursuant to a law with respect to the provision of some other benefit, e.g., sickness or hospital benefits, "the law must not authorize any form of civil conscription of such services": the B.M.A. Case [9] , per Williams J.; see also, General Practitioners Society v. The Commonwealth [10] , per Gibbs J. Thirdly, the concept intended by the use in the paragraph of the word "benefits" is not confined to a grant of money or some other commodity. It may encompass the provision of a service or services. There is a passage in the judgment of Dixon J. in the B.M.A. Case [11] which can be read as indicating that his Honour thought that the legislative power with respect to the provision of hospital and sickness benefits would not extend to the actual provision of services such as nursing services: but cf. the same judgment at p. 260. It may be that his Honour was influenced in his choice of language by the argument of counsel for the plaintiffs in the case [12] that, in its context in par. (xxiiia), the word "benefit" contemplated some special kind of grant, "either in money or in goods, i.e., a grant of some commodity". However, if that was the view of Dixon J., it was a view that was not shared by any other member of the Court. The meaning of the word "benefit" accepted by the majority of the Court was that expressed by McTiernan [13] :
The material aid given pursuant to a scheme to provide for human wants is commonly described by the word "benefit". When this word is applied to that subject matter it signifies a pecuniary aid, service, attendance or commodity made available for human beings under legislation designed to promote social welfare or security: the word is also applied to such aids made available through a benefit society to members or their dependants. The word "benefits" in par. (xxiiia.) has a corresponding or similar meaning.
See per Latham C.J. [14] ; per Williams J. [15] ; and per Webb J. [16] .
1. (1949) 79 C.L.R. 201.
2. (1949) 79 C.L.R., at pp. 286-287.
3. (1980) 145 C.L.R. 532, at p. 549.
4. (1949) 79 C.L.R., at p. 261.
5. (1949) 79 C.L.R., at p. 207.
6. (1949) 79 C.L.R., at p. 279.
7. (1949) 79 C.L.R., at p. 246.
8. (1949) 79 C.L.R., at pp. 286-287.
9. (1949) 79 C.L.R., at p. 292.
This last-mentioned consideration is relevant to the present case, for it may well be asked, what is the "benefit" in this case? Section 47(1) of the Act provides that there is payable a Commonwealth benefit of a designated amount:
to the proprietor of an approved nursing home, in respect of each qualified nursing home patient, for each day on which the patient receives nursing home care in that nursing home .
Under some circumstances (e.g. s. 48(1)), the benefit can be paid directly to the patient. In any case it is apparent that the intended ultimate beneficiary of any benefit paid is the patient in the nursing home to the proprietor of which the payment will ordinarily be made. While it is plain enough that the provisions of s. 47 providing for the payment of the designated amount are a law with respect to the provision of sickness and hospital benefits, there is room for difference of opinion about the precise identification of the "benefit" provided. On one approach, the benefit can be identified as the money paid to the proprietor of the nursing home. On another approach, the benefit can be identified as the accommodation, sustenance and care to the extent that it is provided by the proprietor to the patient as the quid pro quo for the money payment made by the Commonwealth. Ultimately, it matters not which of these alternative identifications of the "benefit" is preferred because no distinction relevant to the characterization of the overall legislative scheme can be drawn between them. If the scheme is capable of being supported as a law with respect to the provision of a money payment by the Commonwealth to the proprietor of a nursing home in consideration of nursing care provided to a patient it likewise will be capable of being supported as a law with respect to the provision of nursing care for that patient. In the former case, it will be seen as the means chosen by the Parliament of controlling the application and ensuring the effectiveness of the benefits paid; in the latter case, the scheme will be seen as the means adopted to provide those benefits.
We come now to the substantial question in the case. Is the legislative scheme incidental to the provision of sickness and hospital benefits? It is unnecessary and indeed inappropriate to consider the application of s. 51(xxxix): unnecessary because the power conferred by par. (xxiiia) includes within it everything which is incidental to the subject-matter; inappropriate because we are not here concerned "with some matter which arises in or attends the execution of the power of legislation over the subject-matter and so would itself be a subject of legislative power under s. 51(xxxix)": per Dixon J., in the B.M.A. Case [17] . In considering what is incidental to the subject-matter of a legislative power one is not confined to what is necessary to its effective exercise. To cite Dixon J. again, from the B.M.A. Case [17] :
It goes further than "necessary"; "things which are incidental to it, and which may reasonably and properly be done and against which no express prohibition is found, may and ought, prima facie, to follow from the authority for effectuating the main purpose by proper and general means" — per Lord Selborne: Small v. Smith [18] .
1. (1949) 79 C.L.R., at p. 274.
2. (1949) 79 C.L.R., at p. 274.
3. (1884) 10 App. Cas. 119, at p. 129.
The "principal vice" of the legislation, according to counsel for the plaintiffs, is that instead of making a payment to the person in need and then regulating the use that is made of it, it makes a payment to the person by whom nursing home care is provided to the person in need and attaches such far-reaching conditions to that payment as to create a nursing home industry which fits a mould prescribed by the Commonwealth. That has been achieved, so it is said, not by the Commonwealth itself entering into the business of operating nursing homes but by so regulating the management of private nursing homes as to secure to itself total control over their existence, their size, the selection of their patients and their gross income. Such a law moves far beyond the kind of law that could properly be characterized as a law with respect to the provision of the benefit.
We do not think that the argument advanced for the plaintiffs can be accepted. The Parliament having resolved to legislate with respect to the provision of sickness and hospital benefits to patients in nursing homes, some kind of scheme was essential to ensure both that the provision would be effective in meeting the needs of such patients and capable of being held within reasonable budgetary limits. If it be accepted, as the plaintiffs accept, that the Parliament could legislate for the establishment of Commonwealth hospitals to provide nursing home care directly to patients in need of such care, there can be no objection to it adopting what Smithers J. described as "a private enterprise approach to the problem" (Howells v. Nagrad Nominees Pty. Ltd. [19] ) by inviting proprietors of private nursing homes voluntarily to undertake to provide the necessary services in return for a government subsidy. In that approach to the problem it is to be expected that the Parliament should be concerned to see that the intended real beneficiary, the patient, receives care of a quality appropriate to the cost of the programme. A system of controlling the number and location of approved nursing homes and of the number of beds in each approved home is substantially connected with the power. So is an arrangement for selecting patients because it ensures that those who are to be the beneficiaries of the legislative provision are in need of the care to be provided in the nursing home. Again, if the fees charged to the patients were not subject to control some of the more needy might not be able to gain admission to the home and thereby take advantage of the benefit. Furthermore, as was evidenced in the second-reading speech of the Minister in 1983, the scheme had hitherto resulted in a highly protected industry in which it was essential to secure some form of cost control in order to preserve the effectiveness of the benefit. There is an obvious relation between the fees charged and the amount of the subsidy that is required. It may be that the degree and nature of the controls imposed on proprietors seriously affect their freedom to run their business as they wish. It might be argued that those controls are more stringent than are strictly necessary to achieve the objectives of the legislation and in some instances, even the economic viability of a home may be threatened. But it is not for the Court to determine that argument or to pass upon the wisdom or the suitability of the particular scheme that the legislature has chosen to institute, so long as the Court is unable to say that it lacks a sufficient connexion to the head of power.
1. (1982) 66 F.L.R. 169, at p. 177; 43 A.L.R. 283, at p. 291.
Some of the problems associated with the control of fees were alluded to by Smithers J. in the Federal Court in Schroeder Holdings Pty. Ltd. v. Grimes [20] . His Honour said:
It is consistent with the purposes to be discerned in the Act as amended in 1983 that there be a level of fees so determined as to tend to control the level of expenditure undertaken by proprietors, particularly expenditure which encourages the assessment of the value of goodwill at high levels. It has been a feature of the industry that the level of fees fixed in accordance with the requirements of sub-s. 40AA(7) of the Act as in force prior to Act No. 35 of 1983 created a situation in which commercially accepted levels of goodwill were higher and accelerated upwards more swiftly than was regarded as appropriate for a protected industry supported by government subsidy. Those levels of goodwill translated into capital costs when nursing homes changed hands provided a basis for claims for high levels of permitted fees. This situation was regarded as contrary to the public interest. Rental expenditure at levels arrived at by agreement between parties was also a significant factor .
It is certainly compatible with the purposes of the Act that appropriate action be taken to protect the revenue against inflation of the level of fees by expenditure in the conduct of a home that is incurred at a level higher than that which would obtain if strict scrutiny were applied to the relevant transactions on behalf of the taxpayer and patients. It is clear for instance that over award payments to staff are not compatible with a level of expenditure strictly scrutinized . But if principles which the Secretary must apply in assessing the level of fees under the Act are known, and they have restrictive provisions in them, the probability that appropriate voluntary discipline will operate is high.
It seems to us to be impossible to say that the control of fees charged to qualified nursing home patients in an approved nursing home is not a reasonable and perhaps a necessary ingredient of a scheme designed to render effective the provision of sickness and hospital benefits to nursing home patients. Similarly, the conditions touching the keeping and auditing of accounts and reasonable inspection of the home demonstrate a clear connexion to the power.
1. Unreported; 18 February 1986.
One may draw an analogy with respect to the provision of pharmaceutical benefits. The B.M.A. Case provides an illustration of the way in which a legislative power to provide for a pharmaceutical benefit will authorize the imposition of controls on both doctors and pharmacists in order that a scheme for the provision of such a benefit may be effectively administered with due regard to the interests both of the intended recipient and the revenue.
Three matters of lesser importance remain to be mentioned. First, the question of civil conscription, while pleaded in the statement of claim, was not pursued by counsel and does not call for consideration. Secondly, it was suggested by counsel for the plaintiffs that s. 51(xxxi) of the Constitution which prohibits the acquisition by the Commonwealth of property otherwise than on just terms, provided an alternative ground for invalidating the law. But clearly there is no acquisition of property from the plaintiffs by the Commonwealth and it is unnecessary to discuss the matter. Finally, it was argued that even if the main attack on the legislation failed the principles ought to be struck down as ultra vires the statute. But enough has been said in the description of the scheme to show that the amending Act No. 35 of 1983 provided ample warrant for the principles that were subsequently made. We note that Smithers J. dismissed a similar argument in Schroeder .
In the result the plaintiffs fail on all issues. Both the Act and the principles, in their general conception and in their essential provisions, are within power and valid. The demurrer should be upheld. |
high_court_of_australia:/showbyHandle/1/9312 | decision | commonwealth | high_court_of_australia | text/html | null | Hooper v Hooper [1955] HCA 15 | https://eresources.hcourt.gov.au/showbyHandle/1/9312 | 2024-09-13T22:54:26.431246+10:00 | High Court of Australia
Dixon C.J. McTiernan, Williams, Webb, Fullagar, Kitto and Taylor JJ.
Hooper v Hooper
[1955] HCA 15
ORDER
The petition of the above-named Lilian Mavis Hooper dated 11th February 1954 having been filed in the Supreme Court of New South Wales in pursuance of the Matrimonial Causes Act 1945 of the Commonwealth claiming relief by way of dissolution of marriage under s. 9 (1) (i) of the Matrimonial Causes Act 1860, as amended, of Tasmania and such petition having come on to be heard on 18th November 1954 before the Supreme Court of New South Wales and a question having thereupon arisen as to the validity of provisions of the said Matrimonial Causes Act 1945 of the Commonwealth amounting to a question as to the limits inter se of the constitutional powers of the Commonwealth and of a State and the cause standing removed accordingly into this Court pursuant to s. 40A of the Judiciary Act 1903-1950 and such cause coming on to be heard before Fullagar J. on 10th December 1954 and the order of that date having then been made by his Honour containing the findings therein set out and directing that pursuant to s. 18 of the Judiciary Act 1903-1950 the case be argued before the Full Court, now order that the marriage celebrated on 25th August 1947 between the petitioner and the respondent be dissolved by reason that the respondent has without just cause or excuse deserted the petitioner and has without any such cause or excuse left her continuously so deserted during two years and upwards unless sufficient cause to the contrary be shown in the Supreme Court of New South Wales within six months from the service of this order on the Crown Solicitor for the said State and order that the costs of the petitioner including the costs of the proceedings in this Court be taxed by the proper officer of the Supreme Court of New South Wales and that the respondent pay into the Supreme Court of New South Wales within fourteen days after service on him of a copy of the certificate of taxation the said costs as so taxed and that such costs unless otherwise ordered by the Supreme Court of New South Wales be paid out to the petitioner or her solicitor after decree absolute and further order that the cause be remitted to the Supreme Court of New South Wales and further order that an office copy of this order and of the order of Fullagar J. be filed in the Supreme Court of New South Wales.
Cur. adv. vult.
The Court delivered the following written judgment:—
March 30
Dixon C.J., McTiernan, Williams, Webb, Fullagar, Kitto and Taylor JJ.
This is a wife's undefended suit for dissolution of marriage on the ground of desertion. It comes before the Full Court in the following circumstances. It was commenced by petition in the Supreme Court of New South Wales. Under the law of New South Wales the jurisdiction of that court to entertain such suits depends, subject to immaterial exceptions, on domicil. The respondent husband—and therefore, of course, the petitioning wife—was domiciled not in New South Wales but in Tasmania. The petitioner, however, having been resident in New South Wales for more than one year, invoked the jurisdiction which an Act of the Parliament of the Commonwealth, the Matrimonial Causes Act 1945, purports to confer upon the Supreme Courts of the States. The learned Judge of the Supreme Court of New South Wales before whom the suit in due course came on for hearing, Nield J., was disposed to think that the Commonwealth Act was unconstitutional, and that the Supreme Court, therefore, had no jurisdiction to entertain the suit. The question of the validity of the Commonwealth Act is a question as to the limits inter se of the constitutional powers of the Commonwealth and those of the States, and his Honour was right, we think, in holding that such a question had "arisen" in the suit within the meaning of s. 40A of the Judiciary Act 1903-1950. It is true that the suit was undefended, and the point was not taken by a party to the "pending cause". But it is clear that his Honour was not prepared to proceed to a consideration of the suit on the merits unless and until the constitutional question were resolved in favour of the petitioner, and in those circumstances that constitutional question must, in our opinion, be held to have "arisen". The consequence of its arising was that it became the duty of the Supreme Court to proceed no further in the suit, which was automatically removed into this Court by virtue of s. 40A. At a later date the suit came on for hearing before Fullagar J. Counsel appeared for the petitioner, but there was no appearance for the respondent. Counsel also appeared for the Commonwealth, seeking leave to intervene in order to support the validity of the Commonwealth Act, and leave was given to the Commonwealth to intervene. Having heard the petitioner's evidence, and being of opinion that the constitutional question was the only substantial question involved, Fullagar J. referred the matter to the Full Court.
The Matrimonial Causes Act 1945, by s. 3, defines the term "matrimonial causes" as including suits for dissolution of marriage, nullity of marriage, restitution of conjugal rights and judicial separation, and a number of matters as incidental to such suits. Part II of the Act deals with the "Institution of matrimonial causes against members of overseas forces and certain other persons not domiciled in Australia". It was a temporary measure occasioned by war-time conditions, and, unless its term is extended, it will cease to be in force on 1st June 1955. The present proceedings were taken under Pt. III, and the validity of Pt. II is not now directly in question. If, however, Pt. III were held to be invalid, it would seem to be impossible to maintain that Pt. II is valid. Conversely, if Pt. III is valid, it would seem that Pt. II is not open to attack.
Part III relates to the "Institution of matrimonial causes by certain persons domiciled in Australia". It consists of ss. 10, 11 and 12. Section 10 is in the following terms:—"(1) Where any person domiciled in a State or Territory is resident in some other State or Territory and has resided there for not less than one year immediately prior to the institution of proceedings under this Part, that person may institute proceedings in any matrimonial cause in the Supreme Court of that other State or Territory notwithstanding that that person is not, or has not been for any period required by the law of that other State or Territory, domiciled in that other State or Territory. (2) The Supreme Court of each State is hereby invested with federal jurisdiction, and jurisdiction is hereby conferred on the Supreme Court of each Territory, to hear and determine matrimonial causes instituted under the last preceding sub-section." Section 11 provides:—"Subject to this Part, the Supreme Court of a State shall exercise any jurisdiction with which it is invested, and the Supreme Court of a Territory shall exercise any jurisdiction which is conferred on it, by the last preceding section in accordance with the law (other than the law relating to practice and procedure) of the State or Territory in which the person instituting the proceedings is domiciled." It is unnecessary to set out s. 12, which contains merely incidental provisions. Section 13, which is contained in Pt. IV, provides that:—"Any judgment, decree, order or sentence of the Supreme Court of a State or Territory given or pronounced in the exercise of any jurisdiction invested or conferred by this Act shall be of the same force and effect as if that judgment, decree, order or sentence had been given or pronounced by a court of the State or Territory in which the parties were domiciled."
The argument for the view that Pt. III of the Commonwealth Act is unconstitutional is set out in substance in the reasons given by Nield J., when he held that a constitutional question arose which he had no jurisdiction to decide. It may be stated quite shortly. It concedes that the law is, on its face, a law with respect to divorce and matrimonial causes, and therefore prima facie authorized by s. 51 (xxii.) of the Constitution. But it is an essential feature of the law that it purports to invest State Courts with federal jurisdiction in matrimonial causes, and the power to invest State courts with federal jurisdiction must be sought not in s. 51 but in s. 77 of the Constitution. Section 77 (so far as material) provides that " with respect to any of the matters mentioned in the last two sections the Parliament may make laws (iii) investing any court of a State with federal jurisdiction". The matters mentioned in ss. 75 and 76 do not include divorce or matrimonial causes, and Pt. III of the Matrimonial Causes Act is therefore not authorized by s. 77. "The Act purports", said his Honour, "to give federal jurisdiction to the Supreme Court of this State to deal with matters which otherwise could only be dealt with in the Supreme Courts of other States. That is not giving a federal jurisdiction at all. That seems to be an attempt to invest with the jurisdiction of another State the Supreme Court of this State". His Honour did not overlook the fact that among the "matters" mentioned in s. 76 are matters "arising under any laws made by the Parliament". But he said:—"Until the Federal Parliament has legislated with regard to divorce and matrimonial causes, as it may under s. 51, there is, it seems to me, no federal jurisdiction at all in matrimonial causes, and consequently there is nothing to invest this court with by way of federal jurisdiction".
We agree with his Honour that s. 51 (xxii.) alone will not support the Matrimonial Causes Act 1945, and that, unless they are authorized by s. 77 (iii.) of the Constitution, the provisions of that Act which purport to invest the Supreme Courts of the States with federal jurisdiction in "matrimonial causes" are invalid. We are of opinion, however, that those provisions are authorized by s. 77 (iii.). They have, in our opinion, the effect of investing State courts with federal jurisdiction in "matters arising under a law made by the Parliament" within the meaning of s. 76 (ii.).
The essence of the argument against validity is that a "matter" cannot "arise" under a law made by the Parliament unless there is a substantive law made by the Parliament conferring rights or imposing duties, and that it is only "with respect to" substantive rights or duties so created by federal law that State courts can be validly invested with federal jurisdiction. This broad major premiss may probably be accepted as substantially correct. But it is necessary to remember that a substantive statutory right may, as a matter of drafting, be created by more than one method. According to accepted canons of drafting, the best method, wherever it is practicable, is to keep substantive and adjective matters distinct—to create the right as such and then to provide the remedy: cf. Ilbert, Mechanics of Law Making, p. 121. But this is not invariably the simplest or easiest course to follow, and it is by no means uncommon for an Act to be drafted in such a way that the two things are done, as has been said, uno ictu, by providing that in certain specified circumstances a person may take proceedings in a particular court to obtain a specified remedy. This is in fact the method followed in ss. 12, 13, 14, 15 and 16 of the Matrimonial Causes Act 1899-1951 NSW and in ss. 75, 76 and 77 of the Marriage Act 1928 Vict.. This method may sometimes give rise to difficulties, and is perhaps specially apt to do so when a jurisdiction is to be conferred on a State court and it is necessary to rely on s. 77 of the Constitution. It does not follow, however, that it will be ineffective, and the effect, when the enactment is analyzed, will generally be seen to be at once to create a right and provide a remedy. In terms this is the method which the draftsman has followed in the Matrimonial Causes Act 1945 Cth, and it is not easy to suggest any better course that could have been followed in the particular case.
In order to appreciate the real effect of Pt. III of the Act, it is necessary to read s. 10 (1) with s. 11, and s. 10 (2) is then seen as investing the Supreme Courts with the jurisdiction necessary to give effect to rights which are really created by s. 10 (1) and s. 11. Section 10 (1) says (to put it shortly) that, where a person is domiciled in one State but has been resident for one year in another State, he or she may institute a "matrimonial cause" in the Supreme Court of that other State. This, in form, merely authorizes certain persons to take proceedings of a character defined in s. 3. As a matter of substance, however, it confers rights, though it does not tell us precisely what those rights are. It is s. 11 that tells us precisely what those rights are. They are the rights which the person mentioned in s. 10 (1) has according to the law of the State in which he or she is domiciled. A substantive "law of the Commonwealth" is thus enacted, and, whenever a "matrimonial cause" is instituted putting any of those rights in suit, there is a "matter" which "arises" under that law of the Commonwealth. And "with respect to" that "matter" State courts may be lawfully invested with federal jurisdiction under s. 77 (iii.) of the Constitution.
It is no answer to the above analysis to say that the right put in suit when a "matrimonial cause" is instituted under the Act is a right created by State law—by the law of the State of the domicil. What the Act does is to give the force of federal law to the State law. The relevant law is administered in a suit instituted under the Act not because it has the authority of a State, but because it has the authority of the Commonwealth. For the purposes of the suit it is part of the law of the Commonwealth. The Act might, in s. 11, have defined the rights to which effect was to be given in "matrimonial causes" by enacting a system of its own. Or it might have defined those rights by reference to the law of England or the law of New Zealand or the law of one particular Australian State. The fact that it chose to adopt the law of the State of the domicil in each particular case cannot affect the substance of the matter.
The view that State laws for the purposes of the Act have the force of laws of the Commonwealth does not involve any startling consequences. The State laws to which that force is given are the State laws as they may exist from time to time (cf. The Commonwealth v District Court of Sydney [1] ) and the legislative powers of the States to prescribe grounds for divorce or other matrimonial remedies are in no way affected by the Commonwealth Act. Nor does that Act take away or diminish the power of the Parliament of New South Wales to entrust jurisdiction in matrimonial causes to any tribunal it pleases. This would have been so even without s. 12 (1). The Parliament of New South Wales cannot take away or abridge the jurisdiction given to the Supreme Court by the Commonwealth Act in the special cases with which that Act deals, but otherwise the power of that Parliament to make laws with respect to matrimonial causes remains uninhibited. The fears expressed in these respects by Nield J. appear to us to be groundless.
1. (1954) 90 C.L.R. 13.
The question which has arisen in this case actually arose in a somewhat more difficult form in the case of R. v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [2] which does not appear to have been brought to the attention of Nield J. The statutory provision attacked in that case was s. 58E of the Commonwealth Conciliation and Arbitration Act 1904-1934 (s. 81 of the Act now in force). That section (so far as material) provided that: "The Court may make an order giving directions for the performance or observance of any of the rules of an organization by any person who is under an obligation to perform or observe those rules." A penalty was provided for disobedience to such an order. It had been held in Jacka v Lewis [3] that the power given by this section was judicial power within the meaning of the Constitution, and it was argued in R. v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [2] that it was not within the power given by s. 77 (i.) of the Constitution because, although it was a measure "defining the jurisdiction of a federal court", it was not "with respect to" any of the matters mentioned in s. 75 or s. 76. The obligation which the court was given jurisdiction to enforce was, it was said, not the creation of Commonwealth law but an obligation arising out of contract. The argument was unanimously rejected by this Court. Latham C.J. said:—"A right is created by the provision that a court may make an order, and such a provision also gives jurisdiction to the court to make the order" [1] . Dixon J. said:—"It appears to me, that, on the footing that s. 58E includes judicial power, it must be taken to perform a double function, namely to deal with substantive liabilities or substantive legal relations and to give jurisdiction with reference to them" [2] . And then, after referring to the two forms which legislation may take, and to which reference has been made above, he said:—"But, under either form of legislation, it is quite clear that a liability is imposed and that the liability accordingly supplies an appropriate subject or "matter" upon which "judicial power" or "jurisdiction" may operate, whether the jurisdiction is given in the same breath or quite independently" [3] . The present case is a clearer case than R. v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [4] .
1. (1945) 70 C.L.R. 141.
2. (1944) 68 C.L.R. 455.
3. (1945) 70 C.L.R. 141.
4. (1945) 70 C.L.R., at p. 155.
5. (1945) 70 C.L.R., at p. 165.
6. (1945) 70 C.L.R., at p. 166.
7. (1945) 70 C.L.R. 141.
There should be a decree nisi on the ground of desertion. With regard to the form of the decree and the time and manner of its being made absolute, we were referred to a number of decisions of State Supreme Courts on the question whether these matters are matters of practice or procedure within the meaning of s. 11 of the Commonwealth Act. These disclose a marked difference of opinion. We think that the correct view was taken by the Full Court of Victoria in White v White [5] in which it was held that these matters are matters of practice and procedure and are therefore to be treated as governed by the lex fori. The decree in the present case will accordingly follow the New South Wales form.
1. (1947) V.L.R. 434. |
high_court_of_australia:/showbyHandle/1/12277 | decision | commonwealth | high_court_of_australia | text/html | null | Barca v The Queen [1975] HCA 42 | https://eresources.hcourt.gov.au/showbyHandle/1/12277 | 2024-09-13T22:54:27.740859+10:00 | High Court of Australia
McTiernan, Gibbs, Stephen, Mason and Murphy JJ.
Barca v The Queen
[1975] HCA 42
ORDER
Grant special leave to appeal. Appeal allowed. Conviction set aside and a new trial ordered.
Cur. adv. vult.
The following written judgments were delivered:—
Oct. 10
McTiernan J.
I am of the opinion that special leave to appeal should not be granted. It would be a departure from the traditional practice of this Court to grant the application.
This is a motion brought by Domenico Barca in purported pursuance to s. 35 (1) (b) of the Judiciary Act 1903-1969 Cth for special leave to appeal from a judgment of the Supreme Court of New South Wales constituted as the Court of Criminal Appeal dismissing an appeal under the Criminal Appeal Act, 1912, as amended, N.S.W. against a conviction on indictment for the crime of the murder — Crimes Act, 1900, as amended, N.S.W., s. 19 — of Raffaele Petula at Llandilo, New South Wales, on or about 27th September 1973.
Section 35 (1) provides, so far as material, that the appellate jurisdiction of the High Court with respect to judgments of the Supreme Court shall extend to any judgment whether final or interlocutory or whether in a civil or criminal matter, "with respect to which the High Court thinks fit to give special leave to appeal".
The deceased, Raffaele Petula, was the husband of Grazzia Petula, a sister of the applicant. The deceased and his wife lived at 171 Great Western Highway in the town of St. Marys, New South Wales, and the applicant lived with his wife at 121 Wrench Street, Cambridge Park, New South Wales. All were born in the Italian province of Calabria. The applicant was nearly thirty-seven years of age at the time of the murder of Raffaele Petula. He emigrated from Italy to Australia about twenty-two years ago and has been a naturalized Australian for approximately fourteen years. On Friday evening, 28th September 1973 the deceased's body was found in a rubbish dump in a lonely area of bush at Llandilo, New South Wales, partially concealed by a mudguard and felt. The deceased had been shot twice in the head with a .22 rifle, his skull was fractured and in the opinion of the doctor who performed the post mortem, this could have been caused by heavy clubbing over and around the head with a blunt object or instrument.
Salvatore Manna, a witness called for the Crown, gave evidence of what he said was a Calabrian custom that if a woman was dishonoured by her husband he was liable to be killed according to the special custom called putting a cross on him. The paths of the two bullets, one fired through the nose, the other through the ear, into the head, intersected within the skull of the deceased in the form of a cross. The deceased had been accused by his wife of actions which might be regarded as dishonouring her. In cross-examination Salvatore Manna said that the first responsibility to vindicate the honour of a woman rests on her father. The deceased's wife's father lived at Llandilo. In cross-examination of the witness it was further said:
Q. Do you know very much about this Calabrian custom that you have mentioned?
A. Only what I have heard and been brought up with, you know.
Q. Is this something you came to know about in the first 12 years of your life in Calabris [sic] or have you heard it among people in Australia?
A. No, well, I have been brought up in the Calabrian custom way and what I have heard amongst Calabrians.
The learned primary judge in summing up told the jury there was no evidence at all that the accused's father was implicated in the murder, and the fact that he was of the class who, according to what is said about the custom, may carry out the murder, did not alter the conclusion.
The accused did not rely solely on this for his defence. He raised a question whether or not the evidence established that the crime was committed at some time other than was said in the Crown case. The Crown called the doctor who performed the post mortem on the victim of the murder. She gave her opinion that death occurred approximately twenty-four to twenty-eight hours before the post mortem took place. This would make the time of death 7.30 p.m. to 11.30 p.m. on Thursday, 27th September 1973. The contents of the deceased's stomach were regarded as important on this matter since on that day the deceased had a meal at 11.30 a.m. consisting of potato chips, olives, cheese, salami and chilli (or capsicum in vinegar), and according to the evidence of the condition of the food found in his stomach the deceased would have eaten the food at the most an hour before his death. Moreover the expert evidence with regard to the stomach contents indicated that the remains of cucumber was present and there was no evidence that cucumber was part of the luncheon food. The Crown's case was that the murder occurred between 1.00 p.m. and 3.00 p.m. on that day and that the doctor was in error in her estimation of the time of death.
But there was evidence that the applicant prepared an alibi consisting of the alteration of invoices for the purchase of roofing nails at a local store. In the record of the interview of 24th November 1973 between the police and the applicant it was said:
Q. You will remember that on 4th October this year, you came to this police station.
A. Yes, I remember.
Q. At that time you produced these two receipts to me. (Shown Gabriels Builders Hardware receipt no. 36 dated 27.9.73, and Homemakers Store receipt no. 42461 dated 26.9.73.) Are those the two receipts you showed me?
A. Yes.
Q. Do you agree that at the time you produced those receipts to me you told me that you were given them at the time you obtained the nails?
A. Yes.
Q. And do you agree that at the time you handed me those receipts they were in a very crumpled condition?
A. Yes.
Q. Do you remember that when you handed me those receipts I asked why they were crumpled?
A. Yes, I told you I had them in my pocket since I got the nail.
Q. Since 4th October, we have made inquiries at Gabriels Hardware Store, St. Marys and have been informed that receipt no. 36 was not issued to you at the time you got the nails at all, but was issued to you on 2nd October, and at your request back dated to 27th September 1973. Have you anything to say about that?
A. I went there on Tuesday and asked them to give me a receipt for the nail and the lady was there. I wanted to see the one that served me, but he wasn't there and I say I bought four pound of nail and they didn't give me the receipt. She say I give you the receipt. I said, "Do you remember the time I left here was about five to one". She say, "I can't remember".
Q. Why did you go back to Gabriels on Tuesday and ask them for a receipt dated 27th September?
A. It was very important to me to have the receipt.
Q. Why was it very important to you?
A. So if anyone ask me I could say that's my receipt where I bought the nail.
Q. Why was it important to show anyone where you bought the nails?
A. If someone ask me it handy to have.
Q. And do you say that is the only reason why you went back to Gabriels and had the receipt back dated.
A. The only reason.
Q. We have also made inquiries at the Homemakers Store at St. Marys and have been informed that on Tuesday 4th October, you also visited that store and asked for this receipt no. 42461 for two pound of nails to be back dated to 26th September 1973. Why did you do that?
A. If anyone ask me for the receipt it handy to have it.
Q. And do you ask for receipts for everything you buy?
A. Yes.
Q. Do you normally get the receipts at the time you buy the articles?
A. It never worry me if I get or not.
Q. If it does not worry you if you get the receipts or not, why did you go back and especially get theses [sic] receipts back dated.
A. When I bee [sic] here first I did not have the receipt with me and then I better go an ask to give me the receipt, to show to you where I been thats [sic] days.
Q. Why didn't you tell Detective Sergeant Sawyer that you did not have a receipt for the nails, but if he went to the store the people would remember you.
A. No one ask me I not worry about it.
Q. But you did worry enough about it to go back to the store and ask them to back date the receipt for you.
A. Yes.
Q. And do you agree that you asked the woman at Gabriels Hardware to write on the docket that you purchased the nails about one o'clock?
A. I ask her to put a time on the receipt and told her I was there about five to one and she told me that they don't put time on the receipt.
Q. When you asked her if she would put a time on the receipt was that to try and show that you were at Gabriels Builders Store purchasing nails about one o'clock on the Thursday, 27th September 1973.
A. Yes.
Q. And do you agree that when the man at the Homemakers Store first wrote this receipt (Shown receipt no. 42461) that he put the date of the docket 2nd September 1973?
A. Yes I agree.
Q. And do you agree that you asked him to alter the date to 26th September.
A. Yes.
Q. And we have been informed that he overwrote the 26th over the date and you then said to him, "That is no good, I don't want it written over. I will have to have another docket".
A. Yes I tell him that.
Q. Would you care to tell me why you didn't want it written over?
A. To make him careful he do it properly next time.
Q. I suggest to you that the reason you did not want the date altered was that you wanted anyone inspecting that docket (Points to 42461) that docket, to believe that it was written out on the 26.9.73.
A. That's it.
Q. Would you say that the only reason you get either of those two dockets was to show the Police that you had purchased the nails on the dates and at the places you had previously told.
A. Yes. Could I have a glass of water.
The applicant's connexion with the killing was proved by the finding of ammunition of the type which was used to kill the deceased, under the applicant's house. Also, the applicant denied having a rifle but on being told during an interview with the police that his house would be searched for the rifle, he returned home and at 2 a.m. emerged carrying a large parcel. He placed it inside the car and drove off towards the Nepean River. He was some distance later intercepted by the police who on searching his car found the rifle under the back seat wrapped in material with a sock over the end of the barrel resembling the sock in which the ammunition was found. The applicant informed the police at a later interview that he had found the rifle buried under his house. The interview continued:
Q. How did you come to find this gun?
A. After I leave you last time I was worried about the bullets that were found under my house, I couldn't go to sleep I got my lead light out and got under the house and found the gun.
Q. I find it difficult to believe that any person would make a search underneath their house at two o'clock in the morning on the off chance that a gun might be hidden there. Further from what you have told us it is apparent that at the time you were spoken to by the Police you were headed away from the Penrith Police Station and in fact was driving towards the river or the gravel pits. Have you anything to say about that?
A. All right I will tell you. When you told me last night that Police would come back in the morning to look again for the gun I knew they would find it, so I dig it up and put it in my car. I never tell my wife. She had a headache so I told her I would go to the chemist to get something for her. I knew I had to get rid of the gun tonight.
Q. Is this the gun that was used to kill Raffaele Petula?
A. Yes.
Further in the record of the interview of 24th November 1973 between the police and the applicant it was said:
Q. We have been informed that during the morning of Thursday 27th September 1973, Raffaele and you sister Grazzia had a very big argument at the house in your presence. What have you to say about that?
A. I can't answer that question.
Q. We have been informed that during the course of this argument your sister Grazzia accused Raffaele of misbehaving towards his daughters. Have you anything to say about that.
A. I can't answer that.
Q. As at the morning of Thursday 27th September 1973, did you know that Raffaele and your sister Grazzia had had many fights about money, land and Raffaele's conduct towards his daughters?
A. That is their business. I won't answer that.
Q. Do you know that Raffaele is well know [sic] in the public bar of the St. Marys Hotel.
A. I wouldn't know this.
Q. We have made inquiries at the St. Marys Hotel, and we have been informed that Raffaele did not go to the public bar of that hotel on the afternoon of Thursday 27th September. We have also made inquiries at the St. Marys railway station and have been informed that Raffaele did not catch the 1.03 p.m. train or the 1.18 p.m. train from that Railway Station on that day. Have you anything to say about that?
A. I dropped him there and he go to work.
Q. We have made inquiries at the shops in Queen Street, and from the taxi drivers operating from the taxi rank at the St. Marys railway station, and not one person saw Raffaele in Queen Street, or near the St. Marys railway station on the afternoon of Thursday 27th September 1973. Although he was seen in the area by a number of people on the preceding Monday, Tuesday and Wednesday. Have you anything to say about that?
A. I still say I left him at the taxi rank at twelve forty five.
Q. We have caused the photograph of Raffaele and his description to be published in the local newspapers, and requested any person who saw him between the time you say you left him at the St. Marys railway station and when he was found in the bush at Llandilo, to contact the police, but not one person has reported seeing Raffaele after you say you left him. Have you anything to say about that?
A. No I have nothing to say about that. I left him at the station, that's it.
Q. If you had left him at the station as you say would you expect some person to have seen him somewhere after you had driven away?
A. Oh yeah.
Q. We have been informed that between 12 noon and 2.30 p.m. on Thursday 27th September 1973, two persons saw Raffaele in the public bar of the Waggon Wheel Hotel, which is situate in the Great Western Highway, St. Marys. Have you anything to say about that?
A. Well look I have nothing to say about that.
Q. We have been informed that Raffaele was served with a schooner of beer and a schooner of lemonade which he carried from the hotel into the street. Do you know anything about that?
A. I know nothing about that.
Q. Do you deny that you were the person to whom Raffaele took the schooner of lemonade on that day?
A. I have nothing to say about that.
Q. Do you agree that when I interviewed you on 4th October 1973, that you told me that you did not like beer very much?
A. Yes I agree with that.
Q. And do you also agree that during the course of the same interview you told me that you often preferred to drink a schooner of lemonade?
A. Sometime.
Q. Have you been to the Waggon Wheel Hotel at St. Marys with Raffaele?
A. Yes on Wednesday night I go there with him from my sister's place. I was to go home and he say to me, "You drop me at the pub". I drop him at the pub, and he say, "You come in". I go in with him and I had a lemonade and he had a beer. Then he said, "You have another one". I say, "No, I go home now". He say, "All right" and I drive him back home to his place, and I reach my place at ten o'clock. That was a late night I had.
Q. On that occasion which bar did you have the drink?
A. We had the drink in the bar on the corner of the street.
Q. Did you drink lemonade in the bar?
A. Yes.
Q. And how many beers did Raffaele have on that occasion?
A. He only had one.
Q. Did you and Raffaele drink your drink whilst you were standing at the bar?
A. Yes.
Q. When you drove Raffaele from his home on Thursday 27th September 1973, did he have his coat with him?
A. I don't remember.
Q. We have been informed that when Raffaele went to the Waggon Wheel Hotel and bought the glass of beer and the glass of lemonade he was wearing his coat, that is on Thursday 27th September 1973. Have you anything to say about that?
A. When I drop him at the station at twelve forty five he no have a coat. He have the shirt with the sleeve rolled up.
Q. Are you absolutely sure of that?
A. Oh yeah sure.
Q. What makes you so sure?
A. I remember it.
Q. What makes you so sure?
A. I remember it.
Q. Do you remember being interviewed by Detective Sergeant Sawyer at the Penrith police station on 30th September, this year.
A. Oh yeah.
Q. Do you remember Sergeant Sawyer saying to you, "Can you tell me what clothing Raffaele was wearing when you last saw him?" Can you remember him asking you that?
A. Yes.
Q. And do you remember telling the sergeant, "I know he was wearing a shirt with squares, I didn't much notice".
A. Yes.
Q. Well do you agree that there is no mention there that Raffaele was not wearing a coat?
A. Well he probably not ask me.
Q. Do you know that Raffaele's caot [sic] was found back at his house after he was found dead?
A. No.
Q. Were you at the Petulla [sic] home all day Friday 28th September 1973?
A. Yes.
Q. And were you there on Saturday 29th September 1973?
A. Yes.
Q. Were you there on Sunday 30th September 1973?
A. Yes.
Q. Were you there on Monday 1st October 1973?
A. Yes.
Q. And do you still say that you have knowledge that Raffaele's coat was found in the kitchen of his home after he was found dead?
A. I don't know.
Q. If Raffaele was wearing that coat when he was served with the lemonade and beer at the Waggon Wheel Hotel on Thursday 27th September, can you tell me any way it could get back into his house if he did not return to the house or leave the coat in your car.
A. I can't answer you that.
Q. When you were last spoken to by the Police you did not say anything about seeing Francesca going to the school at the time you arrived back at your sister's place. Can you tell us why you did not say this before?
A. Probably I forgot.
Q. We interviewed your sister Grazzia here today and for the first time since this inquiry began she informed us that you arrived at her home on Thursday 27th September just when Francesca was stepping into the school yard. Do you think it unusual that both you and your sister thought of this indicent [sic] which set the time of your return to your sister's palce [sic]?
A. No not unusual.
Q. Would you agree that this may suggest that you and your sister Grazzia have talked about this and decided to tell the Police that the time you got back to your sister's place on that day was just when Francesca was walking back into the school?
A. Definately [sic] not.
Q. We have been informed that since the death of Raffaele you had a conversation with Grazzia at her house, and she ask you why you did not return to the house until two o'clock on Thursday 27th September, and you said you were buying the nails and not to mention it to the Police. Did that conversation take place?
A. Definately [sic] not.
Q. We have been informed that between 28th September and 4th October 1973 you were at your sister's Grazzia's home and were overheard to say, "For money or anything else Calabrians will let you go, but for honor they will kill you for sure". Did you say that?
A. Yes I did say that.
Q. And what did you mean by that?
A. What I said.
Q. Were you suggesting that Raffaele was not killed for money or anything else, but for honor and nothing else?
A. Yes.
Q. And did Mrs. Petulla [sic] say, "That's for sure. Whoever kill him kill him for honor and nothing else. They put a cross on him by shooting him one in the nose and one in the ear." Did she say that?
A. I didn't hear her say that.
Q. Did you hear anyone say that they had put a cross on Raffaele?
A. No.
It was further said in the interview:
Q. It is our intention to have that magazine and bullets tested to see if they are the same type as used in the gun to shoot Raffaele.
A. If they are the same they must be the ones that kill Raffaele, anyway he a mongrul [sic] to my sister Grazzia and deserva [sic] what he got.
The interview continued:
Barca said,
Yes I say all that. I was stupid to listen to my sister's talk and I was more stupid not to think about the lemonade.
Sergeant Cartmer said,
Q. Is there something else you feal [sic] that you should tell Sergeant Parrington about this?
A. No first I must think of my own family.
Sergeant Cartmer said,
Q. Are you prepared to sign this record of interview as being true and correct?
A. Yes.
In an interview on 25th November 1973 between the police and the applicant it was said:
Q. I am now going to ask you some questions in relation to the murder of Raffaele Petulla [sic] on Thursday 27th September 1973.
A. You have got the gun and you have got me. What more do you want?
Q. From our inquiries we believe that you did not drive Petulla [sic] to the St. Marys Railway Station as you have previously stated but went with him to the Waggon Wheel Hotel at St. Marys. Is that right?
A. You know where I went I am the only one Raffaele would buy lemonade for.
Q. We believe that within one hour of leaving the Petulla [sic] home you drove him to an area of bushland at Llandilo where after hitting him over the head you killed him by shooting him twice in the head with that gun. (Points to gun on table.)
A. That's the gun all right but I don't want to tell you what happened until after I see my father.
Q. Were any other persons involved in the shooting of Petulla [sic]?
A. I won't answer that.
Q. Would you care to tell us why Raffaele Petulla [sic] was murdered?
A. Because he is a mongrel, that's why.
Q. What time do you say you arrived back at your sister Grazzia's place that afternoon?
A. What did she tell you?
Q. I am not prepared to tell you what your sister told me at this time.
A. After I have seen her I will tell you.
Q. We are satisfied that you were responsible for the death of Raffaele Petulla [sic] and you will be charged with his murder. Is there anything further that you want to tell us or any statement you wish to make before we complete this interview.
A. (Long pause). (Barca starts to cry). I have lost everything, my wife, my beautiful children. It would be better if the mongrel was still alive. I don't want to talk about it any more. I am finished with it. All I want to do is to go home to my family.
The summing-up of the learned trial judge, which occupies thirty-one pages of the appeal book, accurately reviews all the evidence in the case. In concluding his summing-up his Honour said:
You see, this is what you have: you have to evaluate each piece of this circumstantial evidence and analyse how it builds up because, it is the Crown case; and ultimately it builds up to a point where, as reasonable men, you can come to no other conclusion than that he was the man who committed this murder; and it starts with the evidence of him going to build this shed; creating, the Crown says, an opportunity; and it starts with him doing that, and it goes on with him taking the deceased away, ostensibly to go to work — with his coat — and they do not go to work; they go down and they are drinking in the hotel, and from then on the deceased is never seen again alive and the accused does not go back to the house until twenty to three or three o'clock. In that time, the Crown says, by fair inference, and being consistent with no other explanation, this murder was done; and it says that immediately he set out to establish a false alibi for himself, being back at one o'clock, and being in the nail shop at five to one; that was the vital period he knew, so the Crown says, the important time to have his alibi for, and it was between one o'clock and three o'clock the Crown says, when the deed was done and if you take those circumstances, the circumstances of the lies he told the police from the start, the fact that he was seen in this hotel, which he now admits — and if you accept that final interview he was there and the woman is right — and if you accept her evidence, the deceased was wearing his coat — and you might well ask yourselves how it got back into the house — the deceased did not bring it back, and there were only two of them in the car — then you have the manufacture of these receipts, and that goes on to it; and then you have this record of interview in which he admits specifically that he set out to create this false alibi; and then you have the finding, firstly by the police, under his house of the sock and the tin; and then you have him going and digging up his rifle; and by fair inference the Crown would say — from this evidence, on his way to get rid of that forever — and if that had happened of course nobody would have been able to say that that rifle fired that bullet — and you have the evidence of Letherbarrow that that is the rifle that fired that cartridge, and that, as I apprehend it, is not challenged.
It does not only rest on circumstantial evidence, because you have what the accused admitted to in this last record of interview. What that amounts to is your responsibility and for you to say and not for me.
The Crown takes all the separate circumstances, all the separate facts proved, all the surrounding circumstances, and it fits them together; each one on its own perhaps not of great significance, but in their totality, when you look at them all, all the surrounding circumstances proved — or that you find to be proved here — amounts to such a series of undesigned and unexpected coincidental matters that a reasonable man, as you must find in your judgment, would be compelled to the conclusion that the accused did it. How could all these things happen if it were not him? How could you have this coat? How could you have these lies told? How could you have this weapon under his house? All these things; when they are added together are explicable, so the Crown says, only on the basis that the accused is the person who did this murder, and they are reinforced and supported. It is your responsibility, I repeat. To convict the accused you must be satisfied beyond reasonable doubt that he it was who murdered this man, who fired the shots that killed him, and that he intended so to do. If you are so satisfied, it is your bounden duty to say that he is guilty of murder. If you are not so satisfied it is your bounden duty to acquit; would you please retire and consider your verdict.
In my opinion, the submission by counsel for the applicant that the summing-up was unfair and unbalanced, was not maintainable.
His Honour having concluded his survey of the Crown case said:
That is in substance the Crown case, and I have read out to you the statement that he made, and I tell you that you will take this statement he made into consideration as a possible version of the facts and consider it in the light of the sworn evidence. You will remember it is not in itself evidence in the same way as the statement of a witness given on oath and subjected to the test of cross-examination. You will give the accused's statement such weight as you think it is entitled to in comparison with the facts which you find to be clearly established by the evidence. I have read it to you, and there is no point in going over it again. He denies the ultimate fact in this statement, that he is guilty, and he does not deny any of the subsidiary facts upon which the Crown case rests.
and continued:
What is the defence to this case of the Crown? As I understand it, it is an argument advanced by learned counsel that if the death took place at 7.30 or thereabouts, then the Crown case disappears because none of this is relevant; and then it is put to you by way of submission or argument by counsel, that the evidence in this case is just as consistent with his father having done it as the accused having done it.
I repeat to you what I said to you yesterday: there is no evidence before you in this case that his father committed this murder. Still less is there any evidence that he was ever taken to his father's house. It is put to you as an argument by counsel that the real truth of the matter is that his father did it and the accused was minding the weapon for his father, hiding it. He was the one who had custody of the gun, and it is just as consistent.
The learned trial judge further said:
Well, gentlemen, let me make this quite plain to you: you are concerned here with a charge of murder by this man of this deceased and you are not concerned with the guilt or innocence of any other person. It matters not if somebody else planned it. It matters not if he was the executioner of something somebody else wanted done. If he fired the shot that killed this man he is guilty of murder, if that is your finding, and this question of what other people might have decided is no concern of yours. You will remember what I told you yesterday, that there is no evidence before you that this man was ever taken by him on that day to his father's house; still less is there any evidence that his father, or anybody else, fired these shots; and these are arguments that were put by counsel, theories, and if they have no sub-stratum or evidentiary fact, then gentlemen, you pay no attention to them. Nothing that counsel says in a case is evidence. It can never take the place of evidence. Your oath is to "well and truly try and true deliverance make according to the evidence"; and that is all you are concerned with, and it is for you to decide the guilt or innocence of this man on the evidence given in this court and you are not to take into account any theories or arguments of counsel unless they have an evidentiary basis; unless they are based on evidence that you accept, or a reasonable inference from that evidence.
In In re Eather v. The King [1] it was said that special leave "connotes the necessity for making a prima facie case showing special circumstances". A headnote of Craig v. The King reads [2] :
The High Court will not grant special leave to appeal to a prisoner convicted upon indictment unless (per Rich and Dixon JJ.) the case presents some special features, (per Starke J.) it is shown that exceptional and special circumstances exist, and that substantial and grave injustice has been done, (per Evatt and McTiernan JJ.) it presents features of sufficient gravity to warrant a review of the decision of the State Supreme Court.
1. (1915) 20 C.L.R. 147.
2. (1933) 49 C.L.R. 429.
In Packett v. The King [3] the following dicta occur. Per Latham C.J. [4] :
Thus, upon a full consideration of the facts and the relevant law, I reach the conclusion that the only objection to the trial is that the judge told the jury, to put it in the simplest form, that, as far as he was concerned, he thought it was a plain case of murder. But as he warned the jury most emphatically that they were not bound in any way to accept or to follow his opinion, this is not a sufficient objection to the summing up to raise any doubt as to the justice of the conviction. In my opinion special leave to appeal should be refused.
Per Starke J. [5] :
It would be wholly destructive of the administration of criminal justice if it were thought that a judge was bound to direct a jury that it could act without regard to the law and the facts proved before them. Special leave to appeal should be refused.
Per Evatt J. [6] :
But I cannot hold that, in the present case, the trial judge erred in any matter of law.
As to whether the summing up gave a fair presentation of the prisoner's defence, I am not disposed to dissent from Clark J.'s conclusion that it was too one-sided. But ordinarily such matters should be remedied by the Supreme Court sitting as the Criminal Appeal Court. In criminal appeals the responsibilities and duties of the Supreme Court are even greater and more onerous than in the case of ordinary civil matters; and it will be an evil thing if the administration of appellate criminal justice ever comes to be regarded as of relatively minor importance. While this court must reserve to itself an unfettered discretion to intervene in any given case which it regards as "special", on the whole, I think that this is not such a case.
The application for special leave should be dismissed.
Per McTiernan J. [7] :
The general character of the summing up would have amply justified the Supreme Court sitting as a Court of Criminal Appeal in ordering a new trial. But the present application is to the discretion of this court to grant special leave to appeal. Rules cannot be laid down in advance governing the exercise of the discretion in every case. But leave which the court is empowered to grant being "special", it is necessary that a case in which such leave is granted should be characterized by circumstances which are special. While the summing up has the substantial defects which have been mentioned we are called upon to exercise this discretion in a case in which the evidence upon which the applicant was convicted "is what it is". Clark J. used that phrase to state how much he was pressed by the evidence against the accused, notwithstanding the plain defects in the summing up, in arriving at the conclusion that a new trial should be ordered. It is unnecessary to recapitulate the evidence again. But in the present application, which is made to the discretion of the court, we are asked to say that, although the conviction is supported by a preponderating weight of evidence and there is no evidence of any matter amounting in law either to provocation or self-defence, the case is one in which special leave to appeal should be granted because there is evidence which might have influenced the jury in the exercise of their undoubted discretion to return a verdict of manslaughter, or as it would also seem a verdict of acquittal.
I cannot agree that the case is one in which special leave should be granted.
In Basto v. The Queen [8] the Court, consisting of Dixon C.J., Webb, Fullagar, Kitto and Taylor JJ., in a joint judgment said, "The chief attack, however, made upon the course pursued by the judge at the trial was that his Honour had not expressly submitted to the jury the question whether the confessional statement was voluntary or the question whether it was made in such circumstances that the jury ought not to act upon it or to regard it as safe to do so." The Court continued [9] : "In fact an examination of the whole charge given by Maguire J. to the jury leaves the strong impression that it was not only legally correct but factually it was balanced, fair and sufficient". The Court concluded "The case does not disclose any ground upon which this Court should give special leave to appeal".
1. (1937) 58 C.L.R. 190.
2. (1937) 58 C.L.R., at pp. 202-203.
3. (1937) 58 C.L.R., at p. 206.
4. (1937) 58 C.L.R., at p. 220.
5. (1937) 58 C.L.R., at pp. 221-222.
6. (1954) 91 C.L.R. 628, at p. 639
7. (1954) 91 C.L.R., at p. 641.
I do not think that the summing-up of the trial judge contains any erroneous direction on a point of law or even of fact. It does not contain any statement which would cause injustice to the accused having regard to the preponderating weight of the Crown's case and what the accused put forward as his defence. There are no circumstances warranting the exercise of the discretion vested in this Court by s. 35 (1) (b) of the Judiciary Act. [*]
1. The accused was tried again in the Supreme Court of New South Wales; he was convicted of murder and was sentenced to penal servitude for life.
Gibbs, Stephen and Mason JJ.
The applicant, Domenico Barca, who was convicted on a charge that on or about 27th September 1973 at Llandilo in the State of New South Wales he did feloniously and maliciously murder Raffaele Petula, now seeks leave to appeal from the judgment of the Court of Criminal Appeal dismissing his appeal against his conviction.
The deceased man, Petula, was the husband of Grazzia Petula, a sister of the applicant. The body of the deceased was found by one West in the afternoon of Friday, 28th September 1973 in an area of bush at Llandilo, partially concealed under a pile of branches, an old mudguard and a sheet of felt. The deceased had been shot twice in the head at close range with a .22 rifle and the bullet wounds had caused his death. His skull was fractured, possibly by a blow to the head although perhaps by a fall. There were some marks on his arms and thighs which it was submitted in argument could have been caused by two persons pulling or lifting his body. There were, however, indications that he had been shot at or near the place where he was found. The medical witness called on behalf of the Crown said that rigor mortis had set in before she examined the body and that she therefore estimated that death had occurred approximately twenty-four to twenty-eight hours before that time — i.e. that the deceased had died between 7.30 p.m. and 11.30 p.m. on Thursday, 27th September. However, the Crown case was that the murder had occurred between 1 p.m. and 3 p.m. on that day and the jury were directed that if they found that the murder had occurred at 7.30 p.m. they should acquit.
The applicant is a migrant from Calabria. There was evidence - imprecise but uncontradicted — that amongst Calabrians there exists a custom to vindicate the honour of a woman by murdering the man who has dishonoured her and to do so in such a manner as to leave "a sign of honour", a cross, upon the murdered man. The paths of the two bullets fired into the head of the deceased intersected within his skull in the form of a cross. The deceased had been accused by his wife of actions which might be regarded as dishonouring her and it was put by the Crown at the trial that the applicant had killed the deceased to vindicate the honour of the deceased's wife, his sister. The evidence, however, was that under the Calabrian custom the first responsibility to vindicate the honour of a woman rests on her father. Carmello Barca, who is the father of the applicant and of Mrs. Petula, as well as of other children, lived at Llandilo, not far from where the deceased's body was found.
Before us counsel for the applicant did not deny that there was substantial evidence upon which a jury might safely have convicted the applicant. It is accordingly unnecessary either to canvass the evidence in full or to refer specifically to every piece of evidence which the Crown asserted, rightly or wrongly, added to the strength of its case. It is, however, necessary to refer particularly to some of the evidence concerning the movements of the deceased and of the applicant on 27th September and the subsequent conduct and statements of the applicant. On the morning of 27th September the applicant was helping the deceased to build a shed on his land at St. Marys. At some time between 11.30 a.m. and noon the deceased and his family and the applicant ate lunch together. There was evidence as to the food provided for that meal. Expert evidence was given that the stomach of the deceased after his death was found to contain food which, being undigested, would probably not have been eaten more than one hour before death. On behalf of the applicant it was submitted that the evidence showed that the deceased's stomach contained some food that had not been available at the luncheon at his home and that it could therefore be inferred that the death had occurred, not within an hour or so after that luncheon, but after another meal. This, it was said, was inconsistent with the Crown theory that death had occurred between 1 p.m. and 3 p.m. Moreover West, who later found the body, had throughout the morning of 27th September and until about 3 p.m. on that day been in the area within a quarter of a mile from where the body was found; he then left the area, returning again later that afternoon. He at no time heard any shots and this could possibly have been regarded as some evidence that the murder did not take place before 3 p.m.
After they had finished lunch the applicant and the deceased left the deceased's home in the applicant's car. According to statements made by the applicant to the police they drove together to the railway station at St. Marys where the deceased, who was a shift worker, intended to catch a train to his employment. The applicant said that he left the deceased at the railway station at about 12.45 and then, after visiting two different shops for the purpose of buying nails, returned to the deceased's home at about 1 p.m. According to his statements he remained there working on the shed during the afternoon until he returned to his own home at Cambridge Park which he reached at about a quarter to six. There is no doubt that he was back at the shed by 3 p.m. and the account which he gave of his movements after that time was not challenged either by the police in the course of his questioning or at the trial. However, there was evidence on which the jury could have been satisfied that the account given by the applicant of his movements before 3 p.m. was false. At the committal proceedings Mrs. Petula had corroborated the statement of the applicant that he had returned to the deceased's home at about 1 p.m. but at the trial she said that in fact the applicant had not returned until about 3 p.m. She said that she had given false evidence at the committal proceedings because she had been threatened by Carmello Barca that if she did not do so he would stab her. Moreover, it was established that at some time between 12.30 and 1 p.m. that day the deceased entered the bar of the Waggon Wheel Hotel near St. Marys and ordered a schooner of beer and a schooner of lemonade and some of the statements subsequently made by the applicant to the police could have been regarded as amounting to admissions that the lemonade had been for him. There was also evidence that the applicant subsequently obtained receipts for the purchase of nails in circumstances that might perhaps have suggested that he was endeavouring to concoct evidence as to the time at which he made the purchase on the Thursday and thus to fabricate support for his account of his movements at about 1 p.m. on that day.
When the applicant was first questioned by the police, on 30th September 1973, he denied that he owned a rifle. He was questioned again on the afternoon of 24th November 1973 and repeated this denial. On that day the police had found some bullets at his house and told him that they intended to search again on the following day in the hope of finding a rifle. This information was given to the applicant — quite legitimately — in the hope that he would give himself away. The plan worked. In the early hours of the next morning the applicant dug up from underneath his house a .22 rifle that had been buried there — there was evidence that it was the weapon that had been used to commit the murder. The rifle was wrapped in material that had been torn from a piece of bedspread found in the applicant's house. The applicant drove off with the rifle, apparently with the intention of disposing of it, but the police had been keeping him under observation and apprehended him. He was then questioned again, and the following is a record of some of the questions and answers:
I am now going to ask you some questions in relation to the murder of Raffaele Petula on Thursday the 27th September, 1973. — You have got the gun and you have got me. What more do you want.
From our inquiries we believe that you did not drive Petula to the St. Marys Railway Station as you have previously stated but went with him to the Waggon Wheel Hotel at St. Marys. Is that right? — You know where I went. I am the only one Raffaele would buy lemonade for.
We believe that within one hour of leaving the Petula home you drove him to an area of bushland at Llandilo where after hitting him over the head you killed him by shooting him twice in the head with that gun. points to gun on table — That's the gun all right but I don't want to tell you what happened until after I see my father.
Were any other persons involved in the shooting of Petula? - I won't answer that.
Would you care to tell us why Raffaele Petula was murdered? — Because he is a mongrel, that's why.
What time do you say you arrived back at your sister Grazzia's place that afternoon? — What did she tell you?
I am not prepared to tell you what your sister told me at this time. — After I have seen her I will tell you.
We are satisfied that you were responsible for the death of Raffaele Petula and you will be charged with his murder. Is there anything further that you want to tell us or any statement you wish to make before we complete this interview? — (Long pause.) (Barca starts to cry.) I have lost everything, my wife, my beautiful children. It would be better if the mongrel was still alive. I don't want to talk about it any more. I am finished with it. All I want to do is to go home to my family.
At his trial the applicant gave no evidence but made the following short statement from the dock:
There are some things with reference to this case that I do not want to say. What I do want to say is that I did not see Raffaele Petula alive after Thursday. I did not kill him or take any part in his killing.
I personally do not follow this custom, this Calabrian custom, to kill for honour.
I cannot say anything else in reference to this, but please believe me, I am not guilty.
That is all.
His counsel then proceeded to address the jury and to suggest to them that the evidence was consistent with the murder having been committed by Carmello Barca. During the trial evidence had emerged that Carmello Barca had shot and killed one Perri, Mrs. Petula's first husband, and that he had been incensed at the deceased's conduct and had threatened the deceased with dire physical consequences. There was in addition the evidence already mentioned that the first responsibility for vindicating a woman's honour in accordance with the Calabrian custom rests on her father, and that Carmello Barca had threatened Mrs. Petula in an effort to persuade her to give false testimony. It was put that on the evidence generally it was a real possibility that it was the father who had killed the deceased and that while it might be accepted that the applicant had lied about certain of his movements after lunch on the fatal Thursday and had also concealed the murder weapon, all this was consistent with the father's guilt and with his son, the applicant, being no more than an accessory after the fact. It was submitted that after lunch on Thursday the applicant may have taken the deceased to the house of Carmello Barca and left him there and that the deceased was in fact later murdered by Carmello Barca. Further support for these submissions was found in the medical evidence as to the time of death, and the other evidence which it was said suggested that the deceased had not died before 3 p.m.
At the conclusion of the address of counsel for the applicant, and before the Crown prosecutor had commenced his address, the learned trial judge made some remarks to the jury. Amongst other things he said:
There is not any evidence in this case that the accused ever took the deceased to his father's home: no evidence at all. Nor has the accused in his case, in his interviews with the police or at any time or anywhere ever suggested that this is so; so that any argument that has this as a basis must be rejected by you. Do you understand that?
There is not a tittle of evidence in this case that this accused person ever took the deceased to his father's home. There is no evidence in this case, not a tittle of evidence, that the father or any of the brothers were in any way involved in the killing of this man, nor has the accused ever suggested that this is so: so that any invitation extended to you to acquit this man because this murder may have been done by his father is completely without foundation in evidence and would be a completely wrong thing for you to do.
He went on to say that counsel in making his submissions was theorizing, putting "theories that had no foundation in fact", and then said:
And, gentlemen lastly, you are not entitled to read into this statement of the accused — these words — "there are some things with reference to this case that I do not want to say" - what the words mean is for you, but you are not entitled to read into that, this statement by him, that his family has committed this murder and he is trying to protect them.
When the learned trial judge came to sum up, he commenced by giving to the jury a clear and accurate direction as to their duties. He told them, amongst other things, that if there was any reasonable explanation of the circumstances consistent with the innocence of the applicant, then they must adopt that explanation and find the applicant not guilty. Later, after discussing in some detail the evidence led for the Crown, he turned to the defence, and in particular to the submission that the evidence was equally consistent with the conclusion that Carmello Barca had committed the murder. He said:
I repeat to you what I said to you yesterday: there is no evidence before you in this case that his father committed the murder. Still less is there any evidence that he was ever taken to his father's house. It is put to you as an argument by counsel that the real truth of the matter is that his father did it and the accused was minding the weapon for his father, hiding it. He was the one who had custody of the gun, and it is just as consistent.
After saying that it would be immaterial if someone else had planned the crime, he continued:
You will remember what I told you yesterday, that there is no evidence before you that this man was ever taken by him on that day to his father's house; still less is there any evidence that his father, or anybody else, fired these shots; and these are arguments that were put by counsel, theories, and if they have no sub-stratum of evidentiary fact, then, gentlemen, you pay no attention to them. Nothing that counsel says in a case is evidence. It can never take the place of evidence. Your oath is to "well and truly try and true deliverance make according to the evidence"; and that is all you are concerned with, and it is for you to decide the guilt or innocence of this man on the evidence given in this court and you are not to take into account any theories or arguments of counsel unless they have an evidentiary basis; unless they are based on evidence that you accept, or a reasonable inference from that evidence.
He then concluded his summing up by giving a summary of the case for the prosecution, and by reminding the jury that if they were not satisfied beyond reasonable doubt that the applicant had murdered the deceased it was their duty to acquit.
When the case against an accused person rests substantially upon circumstantial evidence the jury cannot return a verdict of guilty unless the circumstances are "such as to be inconsistent with any reasonable hypothesis other than the guilt of the accused": Peacock v. The King [10] . To enable a jury to be satisfied beyond reasonable doubt of the guilt of the accused it is necessary not only that his guilt should be a rational inference but that it should be "the only rational inference that the circumstances would enable them to draw"; Plomp v. The Queen [11] ; see also Thomas v. The Queen [12] . However, "an inference to be reasonable must rest upon something more than mere conjecture. The bare possibility of innocence should not prevent a jury from finding the prisoner guilty, if the inference of guilt is the only inference open to reasonable men upon a consideration of all the facts in evidence." (Peacock v. The King [13] ). These principles are well settled in Australia. It was recently held by the House of Lords in McGreevy v. Director of Public Prosecutions [14] that there is no duty on a trial judge to direct the jury in express terms that before they could find the accused guilty they should be satisfied that the facts proved were inconsistent with any other reasonable conclusion than that the accused had committed the crime. That decision goes only to the form of direction necessary to be given to the jury, and although its effect may be that the practice in this respect is less rigid in England than in Australia, it does not reflect upon the correctness of the principles stated, which are really principles of logic and common sense.
1. (1911) 13 C.L.R. 619, at p. 634.
2. (1963) 110 C.L.R. 234, at p. 252.
3. (1960) 102 C.L.R. 584, at pp. 605-606.
4. (1911) 13 C.L.R., at p. 661.
5. [1973] 1 W.L.R. 276; [1973] 1 All E.R. 503.
The remarks made by the learned trial judge when he intervened at the conclusion of the address by defence counsel could only have been understood as meaning that it would be wrong for the jury to accept that the evidence was consistent with the hypothesis that the murder had been committed by Carmello Barca. In other words, the jury were in effect directed to reject one of the main arguments put forward on behalf of the defence, and to decide one issue of fact in favour of the prosecution. This was a misdirection. It was for the jury to decide for themselves whether they were satisfied that the evidence as a whole was inconsistent with the hypothesis that Carmello Barca and not the applicant had murdered the deceased. Of course it was not proved that Carmello Barca had committed the murder. Moreover, the learned trial judge was perfectly correct in saying that there was no evidence that the applicant took the deceased to Carmello Barca's house or that Carmello Barca fired the shots that killed the deceased. However, although a jury cannot be asked to engage in groundless speculation it is not incumbent on the defence either to establish that some inference other than that of guilt should reasonably be drawn from the evidence or to prove particular facts that would tend to support such an inference. If the jury think that the evidence as a whole is susceptible of a reasonable explanation other than that the accused committed the crime charged the accused is entitled to be acquitted. The learned trial judge told the jury that there was no evidence that Carmello Barca was involved in the killing; this was incorrect, for there was some circumstantial evidence — far too slight, it is true, to support a positive finding of guilt — pointing to his involvement. The evidence showed that Carmello Barca had at least as strong a motive to kill the deceased as that attributed to the applicant, that he had been enraged at the deceased's behaviour and had in consequence threatened him and that he had threatened Mrs. Petula in an endeavour to persuade her to give false testimony as to the time at which the applicant returned to her house after he had driven away with the deceased. In these circumstances it was open to the jury to think that the hypothesis that Carmello Barca had committed the murder could reasonably be based upon the evidence. Moreover, in the very special circumstances of the case, and particularly having regard to the evidence as to the custom amongst Calabrians, the evidence that Carmello Barca had killed Mrs. Petula's first husband might properly have been regarded by the jury as further circumstantial evidence supporting that hypothesis. It should therefore have been left to the jury to consider whether the suggested hypothesis that Carmello Barca had committed the murder was reasonable and consistent with the evidence since unless they rejected that hypothesis they could not have been satisfied of the guilt of the applicant. Further, the learned trial judge directed the jury that they could not understand the statement made by the applicant from the dock — "There are some things with reference to this case that I do not want to say" — as meaning that the applicant's family had committed the murder and that he was trying to protect them. It was not for the judge but for the jury to decide what meaning should be attached to the statement and what inferences should be drawn from it.
The erroneous directions given by the learned trial judge on the occasion of his intervention gained emphasis from the fact that they were given in the course of a forceful direction interposed between the addresses of counsel. In his summing up the learned trial judge did not correct these misdirections. On the contrary, his remarks, which have been quoted above, with reference to the defence case might well have been understood by the jury as reinforcing the earlier direction that they were bound to reject the hypothesis upon which counsel for the applicant had placed so much reliance. Perhaps the directions in the summing up were not quite as adverse to the applicant as those made during counsel's addresses; the learned trial judge said that if the arguments put by counsel had no sub-stratum of evidentiary fact no attention could be paid to them, but since he prefaced these remarks by saying that there was no evidence of certain facts, the jury may well have considered that he was directing them that the hypothesis advanced by the applicant had no basis in the evidence. At any rate, whatever might have been said if this direction had stood alone, there can be no doubt that it was insufficient to correct the misdirection that had been given to the jury when the learned trial judge intervened during the course of addresses.
For these reasons there was a fundamental misdirection which removed from the consideration of the jury an important question which it lay within their province to decide. In these circumstances special leave to appeal must be granted and the conviction must be set aside. However, since there was ample evidence on which a jury, properly directed, could have convicted, a new trial should be ordered.
Since the applicant must again stand his trial, it seems right to deal with a further submission made on his behalf, namely that the learned trial judge failed to direct the jury that the evidence as to certain statements made by the police in the course of questioning the applicant had no evidential value because the applicant had not by words or conduct admitted the truth of the statements. The record of one of the interviews shows that the applicant was asked: "We have interviewed your sister, Grazzia Petula, and she informs us that some fifteen years ago she gave you a rifle. Is that true?" To that question he replied: "That's not true." Later, he was asked the following questions and made the following replies:
We have made inquiries at the St. Marys Hotel, and we have been informed that Raffaele did not go to the Public Bar of that hotel on the afternoon of Thursday the 27th September. We have also made inquiries at the St. Marys Railway Station and have been informed that Raffaele did not catch the 1.03 p.m. train or the 1.18 p.m. train from that railway station on that day. Have you anything to say about that? — I dropped him there and he go to work.
We have made inquiries at the shops in Queen Street, and from the taxi drivers operating from the taxi rank at the St. Marys Railway Station, and not one person saw Raffaele in Queen Street, or near the St. Marys Railway Station on the afternoon of Thursday the 27th September, 1973. Although he was seen in that area by a number of people on the preceding Monday, Tuesday and Wednesday. Have you anything to say about that? — I still say I left him at the taxi rank at twelve forty five.
We have caused the photograph of Raffaele and his description to be published in the local newspapers, and requested any person who saw him between the time you say you left him at the St. Marys Railway Station and when he was found in the bush at Llandilo, to contact the Police, but not one person has reported seeing Raffaele after you say you left him. Have you anything to say about that? — No I have nothing to say about that. I left him in the station, that's it.
It is trite law that a statement made in the presence of a party is only evidence against him of the truth of the matter asserted if he has in some way admitted its truth. If an accused person denies the truth of a statement when it is made and there is nothing in his conduct and demeanour from which the jury, notwithstanding his denial, could infer that he acknowledged its truth in whole or in part, it would accord with accepted practice to exclude the statement altogether: R. v. Christie [15] . In any case, where evidence is admitted of statements made in the presence of an accused it is in general desirable that the judge should explain to the jury that they can only use the statements as evidence of the truth of what was stated if they are satisfied that the accused has by his speech, silence or conduct admitted their truth. The applicant clearly denied the statement that his sister had given him a rifle and there was no evidence that by his demeanour or conduct he accepted its truth. That statement had no evidential value and would have been better excluded. The answers given by the applicant in response to the statements made by the police concerning their enquiries as to the movements of the deceased on the early afternoon of Thursday 27th September, although in themselves admissible, did not amount to admissions of the truth of those statements, which were no evidence of the fact that the enquiries were made or of the result of the enquiries. The learned trial judge did not regard it as necessary to give the directions that were sought as to the effect of this evidence but it needs to be remembered that principles of law that seem elementary to an experienced judge may be quite novel to a jury and also that particular care may be called for in the case of written records of interview. When tendered in evidence these exhibits may be present before the jury throughout their deliberations and may, to an inadequately instructed jury, provide a ready source from which to cull prejudicial material which they may put to impermissible use. However, in the present case it is not necessary to consider the effect of the failure to give a direction as to the effect of the evidence as to the statements made in the presence of the applicant, because for the reasons already given the conviction cannot stand.
1. [1914] A.C. 545, at p. 565.
Special leave to appeal should be granted, the conviction should be set aside, and a new trial should be ordered.
Murphy J.
This is an application by a prisoner, Domenico Barca, for special leave to appeal from the judgment of the Court of Criminal Appeal of the Supreme Court of New South Wales. That Court (McClemens, Isaacs and Lee JJ.) had dismissed his appeal against his conviction of murder at a trial by jury.
Evidence presented at the trial was enough to justify the applicant's conviction, as his counsel conceded. This evidence (set out in greater detail in other judgments of this Court) consisted of statements by the applicant which could be construed as admissions of guilt and of circumstances pointing to his guilt. He was the last person known to have been with the deceased; he tried to construct a false alibi for the time at which it was contended the murder had occurred; the murder weapon was concealed at his home, and he tried to dispose of it two months after the murder, when he was told that the police intended to search his home.
The case was said to be one of circumstantial evidence, but it is only circumstantial in the sense that there was no direct evidence of how the murder occurred. The evidentiary material included lengthy police interviews with the applicant and his statement from the dock in which he denied any part in the killing of the deceased. The statement from the dock is evidentiary (see Peacock v. The King [16] ).
1. (1911) 13 C.L.R. 619.
Two main grounds were argued in support of the application to this Court.
The first ground was that the trial judge had misdirected the jury by failing "to put the defence fully, fairly or at all to the jury and [failing] to allow the jury to consider fairly, properly or at all submissions properly made on behalf of the applicant, in particular with regard to an hypothesis which was open upon the evidence, which the jury might properly have considered reasonable and which was consistent with the innocence of the applicant".
The second and subsidiary ground was that the trial judge should not have intervened after the address by counsel for the defence to direct the jury to disregard arguments relating to the hypothesis advanced for the defence.
The reference to the hypothesis was an invocation by the applicant of the approach referred to in Peacock v. The King and Plomp v. The Queen [17] that, to convict, the jury must be satisfied that the facts were inconsistent with any rational conclusion other than that the prisoner was guilty. To express this in another way, the circumstances must be "inconsistent with any reasonable hypothesis other than the guilt of the accused" (see Peacock v. The King [18] ).
1. (1963) 110 C.L.R. 234.
2. (1911) 13 C.L.R., at p. 634.
The hypothesis was that the applicant's father, and not the applicant, had committed the murder.
It was clear that someone had murdered the deceased. The presumption of innocence and the applicant's statement from the dock entitled him to advance himself or through his counsel the hypothesis that someone else (unspecified) had committed the murder.
The applicant was then entitled, because the Crown had adduced evidence which tended to show that the murder was committed by a member of his family, to narrow the hypothesis to a member of his family, submitting that as he did not commit the murder and, if it were done by a member of his family as evidence for the Crown suggested, it must have been done by one of the other members of his family.
If the applicant was prevented from advancing this hypothesis, he was unable to argue effectively the logical consequences of the presumption of innocence, his statement from the dock and that part of the Crown case which pointed to the murderer as being one of his family.
There was other evidence from which it might be inferred that the applicant was not guilty and therefore that someone else had committed the murder. This was that the death occurred during a period of time some hours later than that specified by the Crown as the time the applicant killed the deceased. It was conceded by the Crown that if there was any reasonable doubt that the death occurred at the time stipulated by the Crown, the applicant should be acquitted.
The applicant was entitled to rely on all those parts of the evidence, taken separately or in any combination, which might justify advancing the hypothesis.
The statement from the dock and the evidence of the time of death provided evidentiary bases for arguing that someone else had committed the murder, while material relating to the family, particularly to the father, allowed the hypothesis to be narrowed to the father.
The material relating directly or inferentially to the family follows. The method of killing was that of a ritual murder of vengeance for dishonour under Calabrian custom. The deceased had dishonoured the applicant's family in a way which warranted his execution under this custom. The obligation to carry out the murder was primarily on the applicant's father who had made threats which could be taken as threats to murder the deceased.
Further evidence, while not tending to implicate the father directly, could be taken as giving support to the other material. The father had threatened to stab his daughter, the widow of the deceased, to induce her to give false evidence at the committal proceedings of the applicant, and he had shot and killed his daughter's previous husband in circumstances which were not disclosed at the trial.
A jury could have taken the view from this material that the father was one of a small group of people (the applicant's family) with a strong motive to murder the deceased, that his motivation was stronger than the others' (including the applicant's), and that he was a person capable of committing murder.
The judge gave firm and clear directions to the jury to acquit if they were not satisfied beyond reasonable doubt that the death occurred at the time stipulated by the Crown, or if they were otherwise not satisfied beyond reasonable doubt that the applicant had committed the murder. He did this, however, in the context of excluding from their consideration the hypothesis that one or more members of the family, in particular the father, had committed the murder.
The judge directed the jury that there was "no evidence in this case, not a tittle of evidence, that the father or any of the brothers were in any way involved in the killing of this man", and said further:
You will remember what I told you yesterday, that there is no evidence before you that this man was ever taken by him on that day to his father's house; still less is there any evidence that his father, or anybody else, fired these shots; and these are arguments that were put by counsel, theories, and if they have no sub-stratum or evidentiary fact, then, gentlemen, you pay no attention to them. Nothing that counsel says in a case is evidence. It can never take the place of evidence. Your oath is to "well and truly try and true deliverance make according to the evidence"; and that is all you are concerned with, and it is for you to decide the guilt or innocence of this man on the evidence given in this court and you are not to take into account any theories or arguments of counsel unless they have an evidentiary basis; unless they are based on evidence that you accept, or a reasonable inference from that evidence. (my emphasis)
It is true that there was no proof in any sense that the father killed the deceased or even had the opportunity to do so, and the judge rightly reminded the jury that various suggestions by counsel for the applicant had no basis in the evidence. Yet there was, as I have already indicated, an evidentiary basis to justify advancing the hypothesis regarding the father. There was also the evidentiary basis for suggesting that someone else had fired the shots.
An hypothesis that the father was guilty, even if accepted, did not necessarily exculpate the applicant. As the judge correctly emphasized elsewhere, the issue was the guilt of the applicant, regardless of whether someone else was also guilty. The applicant was entitled to advance the hypothesis, however, and to have it left to the jury for their consideration.
It is not the evidence presented but what is accepted of it by the jury which is to be considered in relation to any hypothesis, whether of guilt or innocence. To justify conviction, the jury must be satisfied beyond reasonable doubt that the evidence accepted by them is inconsistent with the hypothesis of innocence.
This case illustrates the difficulty in the ordinary criminal trial of a simple application of the process of reasoning referred to in Peacock's Case [19] . Once the facts are established, it is generally not difficult to apply that approach, but in almost every criminal case, there is conflicting evidence.
1. (1911) 13 C.L.R. 619.
The application of this approach depends upon the resolution of the conflicts in the evidence. For example, the jury might refuse to accept the evidentiary bases for the hypothesis of innocence advanced, or might reject the hypothesis because it accepted the admissions to the police as accurate and truthful confessions of guilt.
In truth, the method of approach in Peacock's Case assists (when the facts or circumstances are determined) in deciding whether the case against the accused has been established to such a high degree of probability that it amounts to proof beyond reasonable doubt.
A further ground in support of the application was that the jury should have been directed not to treat statements which were made to the applicant during police interviews, but not accepted by him, as evidence of the truth of the statements.
One of these statements was, "We have interviewed your sister Grazzia Petula and she informs us that some fifteen years ago she gave you a rifle. Is that true?" The applicant replied, "That's not true". That statement was not admissible to prove the truth of what was contained in it (see R. v. Christie [20] and R. v. Grills [21] ).
1. [1914] A.C. 545.
2. (1910) 11 C.L.R. 400.
The jury should have been told that it was not evidence that the sister made such a statement to the police and that it was not evidence that she did give a rifle to the applicant. A warning should have been given to the jury indicating the precise reasons for which the statement was admitted (see Adams v. The King [22] ).
1. (1923) 17 Cr. App. R. 77.
The difficulty in this case emphasizes one of the problems of the adversary system compared to the inquisitorial system. The accused may, and in fairness should be allowed to, suggest that he is not guilty because someone else committed the crime. However, if someone is named, that person has no standing to defend his reputation. The trial is almost always conducted on a basis which does not allow the suggestion to be properly investigated. Innocent persons may have their reputations damaged or destroyed without any opportunity to be heard in the proceedings and without redress.
The applicant complained of general unfairness in the summing-up. I do not accept that complaint. The case against the applicant was very heavy. Some of the directions by the trial judge were distinctly favourable to the applicant. The question of the hypothesis was difficult, and made more difficult for the trial judge by the way it emerged at the trial. Because of the misdirection on the hypothesis, and only because of that, I would grant special leave.
Special leave to appeal should be granted, the appeal allowed, the conviction quashed, and a new trial ordered. |
high_court_of_australia:/showbyHandle/1/10169 | decision | commonwealth | high_court_of_australia | text/html | null | Schellenberger v Trustees Executors & Agency Co Ltd [1952] HCA 69 | https://eresources.hcourt.gov.au/showbyHandle/1/10169 | 2024-09-13T22:54:36.623642+10:00 | High Court of Australia
Dixon C.J. McTiernan and Fullagar JJ.
Schellenberger v Trustees Executors & Agency Co Ltd
[1952] HCA 69
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The Court delivered the following written judgment:—
Dec. 12
Dixon C.J., McTiernan and Fullagar JJ.
This is an appeal from a decision of Coppel A.J. in chambers on an originating summons relating to the will of Emile Henry Shelley deceased.
The testator, who was a resident of Bunyip, a small country town in Victoria, made his will on 15th November 1941, and died on 8th January 1944. By his will he appointed the respondent company to be the executor and trustee thereof, and he devised and bequeathed the whole of his estate both real and personal to the company upon trust for his wife for her life. After her death he gave a sum of £1,000 to the trustees of the Bunyip Mechanics' Institute for the purposes of the Institute, and a sum of £1,000 to the trustees of the Bunyip Agricultural Society for the purposes of the Society. The will proceeded:—"And as to all other my estate to be known as the Emile Henry Shelley Trust in trust as to capital and income to be administered by my trustee as it in its absolute discretion shall decide for the beautification and advancement of the township of Bunyip aforesaid And my trustee may seek the advice of Frank Shelford Hodge, John Alfred Cock and George Brown Calderwood all of Bunyip aforesaid or the survivor or survivors of them.". The will concluded with a discretionary power of sale expressed to be given for the purpose of enabling the trustee to carry out the provisions of the will.
The testator's widow died on 3rd June 1950. All debts, and the two legacies of £1,000, have been paid, and the respondent company has in its hands property of the value of about £9,600. The main question raised by the originating summons was as to the validity of the trust for the "beautification and advancement" of the township of Bunyip. It was argued for the next of kin of the testator that the trust was void for uncertainty. It was argued for the Attorney-General of Victoria that it was a charitable trust and valid. Coppel A.J. held that the trust was a good charitable trust, and against that decision the next of kin appeal.
The learned judge appears to have attached some importance to the question whether the expression "beautification and advancement" should be construed—to use his Honour's own words—"conjunctively" or "disjunctively". His Honour thought that it should be construed "conjunctively". He said: "I think that grammatically the words express a single conception, and that any steps which are taken to put this conception into effect must be such as will both beautify and advance the township of Bunyip". The question is, of course, arguable, but, on the whole, we are of opinion that the other view is correct, and that anything which will either beautify or advance the township of Bunyip is within the terms of the trust. As a matter of meaning, the word "beautification" should be regarded as giving some colour to the word "advancement", with which it is associated. But, as a matter of construction, we think that the testator, who is devoting the whole of the capital and income of his residuary estate to the interests of the community in which he lives, should be regarded as contemplating the use of that whole for the fulfilment of two classes of purpose and the use of any part of that whole for either. This view is supported by the fact that, if the other view be adopted, the word "advancement" is really superfluous. For everything which will tend to the beautification of the township will tend to its advancement within the fair meaning of the words used by the testator, although not everything that will tend to its advancement will necessarily operate for its beautification. The provision of a public swimming pool for children is an example which occurs readily to one's mind.
But, although the question of construction which we have been considering is obviously of great importance from the point of view of the administration of the trust, it has, in our opinion, no bearing on its validity. Whichever construction be adopted, we are of opinion that the right conclusion was reached in the Supreme Court, and that the trust is a charitable trust.
We would regard it as plain that what the testator has in mind is the provision of physical things within a particular locality, which, because they have an element of beauty, or for some other reason, will tend to the general benefit or advantage of the small community dwelling in that locality, and so "advance" it as a community. Such trusts have been uniformly held to be charitable. They might indeed be said to afford an outstanding example of the fourth of Lord Macnaghten's four classes of charitable trusts and to fall very clearly within the "scope and intendment" of the preamble to the statute of Elizabeth I. They afford an outstanding example because in them we find a private person choosing to devote a part of his resources to what could fairly be regarded as a possible subject of public responsibility. Examples of trusts of this class which have been held to be charitable are Howse v. Chapman [1] (to the improvement of the city of Bath), Attorney-General v. Heelis [2] (for the improvement of the town of Bolton); Faversham Corporation v. Ryder [3] (for the benefit and ornament of the town of Faversham); Wrexham Corporation v. Tamplin [4] (for the use and benefit of the borough of Wrexham), Mitford v. Reynolds [5] (words which were construed as meaning that the bequest was to be applied to "works—something to be constructed or established—for the benefit of the native inhabitants" of the city of Dacca in Bengal), Dolan v. Macdermot [6] (charities and other public purposes in the parish of Tadmarton), Re Allen; Hargreaves v. Taylor [7] ("general purposes for the benefit of the town of Kendal"; Re Bones; Goltz v. Ballarat Trustees Executors & Agency Co. Ltd. [8] (the improvement of the city of Ballarat). In Theobald on Wills, 10th ed. (1947), pp. 277, 278, are cited a number of other decisions in which the trust has been of a more specific character than is conveyed by such general words as "benefit" or "improvement" or "advantage", e.g., for providing a water supply to a town or for repairing bridges in a town. A good example of this latter class of case is Monds v. Stackhouse [9] . Such cases provide examples of what may be comprehended within more general words, such as are found in the present case. An example of a gift for the beautification of a locality in a particular way is to be found in Grant v. Commissioner of Stamp Duties [10] . Johnston J. thought it clear that the gift was charitable.
1. (1799) 4 Ves. 542 [31 E.R. 278].
2. (1824) 2 S. & S. 67 [57 E.R. 270].
3. (1854) 5 De G.M. & G. 350 [43 E.R. 905].
4. (1873) 21 W.R. 768.
5. (1842) 1 Ph. 185 [41 E.R. 602].
6. (1867) L.R. 5 Eq. 60; (1868) L.R. 3 Ch. App. 676.
7. (1905) 2 Ch. 400.
8. (1930) V.L.R. 346.
9. (1948) 77 C.L.R. 232.
10. (1943) N.Z.L.R. 113.
Mr. Voumard's main argument for the next of kin was founded on a passage in the judgment of the Court of Appeal, delivered by Lord Greene M.R., in Re Strakosch; Temperley v. Attorney-General [1] . The gift in that case was of an entirely different character from that with which we are now concerned, but, in the course of the judgment, the Master of the Rolls found occasion to refer to the somewhat controversial case of Re Smith; Public Trustee v. Smith [2] , in which a gift "unto my country England for—own use and benefit absolutely" (sic) was held by the Court of Appeal to be a charitable gift. In the course of the judgments in that case the line of cases cited above was discussed, together with the case in the House of Lords of Goodman v. Saltash Corporation [3] , which is, of course, a leading case on the subject. The cases of Re Smith [2] and Goodman v. Saltash Corporation [3] had also been discussed by Lord Simonds in Williams' Trustees v. Inland Revenue Commissioners [4] , in an opinion in which four other learned Lords concurred. In Re Strakosch [5] the Master of the Rolls, speaking for the Court, expressed the view that the reasoning which lay behind the cases was "that where general words are used such as to benefit such and such a parish or "my country" the law will construe these words as restricted to benefits which are charitable in law" [6] . His Lordship concluded:—"If we are right in holding that the principle laid down is that general words that money is to be applied for the benefit of a district or a country are construed as meaning for such purposes as are recognised by the law as charitable purposes, the principle has no application here where the purpose is expressed" [7] .
1. (1949) Ch. 529, at pp. 539-541,
2. (1932) 1 Ch. 153.
3. (1882) 7 App. Cas. 633.
4. (1932) 1 Ch. 153.
5. (1882) 7 App. Cas. 633.
6. (1947) A.C. 447, at pp. 459, 460.
7. (1949) Ch. 529.
8. (1949) Ch., at p. 539.
9. (1949) Ch., at p. 541.
Mr. Voumard said that both the word "beautification" and the word "advancement" comprehended purposes which were not charitable as well as purposes which were charitable, and he said that, while the word "advancement" was a general expression which could, in accordance with the passages quoted, be construed as including only such purposes conducive to the advancement of the community of Bunyip as were charitable, the word "beautification" expressed a specific purpose to which that passage could not be applied. By way of example of a "beautifying" project which would not be charitable, he said that the words would authorize the building of fine houses with fine gardens for the councillors of the local municipality, because these would tend to "beautify" the township.
We are not able to accept this argument, and for two reasons. In the first place, we think that the words "beautification of the township", construed without the aid of any canon of construction, do not include such an example as that given. The real meaning of the testator is that physical things, having an element of beauty, shall be provided in the township for the edification and enjoyment of the local community as a whole and not for the benefit of private individuals. That appears to us to be a charitable gift. To extend the words used as Mr. Voumard suggested would be to take an unreal and far-fetched view. In the second place, if this were not so, we think that the word "beautification" would be just such a general word as the Master of the Rolls may be taken to have had in mind in Re Strakosch [1] . Cf. the cases already cited of Howse v. Chapman [2] ; Attorney-General v. Heelis [3] ; and Faversham Corporation v. Ryder [4] .
1. (1949) Ch., at pp. 539-541.
2. (1799) 4 Ves. 542 [31 E.R. 278].
3. (1824) 2 S. & S. 67 [57 E.R. 270].
4. (1854) 5 De G.M. & G. 350 [43 E.R. 905].
It is not necessary to consider whether s. 131 of the Property Law Act 1928 Vict. would apply so as to save the gift if it were otherwise invalid. The gift in question is, in our opinion, a charitable gift.
The originating summons asked that, if the trust were held to be charitable, an order should be made embodying a "scheme" for the administration of the trust. Strictly speaking, the settling of a scheme by or under the authority of the court is only appropriate where a charitable trust has failed or where for some other reason there is to be a cy-pres application of the fund. The trustee in the present case, however, may well desire to submit to the court a question as to whether some proposed application of the fund will be within the terms of the trust. The order made by Coppel A.J. directed that the question of the settling of a scheme be reserved for further consideration. This order is not open to serious criticism, but it is perhaps preferable to delete par. 3 of the order as it stands, to substitute therefor the words: "It is unnecessary to answer this question", and then, after the representative order, to provide that the plaintiff and the defendant the Attorney-General have liberty to apply with regard to the mode of application of the residuary estate of the testator under the trusts of the will.
The appeal should be dismissed, and the order varied in the manner we have indicated. We do not think that there is sufficient reason in this case for departing from the prima-facie rule as to the costs of an unsuccessful appeal. The appellant should pay the costs of the appeal. |
high_court_of_australia:/showbyHandle/1/10565 | decision | commonwealth | high_court_of_australia | text/html | null | Continental Liqueurs Pty Ltd v GF Heublein & Bro Inc [1960] HCA 37 | https://eresources.hcourt.gov.au/showbyHandle/1/10565 | 2024-09-13T22:54:44.234124+10:00 | High Court of Australia
Kitto J.
Continental Liqueurs Pty Ltd v GF Heublein & Bro Inc
[1960] HCA 37
ORDER
Order that the trade mark registered No. 82843 the subject of these proceedings be removed from the register of trade marks on the ground that it is shown that there has been no bona fide user thereof for a consecutive period of three years since the date of the last registration thereof. Order that the respondent Heublein Incorporated pay the costs of the applicant and the costs, if any, of the Registrar of Trade Marks, including in each case any reserved costs.
Cur. adv. vult.
Kitto J delivered the following written judgment:—
1960, June 28
Kitto J
I have been inclined to await the result of the pending appeal from my decision on the registered user application [1] ; but I understand that other litigation between the parties is being proceeded with, and in all the circumstances I have come to the conclusion that it is probably the better course to deliver my judgment now.
1. (1959) 103 C.L.R. 435.
By a notice of motion filed on 15th March 1957, Continental Liqueurs Pty. Limited, claiming to be a person aggrieved within the meaning of s. 72 of the Trade Marks Act 1905-1948 Cth, applied to this Court for an order that trade mark No. 82843 be removed from the register of trade marks on the ground that there had been no bona fide user of the mark for a consecutive period of three years since the date of the last registration thereof. "The date of the last registration" is an expression defined by s. 54, and, as applied to the present case as at the institution of the application it means the date of the original registration, namely 27th November 1944. I say "as at the institution of the application" because it is common ground that, although the registration has since been renewed the section is to be applied, if it is to be applied at all, as at that date.
Sub-section (1) of s. 72 was in the following terms: "The Court may, on the application of any person aggrieved, if it is shown that there has been no bona fide user of a trade mark for a consecutive period of three years since the date of the last registration thereof, order its removal from the register, unless it was at the date of the application in bona fide use and had been so for a period of six months immediately prior to the date of the application". Sub-section (2) defined bona fide user or use for the purposes of the section to mean user or use of a trade mark in respect of the goods in respect of which it was registered for the purposes of trade by the proprietor or registered user of the trade mark or a predecessor in title. In the section as originally enacted in 1905 there were only these two sub-sections. Like s. 37 of the English Act passed in the same year, 5 Edw. 7, c. 15, it dealt with a topic which had come before the House of Lords in John Batt & Co. v. Dunnett [1] and had been further considered by Farwell J. in Louise and Co. Ltd. v. Gainsborough [2] . In the absence of the special provisions made in 1905, the courts had reached the position that there were two cases of non-user in which a trade mark would be removed from the register: first, where, at the time of registration, there was no bona fide intention of using it and it had never in fact been used for the goods in respect of which it was registered, and, secondly, where, although there was a bona fide intention to use it at the beginning and it was even used for a time, its use had been discontinued and an intention to abandon it was proved either by direct evidence or by inference from the duration of the non-user: see the case last cited [3] . The United Kingdom and Australian legislatures dealt with the matter in rather different ways. The first of the two cases abovementioned was dealt with in the United Kingdom in 1905, but not in Australia until sub-s. (1A) was inserted into s. 72 in 1948. The second of the two cases was dealt with in the United Kingdom by prescribing an objective test in the first instance, namely whether the trade mark had not been bona fide used during the five years immediately preceding the application, with the qualification "unless such non-user is shown to be due to special circumstances in the trade, and not to any intention not to use or to abandon such trade mark in respect of such goods". In Australia it was dealt with by s. 72 (1) and (2). The reason for drawing attention to the nature of the subject-matter of these provisions is that it enables a clear choice of meanings to be made in order to resolve the ambiguity of sub-s. (1). On the face of that sub-section, the first or affirmative condition of the power which it gives might be either that it is shown that during some consecutive period of three years since the last registration no bona fide user has taken place, or that it is shown that since the last registration there has been no consecutive period of three years of bona fide user. Given the first meaning, the sub-section provides an objective test which may not unreasonably have been thought a practically desirable substitute for the former test of intentional abandonment. This consideration is enough to justify the adoption of that meaning, and it does not seem to be counterbalanced by any which favours the second meaning. It appears to have been adopted by Fullagar J. without discussion, in Rothman's Limited v. W. D. & H. O. Wills (Australia) Ltd. [1] , and presumably was adopted by the Full Court also: W. D. & H. O. Wills (Australia) Ltd. v. Rothman's Ltd. [2] .
1. (1899) A.C. 428.
2. (1903) 20 R.P.C. 61.
3. (1903) 20 R.P.C., at p. 68.
4. (1955) 92 C.L.R. 131, at p. 134.
5. (1956) 94 C.L.R. 182, at p. 186.
The original proprietor of the mark now in question was a corporation organized and existing under the laws of Connecticut and named, according to the register, Ste. Pierre Smirnoff Fls. Inc., (which is an abbreviation for Société Pierre Smirnoff Fils Incorporated). That corporation was dissolved in 1954, and on 24th July 1956 the registration was transferred, with goodwill, to another Connecticut corporation, G. F. Heublein and Bro. Incorporated. The latter corporation, which now bears the name Heublein Inc., was made a respondent to the notice of motion, as also was the Registrar of Trade Marks.
For reasons which have not been investigated before me and may have been connected with the fact that other litigation involving the same parties was in progress, no further step was taken in the application until September 1958. In that month the applicant filed several affidavits. In the meantime, namely on 1st August 1958, the Trade Marks Act 1955 Cth came into operation. By s. 4 it repealed the whole of the Trade Marks Act 1905-1948 Cth, and by s. 5 it made certain transitional provisions. Subject to an immaterial qualification, the new Act was made to apply to and in relation to trade marks registered under the repealed Acts (s. 5 (2)), and to and in relation to applications for the registration of trade marks made before the commencement of the new Act and the registration of trade marks on those applications (s. 5 (4)). But nothing was said about applications for removal which were pending at the commencement of the new Act. The respondent Heublein Inc. (which I shall call the respondent, since the Registrar of Trade Marks has not taken any active part in these proceedings) contended before me that the new Act, when it came into operation, had the effect of taking away the jurisdiction of the Court under the old s. 72 and thereby making the present application incompetent. The new Act makes its own provision, in s. 23 (1) (b), as to the removal of trade marks from the register on the ground of non-user, but (the respondent's contention proceeds) the application cannot be treated as an application under that provision, because it was instituted before the new Act came into force; and the difficulty cannot be overcome by any amendment of the proceedings, because s. 23 (1) (b), since it requires a period of non-user measured from the date of the application, is incapable of being applied in proceedings instituted before the commencement of the new Act. Finally, it was said, the applicant can find no comfort in s. 8 of the Acts Interpretation Act 1901-1957 Cth, for these proceedings are not in respect of any right or privilege acquired or accrued under the repealed Act, or any obligation or liability accrued or incurred under that Act.
If the application had not been pending in the Court when the new Act came into force, I should have agreed that the applicant company had not a right to relief under s. 72 which it could thereafter enforce. Even though it had a locus standi to apply under the section as a "person aggrieved", s. 8 of the Acts Interpretation Act could have no application in its favour: see Abbott v. Minister for Lands [1] ; and cf. Brandon's Patent, Ex parte Doty [2] . But in my opinion the applicant, by instituting its application in the Court, that is to say by filing its notice of motion, acquired a right to have the Court decide whether it ought to exercise its jurisdiction under s. 72 in that application, and that right was within the protection of s. 8 (c) of the Acts Interpretation Act: cf. Colonial Sugar Refining Company Limited v. Irving [3] . The principle of Abbott v. Minister for Lands [4] , is expressed in the sentence: " the mere right (assuming it to be properly so called) existing in the members of the community or any class of them to take advantage of an enactment, without any act done by an individual towards availing himself of that right, cannot properly be deemed a "right accrued" " [1] . The filing of the notice of motion in the present case was an act done by an individual towards availing himself of the right to have an order made for the removal of the mark from the register: cf. In re A Debtor; Ex parte Debtor [2] . There is nothing in the 1955 Act to displace the general rule of the common law which the Acts Interpretation Act reinforces, namely that, in general, when the law is altered during the pendency of an action the rights of the parties are decided according to the law as it existed when the action was begun, unless the new statute shows a clear intention to vary such rights: Maxwell on The Interpretation of Statutes 10th ed. (1953) p. 221, Hutchinson v. Jauncey [3] . Accordingly I am of opinion that the repeal of the former s. 72 the Trade Marks Act 1955 Cth does not affect this application, and that the application must now be dealt with as if that section were still in force.
1. (1895) A.C. 425, at p. 431.
2. (1884) 9 App. Cas. 589.
3. (1905) A.C. 369.
4. (1895) A.C. 425.
5. (1895) A.C., at p. 431.
6. (1936) Ch. 237, at p. 243.
7. (1950) 1 K.B. 574, at pp. 578, 579.
The respondent's trade mark is registered in respect of "fermented liquors and spirits". The applicant is a dealer in goods of that class, and that fact is prima facie sufficient evidence of his being a person aggrieved: Powell v. Birmingham Vinegar Brewery Co. [4] ; Attorney-General for N.S.W. v. Brewery Employes Union of N.S.W. [5] ; Farley (Aust.) Pty. Ltd. v. J. R. Alexander and Sons (Q.) Pty. Ltd. [6] ; Shell Co. of Australia Ltd. v. Rohm and Haas Co. [7] . In the case first cited Lord Herschell used words which I respectfully adopt as applicable to s. 72: "Wherever it can be shewn that the applicant is in the same trade as the person who has registered the trade-mark, and wherever the trade-mark if remaining on the register would or might limit the legal rights of the applicant so that by reason of the existence of the entry upon the register he could not lawfully do that which but for the appearance of the mark upon the register he could lawfully do, it appears to me that he has a locus standi to be heard as a "person aggrieved" " [8] . In the present case the applicant is already using the word "Smirnoff" in connexion with his goods, and the same word forms a significant part of the respondent's trade mark. I need not refer at this point to the disputes which have arisen between the parties with respect to this word. It is enough to say that the respondent has shown an intention of preventing the applicant from using the word, if by any means it can do so, and on some future occasion it may well rely for this purpose on the trade mark now in question. The applicant has applied for registration of three trade marks consisting of or containing the word "Smirnoff", and the examiner has made adverse reports under s. 33 (2) on the ground, amongst others, that each of the proposed three marks so closely resembles the respondent's mark as to be likely to deceive. This would suffice even by itself to give the applicant a locus standi: cf. Batt's Case [1] . In all the circumstances it seems to me too clear for argument that the applicant has a substantial business interest in getting the trade mark removed from the register, and accordingly is entitled to maintain the application as a "person aggrieved". I should add that I disallowed cross-examination directed to showing that the applicant had been guilty of some kind of reprehensible conduct in the course of building-up the business by virtue of which it claims to be a "person aggrieved". The ruling which I gave, and to which after consideration I adhere, was that on the question of locus standi under s. 72 it was not relevant to inquire into the past conduct of the applicant in carrying on that business.
1. (1894) A.C. 8, at p. 12.
2. (1908) 6 C.L.R. 469, at pp. 497, 519, 550.
3. (1946) 75 C.L.R. 487, at p. 491.
4. (1949) 78 C.L.R. 601, at p. 606.
5. (1894) A.C., at p. 10.
6. (1898) 2 Ch. 432, at p. 441.
The central issues in the case are, first, whether it is shown that there has been no bona fide user of the respondent's trade mark for a consecutive period of three years since its registration, and, secondly, whether the mark was, at the date of the application, 15th March 1957, in bona fide use and had been so for a period of six months immediately prior to that date. On the first issue the onus of proof rests upon the applicant; on the second it rests upon the respondent. The mark, as I have said, is registered in respect of "fermented liquors and spirits" generally. It is common ground that there has been no use of it unless in respect of vodka, but in my opinion a use of it in respect of goods of even so limited a description would be, within the meaning of sub-s. (2) of s. 72, a use "in respect of the goods in respect of which it is registered". The contrast between sub-ss. (1) and (2) of s. 72 on the one hand and sub-s. (1A) of s. 72 and s. 37 of the Trade Marks Act 1905 U.K. on the other is, I think, in favour of this view. The section is concerned, however, with " bona fide " use only, and having regard to the definition in sub-s. (2) no use of the respondent's trade mark could be held " bona fide " unless it were a use (a) by the respondent or its predecessor the Connecticut corporation Ste. Pierre Smirnoff Fls. Inc., (b) in Australia, (c) for the purposes of trade, and (d) for the purpose of indicating or so as to indicate a connexion in the course of trade between vodka to which it was applied and the registered proprietor for the time being of the mark: Rothman's Limited v. W. D. & H. O. Wills (Aust.) Ltd. [1] ; W. D. & H. O. Wills (Aust.) Limited v. Rothman's Ltd. [2] .
1. (1955) 92 C.L.R., at p. 137.
2. (1956) 94 C.L.R., at p. 191.
It is quite clear that the first of the two issues in the case must be decided in favour of the applicant. Persons who would have been likely to see or hear of any use of the trade mark in this country have given evidence, which I accept, to the effect that no such use came to their notice, at least before 1954. I refer to the respective affidavits of S. E. Curtis, F. S. Kassel, L. Fulop, D. Mandie and A. F. Hocking. The respondent has made no attempt to suggest any use of the trade mark before March 1954 otherwise than in advertisements, and the only advertisements proved were in the American periodicals "Esquire" and the "New Yorker". These were inserted by the respondent. In the issue of "Esquire", the advertisements were in 1947, 1956, 1957 and 1958; and in the case of "New Yorker" they were in 1950, 1954, 1955, 1956, 1957 and 1958. "Esquire" advertisements of July and October 1947 have been produced, and they show the trade mark with only one variation, namely the substitution of "21" for "57" — a variation which might well be overlooked by virtue of the provisions of s. 30. Other advertisements have been put in evidence, some having appeared in the one magazine and some in the other; and although they have a general resemblance to the trade mark their features are too hazy for definite identification. Evidence as to the circulation of the magazine in Australia is contained in affidavits of Mr. G. G. Johnson and Mr. A. M. Davis respectively. I need not consider the advertisements, however, in deciding the question on which the applicant has the onus of proof; for after the "Esquire" advertisement of October 1947 there was a gap of more than six years in which, so far as the evidence shows, nothing occurred which by any possibility could be considered a user of the trade mark. The evidence refers to a series of six advertisements which appeared in the "New Yorker" in the second half of 1950, but there is nothing before me as to their contents. The conclusion is inevitable that the condition is fulfilled which prima facie entitles the applicant to succeed.
I turn, then, to the question whether the respondent has shown that at the date of the application, namely, the date of the filing of the notice of motion: W. D. & H. O. Wills (Aust.) Ltd. v. Rothman's Ltd. [3] , the trade mark was in bona fide use, and had been so for a period of six months immediately prior to that date. The period to be considered is from 15th September 1956 to 15th March 1957.
1. (1956) 94 C.L.R., at p. 186.
In that period there was one full-page advertisement in "Esquire" (December 1956) which contained in a corner a small representation of a package bearing a device with a general resemblance to the trade mark; but the device was too indistinct for any letterpress to be deciphered. In the "New Yorker" there was also a single full-page advertisement (in the issue of 11th August 1956, which I shall assume in the respondent's favour would have reached Australia during the relevant period), and the same comment applies to it. If the question were whether these advertisements were close enough to the trade mark to constitute infringement, I should think that the answer might be that they were. The question is not that, but I am prepared to assume in the respondent's favour that the suggestions which the advertisements contain of the outline and lay-out of the trade mark are sufficiently strong to justify a conclusion that by the circulation in Australia of the issues containing the advertisements, (a circulation which was not great but can hardly be ignored), there was a user of the trade mark. This, however, does not go far enough for the respondent's purpose, for the question remains whether the trade mark was "in bona fide use" for the relevant period of six months and was still "in bona fide use" at the date of the application. The words quoted refer to a course of conduct extending substantially over the period and still continuing at the end of it. The two advertisements referred to are, in my opinion, not nearly enough to amount to a course of conduct satisfying the description. I was referred in this connexion to the case of Vitamins Ld.'s Application [1] , but in my opinion it deals with a completely different problem and affords no assistance in the present matter.
1. (1956) R.P.C. 1.
Then the respondent contends that in addition to the advertisements there was, throughout the six months, a user of the trade mark on bottles sold in Australia. The respective affidavits of Mr. Bruel and Mr. Hucks show a not inconsiderable volume of sales in all States of Australia of bottles of vodka bearing a label which resembled very closely the respondent's trade mark. The trade mark itself is of striking and complicated design, and the labels present both its general appearance and a good deal of its detail. At one point the number "57" in the trade mark becomes "21" on the labels, and the only other point of difference is at the foot of the design, where the legend. "Prepared and bottled by Ste. Pierre Smirnoff Fls. Inc. Hartford. Conn. U.S.A." in the trade mark is replaced on the labels by "Ste. Pierre Smirnoff Fls. Ltd., Produced in England, Oval Road, London, N.W.1". Even in this legend, however, the lay-out, the kind of type and the general appearance are reproduced. If the use of the labels had been a use by the respondent (its predecessor had been dissolved a couple of years before the period I am discussing), it is possible that the case might have been considered a proper one for the application of s. 30. That is to say, the alterations made in the trade mark in order to produce what appears on the labels might have been regarded as not substantially affecting the identity of the trade mark. If so, I should have thought it right to accept a user of the labels by the respondent as equivalent to user of the trade mark.
But Mr. Bruel and Mr. Hucks were respectively the New South Wales Manager and the attorney in Australia of Gilbeys Limited, an English company, and their evidence concerning the labels relates only to use in the course of the marketing in Australia by that company of vodka of its own manufacture. By reason of the express provision of sub-s. (2) of s. 72, no use of the trade mark can be counted, in the circumstances of this case, as bona fide use for the purposes of the section unless it was a use by the respondent. Prima facie, the use of the labels by Gilbeys Limited was not a use by the respondent. Gilbeys Limited was a separate corporation, and in addition (if it matters: contrast Re Radiation Trade Mark [1] ) there was a complete absence of any connexion between the corporations by means of, or through, any shareholding. Moreover Gilbeys Limited, in using the labels, was acting entirely on its own account and not as agent for the respondent. The situation between the two corporations was that as a result of negotiations which began in 1952 the respondent in April 1956 gave Gilbeys Limited a franchise, as it may be conveniently called, in consideration of a royalty, for the making and selling of what was described as "Smirnoff Vodka", together with a licence to use their trade marks, in all parts of the British Commonwealth of Nations. Accordingly Gilbeys Limited made the product in England, imported quantities of it into Australia, and marketed it in Australia under the labels which I have described. The respondent contends that the use of the labels by Gilbeys in these circumstances was a use by the respondent, because it was a use by the respondent's permission for which royalties were payable to the respondent. No doubt in some contexts it may be said that an owner of property who lets it or hires it to another thereby makes a use of it; but that is not to say that the tenant's or hirer's use of it is a use of it by the owner. In any case, what has to be considered here is the nature of the use which s. 72 of the Trade Marks Act intends to comprehend when it speaks of the "use" of a trade mark by the proprietor. It would be inconsistent both with the principle I have stated from Rothman's Case [1] and with a recognition of the evil to which the section was directed to hold that any conduct with respect to a trade mark amounts to a use of it in the relevant sense unless it is a use indicating, or for the purpose of indicating, a connexion between goods and the proprietor of the trade mark. The evil is that which would exist if a person were allowed to retain a trade mark on the register, and so keep it exclusively for himself, after a degree of non-user which the legislature has regarded as sufficient to be treated in the same way as an abandonment. The use of the labels by Gilbeys Limited was not a use by, or in any relevant sense on behalf of, the respondent. The legend at the foot of the labels underlined the fact that the goods had been produced in England by an English company, and not in America by an American corporation. The case is therefore not merely one of a use of a trade mark by someone other than the proprietor: it is a case of a use of a trade mark so altered as to indicate that the goods are connected with someone other than the proprietor. I am not concerned here to inquire whether, as a result of what was done, the trade mark has lost its distinctiveness and consequently its validity: cf. Bowden Wire Limited v. Bowden Brake Company Limited (No. 1) [2] . What I have said relates only to the question whether the use of the mark by Gilbeys Limited (if use of the mark it was) was a use of it by the respondent. In my opinion it was not.
1. (1930) 47 R.P.C. 37.
2. (1955) 92 C.L.R., at p. 137; (1956) 94 C.L.R., at p. 191.
3. (1913) 30 R.P.C. 580; (1914) 31 R.P.C. 385.
I have not overlooked the evidence contained in the several affidavits of R. Kunett, J. G. Martin, D. C. Flynn, M. G. Falvey and Leo Ter-Asarieff, but none of this evidence appears to me to be relevant to the issues which I have to decide, and indeed counsel for the respondent made no use of it in addressing me at the end of the case. Evidence such as that of A. Sideman, H. Samuel, J. W. Forbes and W. S. Campbell I put aside as relating only to advertisements published after the relevant period.
For these reasons I reach the conclusion that in this case the situation exists in which s. 72 provides that the Court "may" order the removal of a trade mark from the register. This appears to be a grant of judicial power: cf. Farbenfabriken Bayer Aktiengesellschaft v. Bayer Pharma Pty. Limited [1] , and prima facie the principle of Julius v. Bishop of Oxford [2] would require the Court to exercise its jurisdiction to order removal. It has been submitted, however, on behalf of the respondent, that on the true construction of the section there is a discretion to refuse to remove a mark notwithstanding its non-user, and that I should exercise the discretion favourably to the respondent in this case for two reasons: first, because the applicant has been guilty, so it is said, of unconscientious conduct in building up the business which gives it a locus standi in these proceedings, and, secondly, because of delay on the part of the applicant in applying for the removal. Kerly (7th ed. (1951) p. 278) assumes that the jurisdiction is discretionary, citing as authority on the point the cases of Andrew v. Kuehnrich [3] and Magneta Time Co. Ld's. Application [4] . To these cases there may be added the Columbia Gramaphone Co. Ld's. Case [5] . It is, I think, a sufficient answer to the respondent's argument to say that even if there is a discretion under the section it is not one to be exercised upon a consideration of any demerits of the particular person who happens to be moving for expungement. The question whether the respondent's non-user of his trade mark disentitles him to have it retained on the register is really one between the respondent and the public, and not only between the respondent and the applicant: In re Hill's Trade Mark [6] . It is to be distinguished from the question which arises in a case where removal is sought on a ground relating peculiarly to the applicant: see, for example, Paine and Co. v. Daniell and Sons' Breweries, Ld. [7] , and cf. Chudzikowski v. Sowak [8] . Turning from the grounds relied on by the respondent, I do not see any reason for leaving the trade mark on the register, even assuming that I have a discretion to do so. Prior to the institution of these proceedings, the respondent and its predecessor did very little indeed in Australia in relation to the trade mark, except to register it and thereby reserve it for possible future use. It does not seem to me to accord with the intention of the Act that other people should be embarrassed in their choice of trade marks by the continued presence of this mark on the register when it has lain unused, or so little used, for so long a time.
1. (1959) 101 C.L.R. 652.
2. (1880) 5 A.C. 214.
3. (1913) 30 R.P.C. 677, at p. 696.
4. (1927) 44 R.P.C. 169.
5. (1932) 49 R.P.C. 483, at p. 489, 490.
6. (1893) 10 R.P.C. 113, at pp. 116, 117.
7. (1893) 10 R.P.C. 217, at p. 232.
8. (1957) R.P.C. 111, at p. 115.
I therefore make the order asked in the notice of motion. The respondent must pay the costs, including any reserved costs. |
high_court_of_australia:/showbyHandle/1/8641 | decision | commonwealth | high_court_of_australia | text/html | null | Uren v John Fairfax & Sons Pty Ltd [1966] HCA 40 | https://eresources.hcourt.gov.au/showbyHandle/1/8641 | 2024-09-13T22:54:49.266294+10:00 | High Court of Australia
McTiernan, Taylor, Menzies, Windeyer and Owen JJ.
Uren v John Fairfax & Sons Pty Ltd
[1966] HCA 40
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
1966, June 2
McTiernan J.
The Full Court of the Supreme Court of New South Wales has ordered a new trial of the issue of damages in this action. It is an action of defamation under the Defamation Act, No. 39, 1958, of that State. There are two counts in the declaration. Each count is for a separate publication of the defamatory words of which the plaintiff complains. One publication was in the first edition of the Sun-Herald ; the other in the second edition. The date of the issue of the newspaper was 10th February 1963. The defendant is printer and publisher of the newspaper. The plaintiff is a member of the Federal Parliament and has held his seat by large majorities. He was first elected in 1958. His party is the Australian Labor Party.
The words on which the plaintiff sued the defendant were the first half of a report from a political correspondent at Canberra. This report was published in the first edition of the newspaper in question under headlines which read: " Labor Link with Red Spy—Canberra Charge ", and in the second edition under headlines: " Spy Duped Labor MPs ". I will not quote all of the part of the report which is the subject matter of the action. It will be sufficient for present purposes to quote the first and second paragraphs:
Allegations are expected to be made in Parliament that two Labor MPs were duped by the Russian spy, Ivan Skripov.
It will be claimed that Skripov inspired them to ask searching questions in Parliament unsuspectingly, on secret defence establishments in Australia. (The italics are mine.)
In a subsequent paragraph it is said that:
Political observers say several Government back-bench members will make the allegations against the Labor MPs when Parliament begins its next sitting on March 28.
The writer of the article was, apparently, Elwyn Spratt—the headlines ascribe it to him. He was not called as a witness, the defendant did not call any witnesses.
The pleas of the defendant raised the issue whether the words "two Labor MPs" could be understood to point to the plaintiff and another person. The defendant conceded at the trial that the words could be understood to do so.
The defendant at the beginning of the trial abandoned all pleas it filed in denial of liability. They included pleas of "qualified protection" under s. 17 (h) of the Defamation Act. It did so to make room for an apology, which counsel then sought leave from the Court to make on behalf of the defendant. Leave was granted and the apology was made at once. The only issue which was left for the jury to try was the quantum of damages.
The plaintiff claimed both aggravated and exemplary damages. The defendant's plea to the jury was to mitigate damages on the grounds that the management stopped publication of the libel in the third edition, the only other edition of the newspaper in question, and the defendant apologized for the publications of the libel which occurred in the first and second editions.
The trial judge gave a full and fair summing up. He told the jury that there were circumstances which made the case one for an award of exemplary damages and it would be within their discretion to make such an award.
The jury assessed damages in respect of the publication of the defamatory matter under the headlines: " Labor Link with Red Spy " at £8,000, and in respect of its publication under the headlines: " Spy Duped Labor MPs " at £5,000.
The State Full Court considered that the direction regarding exemplary damages was wrong and the damages excessive: and for those reasons directed a new trial limited to the issue of damages.
The substantial question is whether an award of exemplary damages was appropriate. The law of exemplary damages as it was before it was altered by the decision of the House of Lords in Rookes v. Barnard [1] is compendiously stated in Mayne & McGregor on Damages, 12th ed. (1961), p. 196: "Such damages are variously called punitive damages, vindictive damages, exemplary damages, and even retributory damages. They can apply only where the conduct of the defendant merits punishment, which is only considered to be so where his conduct is wanton, as where it discloses fraud, malice, violence, cruelty, insolence or the like, or, as it is sometimes put, where he acts in contumelious disregard of the plaintiff's rights." "Such damages" the learned authors said at p. 197 "are recognized to be recoverable in appropriate cases of defamation."
1. [1964] A.C. 1129.
I think that nothing is disclosed by the evidence in the present case that could bring it within Lord Devlin's second category—the first category has no possible relevance. But I think the circumstances of the case are proper to found a claim for exemplary damages, if we do not change the law on damages by holding that a case is not appropriate for an award of exemplary damages unless the judge hearing it is satisfied that it can be brought within Lord Devlin's second category.
A decision of the House of Lords is not as a matter of law binding on this Court. But the Court may prefer to follow a decision of the House of Lords rather than one of its own, even if a conflicting decision. It is a matter of discretion whether the Court should do so or not. I think that we should not in this case decide that an award of exemplary damages is not appropriate merely because the case cannot be brought within Lord Devlin's second category. In my view there is evidence which could reasonably satisfy a jury that the publication of both libels was wanton conduct and was made in contumelious disregard of the plaintiff's right to his good name. I am not prepared to follow the House of Lords because I think the code of law on exemplary damages, which their Lordships have laid down for the United Kingdom, should not by a judgment of this Court in this case be made law in Australia.
Lord Devlin, before specifying the two categories of case, said: "I am well aware that what I am about to say will, if accepted, impose limits not hitherto expressed on such awards" (of exemplary damages) "and that there is powerful, though not compelling, authority for allowing them a wider range" [1] . I would adopt the statement quoted above from Mayne & McGregor on Damages as a summary of the decisions of this Court as to the circumstances giving rise to a claim for exemplary damages. It was not argued before us that any of those decisions are manifestly wrong in principle. The only reason urged for rejecting them is that they allow more scope for exemplary damages than this decision of the House of Lords does.
1. [1964] A.C., at p. 1226.
In Australia, the power to make laws with respect to such a matter belongs under the Constitution to the several States except in the case of a Territory. The Defamation Acts of the States were not examined in argument. Wallace J. in his judgment made observations which show that he considered that there may be some incongruity between Rookes v. Barnard [2] in so far as it applies to damages for defamation and some provisions of the Defamation Act of New South Wales. It is a responsibility of the Parliament of each State to decide whether any departure should be made from the present principles limiting the remedy of punitive damages. I think it would be injudicious for this Court to limit by a decision in this case the scope of exemplary damages as established by the decisions of this Court. They are, in truth, supported by the "powerful" authority to which Lord Devlin refers.
1. [1964] A.C. 1129.
A jury could find that each publication of the defamatory matter was marked with cynical indifference to the fact that Elwyn Spratt's report was a gross imputation on the plaintiff. The defendant put forward no defence of justification. Its only answer to the action was to put the plaintiff to prove that he was one of the members to whom the article referred and to claim a statutory privilege which, if proved by evidence to be available, would have freed the defendant from liability. The claim to that privilege was abandoned at the trial. The defendant behaved well by withdrawing the article. But the conduct complained of was the publication of it in the first edition and again in the second edition. The withdrawal could be construed as evidencing a strong doubt in the defendant that the publication of the article was legally excusable rather than something done out of consideration for the plaintiff.
The article was the premier feature of the front page of each edition in which it appeared. Other features were inserted in that page which aggravated the insult done to the plaintiff by the publication of the article. The article is stated to be Number 1 feature: a second article beginning on the front page was expressed to be Number 2 feature. This article was a story of the detection of the Russian spy, Ivan Skripov. The third feature was a photograph of a man. It was entitled: "The Russian Spy, Mr. Ivan Skripov."
A jury could find that the defendant considered that the publication of Elwyn Spratt's report with a headline " Labor Link with Red Spy " would contribute towards making the issue of the newspaper of 10th February 1963 a financial success, in other words, that it was published for pecuniary gain. The plaintiff gave evidence that on Saturday evening the front page of the Sun-Herald was shown on television and the headline " Labor Link with Red Spy " was displayed: the plaintiff said that the television station's announcer broadcast an exhortation in these words: "Read in tomorrow's Sun-Herald how Russian spy Skripov inspired two Federal Members of Parliament to ask carefully worded questions in Federal Parliament." This circumstance nearly brings the case within Lord Devlin's second category, but it does not satisfy the words: "Where a defendant with a cynical disregard for a plaintiff's rights has calculated that the money to be made out of his wrongdoing will probably exceed the damages at risk, it is necessary for the law to show that it cannot be broken with impunity" [1] . (The italics are mine.) There is no evidence that the defendant made such a calculation.
1. [1964] A.C., at p. 1227.
With great respect, the test for bringing libel within the second category imposes an undue burden on a plaintiff and that seems to me, besides the general considerations I have mentioned, to be a reason for not rejecting the decisions of this Court and proceeding to give adherence to the doctrine on exemplary damages in Rookes v. Barnard [2] .
1. [1964] A.C. 1129.
It is said in Gatley on Libel and Slander, 5th ed. (1960), p. 573: "So where the defendant purposely abstained from inquiring into the facts or from availing himself of means of information which lay at hand when the slightest inquiry would have shown that the imputation was groundless, or where he deliberately stopped short in his inquiries in order not to ascertain the truth, a jury may rightly infer malice. A refusal to listen to an explanation by the plaintiff may be an error of judgment, but is not in itself evidence of malice. It might be otherwise if the defamatory charge was made, not on the evidence of his own senses, but on the information of another, and a slight extrinsic inquiry would have shown that the charge was unfounded."
There is evidence—it was given by the plaintiff—that he knew Elwyn Spratt and he knew the plaintiff; they met at Canberra and had talked with one another from time to time: Elwyn Spratt knew where the plaintiff lived in Sydney and had telephoned to him from time to time; he made no inquiry from the plaintiff about the subject matter of the report in question.
In my view the statements that Skripov "inspired" the plaintiff to ask "searching questions" in Parliament "unsuspectingly" are extravagant and, by themselves, afford evidence of malice. The failure to make inquiry tends to strengthen the proof of malice afforded by the words themselves. The plaintiff swore that he was not inspired, approached or asked by Skripov to ask questions in Parliament. This evidence was not challenged by the defendant. It is said in Mayne & McGregor on Damages, 12th ed. (1961), p. 760: "In one sense defamation is the tort par excellence for the awarding of exemplary damages because of the frequency of the defendant's wanton conduct in the form of malice. Thus it may be argued that the many cases already considered in which evidence has been introduced to prove malice in order to increase the damages reflect the acceptance of exemplary damages in defamation. And the awarding of damages as a punishment as distinct from compensation stands out clearly in Rook v. Fairrie" [1] . In my opinion the matters disclosed by the evidence provided a sound basis for the direction to the jury that it was within their discretion to award exemplary damages.
1. [1941] 1 K.B. 507.
The head of damage was injury to the plaintiff's reputation, and in addition, the injury to his feelings had to be taken into account. These are not matters of pecuniary damage. Lord Atkin said in Ley v. Hamilton [2] : "It is precisely because the "real" damage cannot be ascertained and established that the damages are at large. It is impossible to track the scandal, to know what quarters the poison may reach: it is impossible to weigh at all closely the compensation which will recompense a man or a woman for the insult offered or the pain of a false accusation. No doubt in newspaper libels juries take into account the vast circulations which are justly claimed in present times" [1] . That case was decided in 1935.
1. (1935) 153 L.T. 384.
2. (1935) 153 L.T., at p. 386.
The summing up in the present case shows that the trial judge directed the jury to assess separately the amount of damages they would award the plaintiff under each count. Admittedly the Sun-Herald has a large circulation. The first and second editions came out at different times: and the jury could reasonably assume that both editions of the newspaper have large circulations. "The amount of damages is "peculiarly the province of the jury", who in assessing them will naturally be governed by all the circumstances of the particular case." (Gatley on Libel and Slander, 5th ed. (1960), p. 625.) The character and circumstances of the parties, their position and standing, could properly lead to the aggravation of the damages. The plaintiff was a member of the Federal Parliament. It is a grievous wrong to a member to raise and circulate widely about him a question whether he is a "dupe" of a spy prying into defence secrets, or is a "link" between the spy and the member's party in the Parliament. The retraction of the libel was a circumstance which the jury could take into account: also the apology published in the next issue of the Sun-Herald . But in the meantime the plaintiff commenced the action. It was a matter entirely for the jury whether the apology was too meagre to assuage the plaintiff's injured feelings and whether the apology might have been dictated as expedient because of the issue of the writ. When the plaintiff's action against Australian Consolidated Press Limited for damages for the libels, two of which were similar to the libels in the present case, had ended the defendant in this case offered an apology to the plaintiff and to pay his costs of the present action to date. The trial nevertheless took place and as it has been said the defendant abandoned all its pleas on denial of liability and apologized "in open court" to the plaintiff. Again the value of such action as amends for the wrong done to the plaintiff was peculiarly within the province of the jury. There was cross-examination of the plaintiff in relation to the other action designed to obtain for the defendant a whittling down of damages under s. 24 of the Defamation Act. The State Full Court held that the direction of the trial judge as to the matter elicited by that part of the plaintiff's cross-examination was correct. The defendant, as has been said, adduced no evidence by examination in chief. Its strategy was to get admissions from the plaintiff by cross-examination to prove a case for the mitigation of damages. In this way he obtained evidence of the non-publication of the libel (further than the second edition) by asking the plaintiff questions leading him to say that he read that edition and the libel was not in it. The fact that an apology was published in the Sun-Herald of 17th February was proved in the same way. The words of the apology were read out to the plaintiff and he was asked whether he read it and whether it was in those words. The plaintiff said that as far as he could remember it was. Proof of the contents of the letter offering to apologize and to pay the plaintiff's costs to date was made in the same way. This part of the defendant's conduct in Court at the trial of the action was a circumstance which the jury could take into consideration in the assessment of damages. The jury could take an unfavourable view of it because there could be no cross-examination from the plaintiff's side.
The damages awarded by the jury in respect of each publication are heavy. It was a matter for them to say to what extent, if at all, damages ought to be mitigated by any circumstance or consideration put forward by the defendant. Its plea to the jury was that in all the circumstances justice did not call for a heavy award of damages.
It seems from the award of damages that the jury took the view that the publication of the libel in the first edition and again in the second was in each case wanton conduct and had the colour of a contumelious disregard of his reputation both as a man and a member of Parliament. The jury could only express their disapproval or "detestation" (a word used by Pratt C.J. in Wilkes v. Wood [1] ) by awarding exemplary damages. That is the purpose of exemplary damages. I think taking all the circumstances of the case into consideration and the summing up, that the jury were moved to punish the defendant in that way.
1. (1763) Lofft 1 [ 98 E.R. 489].
The judgment of Pearson L.J. in McCarey v. Associated Newspapers Ltd. [2] said: "However, there still remains the question of the excessive damages, as to which the proper question to be considered is this: Could a reasonable jury, correctly applying the true measure of damages in libel, arrive at this figure of £9,000? Manifestly it is a very high figure. Is it so high that this Court can interfere in accordance with established principles?" [3] I refer to a passage from each of two of the cases mentioned in the judgment found at p. 956 of the report. First "The constitution has thought, and I think there is great advantage in it, that the damages to be paid by a person who says false things about his neighbour are best decided by a jury representing the public, who may state the view of the public as to the action of the man who makes false statements about his neighbour": per Scrutton L.J. [1] . After quoting that passage, Pearson L.J. said: "In my view, that passage also involves the proposition that it is right for a jury to include in their assessment of damages an element of punishment for the defendants as distinct from compensation for the plaintiff" [2] . The second passage is a sentence from the judgment of Holroyd Pearce L.J. in Lewis v. Daily Telegraph Ltd. (in the Court of Appeal) [2] . The sentence is: "The fact that the jury may give exemplary damages for libel must always make it very difficult for the defendants to show that the award is out of all proportion." Diplock L.J. said: "If this were one of those cases where punitive and aggravated damages were appropriate, I would not have thought it right to interfere with the award of the jury; but it is not a case of that kind" [3] . In my view, the present case is such a case.
1. (1964) 3 All E.R. 947.
2. [1964] 3 All E.R., at p. 954.
3. (1934) 50 T.L.R. 581, at p. 584.
4. [1964] 3 All E.R., at p. 956.
5. [1964] 3 All E.R., at p. 956.
6. [1964] 3 All. E.R., at p. 959.
I would not interfere with the jury's assessment of damages under either count. The verdict of the jury for £13,000 damages should, in my opinion, be restored. The appeal should in my opinion be allowed.
Taylor J.
This is an appeal from an order of the Supreme Court of New South Wales directing the new trial of an action in which the plaintiff sought to recover damages for defamation. There were two counts in the declaration and at the first trial the jury returned a verdict for £5,000 on the first count and for £8,000 on the second count. The order for a new trial made by the Full Court on the ground that the damages were excessive is limited to the issue of damages and, as I see it, the vital question is whether this was a case in which the jury was at liberty to award a sum by way of exemplary damages.
The substance of the defamatory matter and the circumstances attending its publication in successive editions of the respondent's newspaper are adequately referred to in the reasons given by the members of the Full Court. It is, therefore, unnecessary to refer in detail to these matters; it is sufficient to say that the alleged libels were substantial and that, properly instructed, substantial verdicts at the hands of the jury might reasonably have been expected. But the learned trial judge directed the jury that the case was one in which, upon the facts, they were at liberty to award exemplary damages and to my mind this was erroneous. The direction was given some months after the decision of the House of Lords in Rookes v. Barnard [1] and shortly after the report of that case was available in this country but his Honour declined to charge the jury in accordance with that decision. Upon the appeal two members of the Full Court (Walsh and Wallace JJ.)—and also, I think, Herron C.J.—were of the opinion that the case was not one in which the jury was at liberty to award exemplary damages either upon the principles enunciated by Lord Devlin in Rookes v. Barnard [1] , or according to the law as it stood before that decision. I agree entirely with that view but since the conclusion follows that the order for a new trial should stand it is necessary for us to determine whether Rookes v. Barnard [1] ought to be followed in this country. In the Supreme Court two of its members thought, though not without reservations, that they should follow that decision whilst the third member was of the opinion that the Court should not do so because of what was said by this Court in Parker v. The Queen [2] and because the law as stated in Rookes v. Barnard [1] is not applicable to the New South Wales legislation "which appreciably differs from the English Defamation Act, 1952 ". I do not, however, see any distinction between the English legislation and that in force in this State which would make the observations in that case inapplicable in New South Wales.
1. [1964] A.C. 1129.
2. [1964] A.C. 1129.
3. [1964] A.C. 1129.
4. (1963) 111 C.L.R. 610.
5. [1964] A.C. 1129.
Prior to Rookes v. Barnard [1] the law relating to exemplary damages both in England and in this country was that damages of that character might be awarded if it appeared that, in the commission of the wrong complained of, the conduct of the defendant had been high-handed, insolent, vindictive or malicious or had in some other way exhibited a contumelious disregard of the plaintiff's rights. Various expressions had been employed to describe such conduct and the law, though, of necessity invested with a degree of flexibility, was sufficiently certain. The cases in which this principle has been acted upon are numerous and it is sufficient for the present to say that it has been acted upon in this Court on a number of occasions. It is, perhaps, desirable to point out that there had been a degree of confusion between "aggravated" and "exemplary" damages and sufficient attention has not, in the past, been given to the distinction between these two concepts. The former are, of course, given by way of compensation for injury to the plaintiff, though frequently intangible, resulting from the circumstances and manner of the defendant's wrongdoing. On the other hand, exemplary damages are awarded, as Lord Devlin says in Rookes v. Barnard [1] , to "punish and deter" the wrongdoer though, in many cases, the same set of circumstances might well justify either an award of exemplary or aggravated damages.
1. [1964] A.C. 1129.
2. [1964] A.C., at p. 1221.
It seems to me that it was the purpose for which exemplary damages had theretofore been awarded that led Lord Devlin in Rookes v. Barnard [2] to review the previous law. Having observed that the object of damages is usually to compensate and that the object of exemplary damages is to punish and deter he observed: "It may well be thought that this confuses the civil and criminal functions of the law; and indeed, so far as I know, the idea of exemplary damages is peculiar to English law. There is not any decision of this House approving an award of exemplary damages and your Lordships therefore have to consider whether it is open to the House to remove an anomaly from the law of England" [1] . A review of a number of authorities convinced his Lordship that the House "could not, without a complete disregard of precedent, and indeed of statute, now arrive at a determination that refused altogether to recognize the exemplary principle" [3] and "that there are certain categories of cases in which an award of exemplary damages can serve a useful purpose in vindicating the strength of the law and thus affording a practical justification for admitting into the civil law a principle which ought logically to belong to the criminal" [3] . Two categories, not including cases where exemplary damages are expressly authorized by statute, were specified by Lord Devlin, and they appear in a passage which I take from his speech: "The first category is oppressive, arbitrary or unconstitutional action by the servants of the government. I should not extend this category—I say this with particular reference to the facts of this case—to oppressive action by private corporations or individuals. Where one man is more powerful than another, it is inevitable that he will try to use his power to gain his ends; and if his power is much greater than the other's he might, perhaps, be said to be using it oppressively. If he uses his power illegally, he must of course pay for his illegality in the ordinary way; but he is not to be punished simply because he is the more powerful. In the case of the government it is different, for the servants of the government are also the servants of the people and the use of their power must always be subordinate to their duty of service. It is true that there is something repugnant about a big man bullying a small man and, very likely, the bullying will be a source of humiliation that makes the case one for aggravated damages, but it is not, in my opinion, punishable by damages. Cases in the second category are those in which the defendant's conduct has been calculated by him to make a profit for himself which may well exceed the compensation payable to the plaintiff. I have quoted the dictum of Erle C.J. in Bell v. Midland Railway Co. [1] . Maule J. in Williams v. Currie [2] suggests the same thing; and so does Martin B. in an obiter dictum in Crouch v. Great Northern Railway Co. [3] . It is a factor also that is taken into account in damages for libel; one man should not be allowed to sell another man's reputation for profit. Where a defendant with a cynical disregard for a plaintiff's rights has calculated that the money to be made out of his wrongdoing will probably exceed the damages at risk, it is necessary for the law to show that it cannot be broken with impunity. This category is not confined to moneymaking in the strict sense. It extends to cases in which the defendant is seeking to gain at the expense of the plaintiff some object—perhaps some property which he covets—which either he could not obtain at all or not obtain except at a price greater than he wants to put down. Exemplary damages can properly be awarded whenever it is necessary to teach a wrongdoer that tort does not pay" [4] .
1. [1964] A.C. 1129.
2. [1964] A.C., at p. 1221.
3. [1964] A.C., at p. 1226.
4. [1964] A.C., at p. 1226.
5. (1861) 10 C.B. (N.S.) 287 [142 E.R. 462].
6. (1845) 1 C.B. 841, at p. 848 [135 E.R. 774, at p. 776].
7. (1856) 11 Ex. 742, at p. 759 [156 E.R. 1031, at p. 1038].
8. [1964] A.C., at pp. 1226, 1227.
I agree that there was, perhaps, some room for a more precise definition of the circumstances in which exemplary damages might be awarded. But with great respect, I do not feel as Lord Devlin did, that such a far-reaching reform as he proposed, and in which the other Lords of Appeal engaged in the case agreed, was justified by asserting that punishment was a matter for the criminal law. No doubt the criminal law prescribes penalties for wrongs which are also crimes but it prescribes no penalty for wrongs which are not at one and the same time crimes, and in both types of cases the courts of this country, and I venture to suggest the courts of England, had admitted the principle of exemplary damages as, in effect, a penalty for a wrong committed in such circumstances or in such manner as to warrant the court's signal disapproval of the defendant's conduct. This principle did not admit of the award of exemplary damages against a defendant "simply because he is the more powerful"; it permits such an award, not because of the character of the defendant, but because of the character of his conduct. But the anomaly, if indeed there was one, was by no means removed by the observations in Rookes v. Barnard [1] . In specifying two categories of cases in which exemplary damages might be awarded his Lordship's observations admit that in the type of cases specified exemplary damages in the true sense may be awarded and the only result which is achieved is the narrowing of the classes of cases in which it is appropriate to permit an award of such damages. It is with the categories as expressed that I find the greatest difficulty. The first category is limited to wrongful acts committed by "servants of the government" and exemplary damages may be awarded where such acts are "oppressive, arbitrary or unconstitutional". But who, for the purpose of this category, is to be regarded as a servant of the government? That the expression is not used with the limitations which would be imposed by a strictly technical understanding of it seems reasonably clear (cf. Attorney-General for New South Wales v. Perpetual Trustee Co. (Ltd.) [2] ). But how far does the expression extend? Does it mean persons invested by the government with authority to exercise particular rights, powers and functions? If so, does it extend to persons who, in these days of governmental participation in forms of trade and commerce, are employed by a corporation created by Parliament for the purpose of carrying on some particular activity not readily recognizable as a strictly governmental function? I mention as examples in this country The Commonwealth Banking Corporation constituted by Act No. 5 of 1959, The Australian Coastal Shipping Commission constituted by Act No. 4 of 1956 for the purpose of establishing and maintaining and operating a shipping service for the carriage of passengers goods and mails, and The Australian National Airlines Commission constituted by Act No. 31 of 1945 for the purpose of providing for the transport by air of passengers and goods. Such functions might, of course, be performed directly by servants of the government and I am unable to see that there is any material difference whether they are so performed or whether they are performed by the servants of a corporation constituted by Parliament. If the servants of such a corporation are, as I understand the intention to be, to be regarded as "servants of the government" and, therefore, within the range of exemplary damages for wrongs committed by them "oppressively or arbitrarily", it is difficult to see why servants of corporations not constituted by an Act of Parliament but carrying on, for instance, the business of banking, aerial transport, shipping or insurance in precisely the same manner as government corporations should not occupy a like position. Indeed, I can see no basis upon which any such distinction can be made.
1. [1964] A.C. 1129.
2. [1955] A.C. 457; (1955) 92 C.L.R. 113.
It seems that the basis of the first category was a group of three cases decided between 1763 and 1766—Wilkes v. Wood [1] ; Huckle v. Money [2] ; and Benson v. Frederick [3] . In each of these cases the defendant was "a servant of the government" and in each case it was held that an award of exemplary damages was justified. In the first of these cases Lord Chief Justice Pratt stated the principle in the following words: "Notwithstanding what Mr. Solicitor-General has said, I have formerly delivered it as my opinion on another occasion, and I still continue of the same mind, that a jury have it in their power to give damages for more than the injury received. Damages are designed not only as a satisfaction to the injured person, but likewise as a punishment to the guilty, to deter from any such proceeding for the future, and as a proof of the detestation of the jury to the action itself" [4] . It will be observed that his Lordship was not purporting to state any new principle. Nor was he stating one the application of which depended upon the official position of the defendant; the principle was stated in general terms as one which had application to a tortious act committed by any person. In the second case the Lord Chief Justice, before dealing with the special facts of the case, again stated in general terms the considerations which should be taken into account in assessing damages for tort though without expressly referring to the term "exemplary damages". He said: "the law has not laid down what shall be the measure of damages in actions of tort; the measure is vague and uncertain, depending upon a vast variety of causes, facts, and circumstances; torts or injuries which may be done by one man to another are infinite; in cases of criminal conversation, battery, imprisonment, slander, malicious prosecutions, etc. the state, degree, quality, trade or profession of the party injured, as well as of the person who did the injury, must be, and generally are, considered by a jury in giving damages" [5] . Again in the third case no point was made that the application of the principle was dependent upon the fact that the defendant occupied an official position; the members of the Court merely agreed that the defendant "had manifestly acted arbitrarily, unjustifiably and unreasonably" and, by inference, maliciously, and that this justified the verdict. Lord Devlin observes that some considerable time elapsed after these cases had been decided "before the principle eo nomine was extended in other directions" and that "six cases, decided in the course of the next century", had been cited to their Lordships. But Tullidge v. Wade [1] , the first of these six cases, was decided in 1769—a mere three years after Benson v. Frederick [2] . It was an action per quod by a father based upon the seduction of his daughter and the complaint was that the jury's award was excessive. But the Court refused to disturb the verdict and in giving judgment Lord Chief Justice Wilmot said: "Actions of this sort are brought for example's sake; and although the plaintiff's loss in this case may not really amount to the value of twenty shillings, yet the jury have done right in giving liberal damages if much greater damages had been given, we should not have been dissatisfied therewith; the plaintiff having received this insult in his own house; where he had civilly received the defendant, and permitted him to make his addresses to his daughter" [3] . Admittedly, this was not a very precise statement of principle but clearly enough his Lordship was not purporting to introduce any new principle; he was, it seems to me, merely acting upon an established principle which, as far as I can see, was completely in accordance with the three cases previously mentioned. I do not refer to the later English cases which his Lordship mentions other than Bell v. Midland Railway Co. [4] which he explains as an example of the award of exemplary damages where the wrongdoer was seeking to make a profit out of his wrongdoing. It is true that Erle C.J. said: "looking at the conduct of the company, who set up a wharf of their own, and, careless whether they were doing right or wrong, prevented all access to the plaintiff's wharf, for the purpose of extinguishing his trade and advancing their own profit, it is impossible to say the plaintiff was not entitled to ample compensation" [5] and that Willes J. said: "The defendants have committed a grievous wrong with a high hand and in plain violation of an Act of Parliament; and persisted in it for the purpose of destroying the plaintiff's business and securing gain to themselves" [6] . But he prefaced this observation by remarking that "if ever there was a case in which the jury were warranted in awarding damages of an exemplary character, this is that case" [1] . Byles J. stated the principle in more general terms when he said: "I agree also with my brother Willes that, where a wrongful act is accompanied by words of contumely and abuse, the jury are warranted in taking that into their consideration, and giving retributory damages" [2] . I do not find in the judgments any suggestion that as against a private individual exemplary damages may be awarded only where the wrongdoer is seeking to make a profit out of his wrongdoing; the observations of the Chief Justice and Willes J. appear to me to be directed to the facts of the particular case and to amount to no more than statements that proof of those facts was sufficient to justify an award of exemplary damages.
1. (1763) Lofft 1 [ 98 E.R. 489].
2. (1763) 2 Wils. K.B. 205 [95 E.R. 768].
3. (1766) 3 Burr. 1845 [97 E.R. 1130].
4. (1763) Lofft, at pp. 18, 19 [ 98 E.R., at pp. 498, 499].
5. (1763) 2 Wils. K.B., at p. 206 [95 E.R. 768].
6. (1769) 3 Wils. K.B. 18 [95 E.R. 909].
7. (1766) 3 Burr. 1845 [97 E.R. 1130].
8. (1769) 3 Wils. K.B., at p. 19 [95 E.R. 909].
9. (1861) 10 C.B.(N.S.) 287 [142 E.R. 462].
10. (1861) 10 C.B.(N.S.), at p. 304 [142 E.R., at p. 469].
11. (1861) 10 C.B.(N.S.), at p. 307 [142 E.R., at p. 470].
12. (1861) 10 C.B.(N.S.), at p. 307 [142 E.R., at p. 470].
13. (1861) 10 C.B.(N.S.), at p. 308 [142 E.R., at p. 471].
I should not leave the first category without remarking upon the difficulty which is occasioned by the use of the word "unconstitutional". This word has a more particular meaning in a federal system and I cannot imagine that a person exercising, in the greatest good faith, a power which an ultra vires statute purports to confer upon him could ever be thought to be within the range of exemplary damages. But the word is not, I think, used in this sense; it carries with it in its context, I think, the notion of a flagrant and deliberate violation of some fundamental principle of the Constitution.
The difficulties occasioned by the statement in the second category, particularly in the case of defamation by a newspaper are, I think, obvious and are illustrated by the case of McCarey v. Associated Newspapers Ltd. [No. 2] [3] ; Broadway Approvals Ltd. v. Odhams Press Ltd. [No. 2] [4] and Manson v. Associated Newspapers Ltd. [5] . This category is based upon the observations in Bell v. Midland Railway Co. [6] to which I have already referred, and to some extent upon the observations of Maule J. in Williams v. Currie [7] and those of Martin B. in Crouch v. Great Northern Railway Co. [8] . I have already said all that I wish to say about the first-mentioned case. The second case, which was an action for trespass by a tenant against his landlord does not, in my respectful view, provide any support for the proposition that the existence of a profit-making motive in a wrongdoer is the only circumstance entitling the jury to award exemplary damages. Indeed, in that case, Coltman C.J. expressly acted upon the principle laid down by De Grey C.J. in Sharpe v. Brice [1] in which the defendant, a customs officer, was successfully sued for trespass and the verdict having been attacked as excessive, a new trial was, it appears, refused because of the circumstances in which the trespass had been committed. Reference may also be made to the case of Leith v. Pope [2] —which is noted at the foot of the report of Sharpe v. Brice [1] —where a verdict for £10,000 for malicious prosecution was upheld because of the outrageous conduct of the defendant. Nor, I should add, do I find anything in the observations of Martin B. in Crouch v. Great Northern Railway Co. [3] to justify the formulation of the second category.
1. [1965] 2 Q.B. 86.
2. [1965] 1 W.L.R. 807.
3. [1965] 1 W.L.R. 1038.
4. (1861) 10 C.B.(N.S.) 287 [142 E.R. 462].
5. (1845) 1 C.B. 841, at p. 848 [135 E.R. 774, at p. 776].
6. (1856) 11 Ex. 742, at p. 759 [156 E.R. 1031, at p. 1038].
7. (1774) 2 Black.W. 942 [96 E.R. 557].
8. (1779) 2 Black.W. 1327 [95 E.R. 777].
9. (1774) 2 Black.W. 942 [96 E.R. 557].
10. (1856) 11 Ex. 742, at p. 759 [156 E.R. 1031, at p. 1038].
There have been not infrequent discussions concerning the propriety of the civil law providing for damages of a penal character but, so far as I know, no writer and no authority has ever claimed that an award of exemplary damages should be restricted to the categories suggested. On this point I content myself with the quotation of two passages in the third edition of Sedgwick on the Measure of Damages. Writing in 1858, the learned author says (s. 38): "Thus far we have been speaking of the great class of cases where no question of fraud, malice, gross negligence, or oppression intervenes. Where either of these elements mingle in the controversy, the law, instead of adhering to the system, or even the language of compensation, adopts a wholly different rule. It permits the jury to give what it terms punitory, vindictive, or exemplary damages; in other words, blends together the interest of society and of the aggrieved individual, and gives damages not only to recompense the sufferer but to punish the offender. This rule, as we shall see hereafter more at large, seems settled in England, and in the general jurisprudence of this country." Thereafter, in Ch. 18 he reviews a number of English and American authorities, some of the former being additional to those cited by Lord Devlin, and cites the following passage from the judgment of Grier J. delivering the opinion of the Supreme Court of the United States in Day v. Woodworth [4] : "It is a well-established principle of the common law, that in actions of trespass and all actions on the case for torts, a jury may inflict what are called exemplary, punitive, or vindictive damages upon a defendant, having in view the enormity of his offence rather than the measure of compensation to the plaintiff. We are aware that the propriety of this doctrine has been questioned by some writers; but if repeated judicial decisions for more than a century are to be received as the best exposition of what the law is, the question will not admit of argument. By the common as well as by statute law, men are often punished for aggravated misconduct or lawless acts by means of a civil action, and the damages, inflicted by way of penalty or punishment, given to the party injured. In many civil actions, such as libel, slander, seduction, etc., the wrong done to the plaintiff is incapable of being measured by a money standard; and the damages assessed depend on the circumstances showing the degree of moral turpitude or atrocity of the defendant's conduct, and may properly be termed exemplary or vindictive rather than compensatory. In actions of trespass, where the injury has been wanton and malicious, or gross and outrageous, courts permit juries to add to the measured compensation of the plaintiff, which he would have been entitled to recover had the injury been inflicted without design or intention, something farther by way of punishment or example, which has sometimes been called "smart money". This has been always left to the discretion of the jury, as the degree of punishment to be thus inflicted must depend on the peculiar circumstances of each case" [1] .
1. (1851) 13 How. 363 [14 Law. Ed. 181].
2. (1851) 13 How., at p. 371 [14 Law. Ed., at p. 185].
To my mind—and I say this with the greatest respect—the attempt, expressly made in Rookes v. Barnard [2] "to remove an anomaly from the law" did not achieve this result. Nor, in my view, was such an attempt justified by the assertion that it was not the function of the civil law to permit the award of damages by way of penalty. Indeed, the statement of the categories in which exemplary damages may be awarded concedes that, in some cases, at least, it is the function of the civil law to permit an award of damages by way of punishment. The first of these is, as we have seen, limited to the "oppressive or arbitrary" invasion of another's rights by a person who answers the description of a servant of a government. I am unable to see any grounds, either in principle or upon authority, justifying the formulation of this limited category. This observation has, I think, special force when it is seen that in many cases much the same functions are performed in precisely the same manner and in the exercise of much the same authority by both "servants of the government" and other persons. There is, I think, even more force in the observation when it is observed that the second category admits the principle of exemplary damages against defendants generally. This category relates to acts done by any person but it is confined to acts done by a defendant who "with a cynical disregard for a plaintiff's rights has calculated that the money to be made out of his wrongdoing will probably exceed the damages at risk". "It is necessary" it is said "for the law to show that it cannot be broken with impunity." I am quite unable to see why the law should look with less favour on wrongs committed with a profit-making motive than upon wrongs committed with the utmost degree of malice or vindictively, arrogantly or high-handedly with a contumelious disregard for the plaintiff's rights.
1. [1964] A.C. 1129.
However this may be, the measure of research disclosed by the observations in Rookes v. Barnard [1] takes no account of the development of the law in this country where frequently this Court has recognized that an award of exemplary damages may be made in a much wider category of cases than that case postulates. In Whitfeld v. De Lauret & Co. Ltd. [2] Knox C.J. said: "Damages may be either compensatory or exemplary. Compensatory damages are awarded as compensation for and are measured by the material loss suffered by the plaintiffs. Exemplary damages are given only in cases of conscious wrongdoing in contumelious disregard of another's rights" [3] . In the same case Isaacs J. dealt with the matter at some length. Having mentioned that, in general, damages are compensatory in character, his Honour went on to say [4] : "Further there is still a well recognized feature, which with one exception is, in the opinion of one learned writer, confined to damages for torts (see Mayne on Damages, 9th ed., at p. 41). I refer to what are called "exemplary damages". From a very early period exemplary damages have been considered by very eminent Judges to be punitive for reprehensible conduct and as a deterrent. That was the opinion of Gibbs C.J. and Heath J. in Merest v. Harvey [5] in 1814, and of Story J. in the Amiable Nancy [6] in 1818. In Emblen v. Myers [7] in 1860 Pollock C.B. used the expression "vindictive damages"; in 1861 Byles J., in Bell v. Midland Railway Co. [8] , termed them "retributory damages"; in 1889 Kay J., in Dreyfus v. Peruvian Guano Co. [9] , called them "vindictive"; in 1891 Lord Hobhouse, for the Privy Council in McArthur & Co. v. Cornwall [10] , called them "penal"; in The Mediana [11] Lord Halsbury L.C. called them "punitive damages"; in 1908, in Anderson v. Calvert [1] , Lord Cozens Hardy and Lord Wrenbury (then in the Court of Appeal), used the word "punitive"; in 1913, in Smith v. Streatfeild [2] , Banks J. called them "vindictive" damages. See also Willoughby Municipal Council v. Halstead [3] ." This principle has been clearly recognized by this Court in the subsequent cases of The Herald and Weekly Times Ltd. v. McGregor [4] ; Triggell v. Pheeney [5] ; Williams v. Hursey [6] ; and Fontin v. Katapodis [7] and I think we should adhere to it. It is a broad principle which I think has been acted upon for a century and upwards, it has been part of the law of this country for many years, the limitation of the application of the principle to the categories specified in Rookes v. Barnard [8] is not, in my view, justified either upon principle or upon authority, and the adoption of those categories would not remove the suggested anomaly, but on the contrary, introduce others. In these circumstances, I am firmly of the opinion that the observations in Rookes v. Barnard [8] do not express the law of this country and that they should not be followed.
1. [1964] A.C. 1129.
2. (1920) 29 C.L.R. 71.
3. (1920) 29 C.L.R., at p. 77.
4. (1920) 29 C.L.R., at p. 81.
5. (1814) 5 Taunt. 442 [128 E.R. 761].
6. (1818) 3 Wheat. 546, at p. 558 [4 U.S. (S.C.) 287, at p. 291] [noted in 4 Law Ed. 796].
7. (1860) 6 H. & N. 54, at p. 58 [158 E.R. 23, at p. 25].
8. (1861) 10 C.B.(N.S.) 287, at p. 308 [142 E.R. 462, at p. 471].
9. (1889) 42 Ch.D. 66, at p. 77.
10. [1892] A.C. 75, at p. 88.
11. [1900] A.C. 113, at p. 118.
12. (1908) 24 T.L.R. 399, at pp. 400, 401.
13. [1913] 3 K.B. 764, at p. 769.
14. (1916) 22 C.L.R. 352.
15. (1928) 41 C.L.R. 254.
16. (1951) 82 C.L.R. 497.
17. (1959) 103 C.L.R. 30.
18. (1962) 108 C.L.R. 177.
19. [1964] A.C. 1129.
20. [1964] A.C. 1129.
Menzies J.
In my opinion, despite the arguments addressed to us about other matters, the fate of this appeal depends upon a determination whether or not the direction which the learned trial judge gave about exemplary damages was correct. I choose the adjective "exemplary" in preference to synonyms because it is that adjective which has been adopted by Parliament: see, for instance, Law Reform (Miscellaneous Provisions) Act, 1934 UK, s. 1 (2) (a), and the New South Wales Act of 1944 similarly entitled, s. 2 (2) (a). The direction was that the jury would be justified in awarding the plaintiff exemplary or aggravated damages "in addition to the compensatory component of damages". His Honour said: "You were invited by the plaintiff to award to him exemplary damages. The way it was put to you by Mr. Evatt was that you ought to show to the defendant company that the publication of this sort of libel does not pay. I think those were the words he used. I would suggest that you do not lightly—I do not think any jury would lightly rush in, if I may use that expression, and award exemplary damages; but, nevertheless, if upon a mature consideration of the situation, it appeared to you, for example, that a serious libel was published without being checked, and it was published with the intent of increasing sales and therefore increasing circulation and profits and with a reckless disregard of the plaintiff's right to have his reputation preserved unsullied, then you would be entitled to award exemplary damages—exemplary damages meaning merely damages that are awarded by way of example and discouragement." This direction the Full Court held to be in error. It therefore set aside the verdict of the jury and ordered a new trial limited to damages.
The libels for which the plaintiff had sued were published in two editions of the Sun-Herald of 10th February 1963. The imputation made was a grave one which impugned the plaintiff's fitness to be a member of Parliament. It was that he, being a member of Parliament, had some link with a Russian spy and had been duped by that spy to ask searching questions in Parliament to extract from the Prime Minister and the Minister for Defence information about secret defence establishments in Australia. In the next issue of the defendant's paper—that is, that of 17th February 1963—under the heading "Apology", the following statement was published by the defendant: "In the early editions of the Sun-Herald last Sunday a report was published under the heading "Labor Link with Red Spy". It stated that some Government members were expected to allege in the Federal Parliament that there had been association between some Labor members and the Russian spy Ivan Skripov and that he had duped them. The report was withdrawn as soon as it came to the notice of a senior executive of the publishing company. The Sun-Herald regrets that the report implied that some Labor members had an improper association with Skripov. It apologizes for publication of the report." It seems to me that the implication here attributed to the earlier publication, viz. that of an improper association between the plaintiff and Ivan Skripov, could be regarded as an aggravation of what had been published previously, for the charge of an improper association with a spy might be thought to go beyond the charge of being the foolish dupe of a spy. This latter charge, it is to be observed, was not withdrawn. Having regard to the terms of this apology, it is not surprising that under cross-examination the plaintiff said that, in his view, this second publication was not a sincere apology. However, more was to follow. On 11th March 1964 the defendant's solicitors wrote to the plaintiff's solicitors a letter saying, inter alia: "As you are aware, the article of which your client complains did not refer to him by name and as soon as its publication was noticed by a senior executive of our client company steps were taken to have it withdrawn from our client's newspaper and from further publication. At the first available opportunity and without request from your client an apology was published; in the belief that your client would not want us to identify him, the apology made no specific reference to him, a course which did not meet with your client's disapproval. In the course of the recent proceedings by your client against Australian Consolidated Press Limited, the article published by our client was referred to and tendered in evidence. It was stated in open court by counsel for your client that it referred to your client and, indeed, it was claimed that the article published in the Sunday Telegraph had been lifted from our client's newspaper. All these matters have received publicity in the morning and evening Press, so that there may be now no doubts in the minds of the reading public that he was one of the persons referred to in the article complained of. Realizing that your client's particular concern is his reputation, our client is now prepared to reiterate its apology to your client by name in open court and also to pay all your client's costs to date. Will you please let us know what are your client's instructions in this matter." This means that, in satisfaction for a serious libel for which it had been sued for heavy damages, the defendant was offering "to reiterate its apology to your client by name in open court and also to pay all your client's costs to date" and no more. This letter was dated the same day as that on which the jury which had tried an action by the plaintiff against Australian Consolidated Press Limited had returned a verdict in favour of the plaintiff for £15,000 in respect of a libel similar to that published by the defendant. This offer could be regarded not as a genuine attempt on the part of the defendant to right a grave wrong which it had done to the plaintiff, but merely as an attempt to escape from the consequences of its wrongdoing. Finally, at the hearing and before the plaintiff's counsel could open his case to the jury, the defendant's counsel offered an apology in open court to be published in its newspaper. The apology was for having inserted the article, together with an expression of regret for any inconvenience or annoyance it may have caused the plaintiff. The offer to pay full costs to date was repeated. Again the jury might think that the expression of regret for "any inconvenience or annoyance" that the defendant may have caused the plaintiff was, in the circumstances, something less than a penitent defendant would have offered.
In the foregoing circumstances, it was hardly surprising that, at the end of a trial lasting six days—notwithstanding that damages only were in issue—in which the plaintiff was cross-examined to indicate that he was entitled to no more than a withdrawal of the libellous imputation, the jury should bring in verdicts of £5,000 in respect of the first count which related to the edition in which the article was published under the heading "Spy Duped Labor MPs", and £8,000 in respect of the second count relating to the publication of the same article under the heading "Labor Link with Red Spy".
One of the defendant's grounds of appeal to the Full Court was that, independently of any misdirection, the damages were excessive, and this contention did there receive some support, for Herron C.J. said " in my opinion the verdict might well be regarded as excessive upon general principles". At the hearing before us, I was left in some doubt about the defendant's attitude to this matter in the event of this Court disagreeing with the Full Court and upholding the direction that exemplary damages could be awarded. A reading of the transcript has not removed that doubt. However, if it was open to the jury to have awarded exemplary damages, I would certainly not regard the verdict as excessive. An infamous personal attack, which the jury could think was nothing but a concoction, was featured upon the front page of the defendant's paper under banner headlines and advertised on television for no purpose other than to induce people to buy the paper. To this matter I must return later.
Before coming to what I regard as the real point of the case, there is a matter to be mentioned merely to be put on one side. Mr. Woodward, for the defendant, laid great stress upon the apologies made or tendered and, as I followed him, he did so not merely as matters to be taken into account in mitigation of damages—a point already discussed and one entirely for the jury—but as, in some way or other, negating malice or ill will on the part of the defendant towards the plaintiff. As I indicated during the argument, I fail to grasp the significance of the apologies to any matter in issue upon this appeal. Whether or not they establish, or even tend to establish, the absence of malice or ill will was a matter for the jury, and it is not surprising that the jury remained unimpressed.
I turn now to the question whether the direction that exemplary damages could in the circumstances be awarded was, as the Full Court decided, a misdirection.
With respect to the different opinion of Wallace J., I think the direction was correct unless the law in Australia is what the House of Lords in Rookes v. Barnard [1] stated the law of England to be. Independently of that case, I think exemplary damages could have been awarded on the simple ground that it was open to the jury to find that the defendant recklessly and arrogantly attacked the plaintiff's reputation for the purpose of publishing a sensational story to attract the custom of newspaper readers. That conduct, if so found, was malicious, wilful and reprehensible. It was a "contumelious disregard" of the rights of the plaintiff to his reputation. See Whitfeld v. De Lauret & Co. Ltd. [1] .
1. [1964] A.C. 1129.
2. (1920) 29 C.L.R. 71, at p. 77.
The next question is whether the law in Australia is as stated by the House of Lords in Rookes v. Barnard [2] . The question of damages in that case arose upon a cross appeal by the defendant to the action and the decision of the House that there should be a retrial because the jury had been wrongly directed that punitive damages could be awarded to the plaintiff was based upon the opinion of Lord Devlin, with which the other members of the House agreed.
1. [1964] A.C. 1129.
Lord Devlin, having stated that exemplary damages are anomalous, considered whether "it is open to the House to remove an anomaly from the law of England" [3] . Having considered earlier authority going back to Wilkes v. Wood [4] , his Lordship said: "These authorities clearly justify the use of the exemplary principle; and for my part I should not wish, even if I felt at liberty to do so, to diminish its use in this type of case where it serves a valuable purpose in restraining the arbitrary and outrageous use of executive power" [5] . His Lordship then considered cases, other than those concerned with the arbitrary and outrageous use of executive power, in which exemplary damages had been awarded. At the conclusion of this survey, his Lordship said: "These authorities convince me of two things. First, that your Lordships could not, without a complete disregard of precedent, and indeed of statute, now arrive at a determination that refused altogether to recognize the exemplary principle. Secondly, that there are certain categories of cases in which an award of exemplary damages can serve a useful purpose in vindicating the strength of the law and thus affording a practical justification for admitting into the civil law a principle which ought logically to belong to the criminal. I propose to state what these two categories are; and I propose also to state three general considerations which, in my opinion, should always be borne in mind when awards of exemplary damages are being made. I am well aware that what I am about to say will, if accepted, impose limits not hitherto expressed on such awards and that there is powerful, though not compelling, authority for allowing them a wider range. I shall not, therefore, conclude what I have to say on the general principles of law without returning to the authorities and making it clear to what extent I have rejected the guidance they may be said to afford" [1] .
1. [1964] A.C., at p. 1221.
2. (1763) Lofft 1 [ 98 E.R. 489].
3. [1964] A.C., at p. 1223.
4. [1964] A.C., at pp. 1225, 1226.
Thus, the first category of cases in which punitive damages could be awarded his Lordship described as cases of "oppressive, arbitrary or unconstitutional action by the servants of the government" [2] . Cases in the second category are those "in which the defendant's conduct has been calculated by him to make a profit for himself which may well exceed the compensation payable to the plaintiff" [2] . In elaboration, his Lordship said: "It is a factor also that is taken into account in damages for libel; one man should not be allowed to sell another man's reputation for profit. Where a defendant with a cynical disregard for a plaintiff's rights has calculated that the money to be made out of his wrongdoing will probably exceed the damages at risk, it is necessary for the law to show that it cannot be broken with impunity. This category is not confined to moneymaking in the strict sense. It extends to cases in which the defendant is seeking to gain at the expense of the plaintiff some object—perhaps some property which he covets—which either he could not obtain at all or not obtain except at a price greater than he wants to put down. Exemplary damages can properly be awarded whenever it is necessary to teach a wrongdoer that tort does not pay" [3] .
1. [1964] A.C., at p. 1226.
2. [1964] A.C., at p. 1226.
3. [1964] A.C., at p. 1227.
His Lordship's judgment continued with a statement of three considerations to be borne in mind when awards of exemplary damages are being considered. These are: (1) "the plaintiff cannot recover exemplary damages unless he is the victim of the punishable behaviour"; (2) "the power to award exemplary damages constitutes a weapon that, while it can be used in defence of liberty, as in the Wilkes Case, can also be used against liberty"; and (3) "the means of the parties, irrelevant in the assessment of compensation, are material in the assessment of exemplary damages. Everything which aggravates or mitigates the defendant's conduct is relevant" [4] . On the basis of this reasoning and after observing that some of the cases where an award of exemplary damages had been upheld could be explained as cases of aggravated compensatory damages, his Lordship reached the conclusion that it was necessary to overrule Loudon v. Ryder [5] and express dissent from much of the reasoning in Owen and Smith (trading as Nuagin Car Service) v. Reo Motors (Britain) Ltd. [1] and Williams v. Settle [2] . His Lordship then stated: "This conclusion will, I hope, remove from the law a source of confusion between aggravated and exemplary damages which has troubled the learned commentators on the subject. Otherwise, it will not, I think, make much difference to the substance of the law or rob the law of the strength which it ought to have. Aggravated damages in this type of case can do most, if not all, of the work that could be done by exemplary damages. In so far as they do not, assaults and malicious injuries to property can generally be punished as crimes, whereas the objectionable conduct in the categories in which I have accepted the need for exemplary damages are not, generally speaking, within the criminal law and could not, even if the criminal law was to be amplified, conveniently be defined as crimes. I do not care for the idea that in matters criminal an aggrieved party should be given an option to inflict for his own benefit punishment by a method which denies to the offender the protection of the criminal law" [3] .
1. [1964] A.C., at pp. 1227, 1228.
2. [1953] 2 Q.B. 202.
3. (1934) 151 L.T. 274.
4. [1960] 1 W.L.R. 1072.
5. [1964] A.C., at p. 1230.
The question for us now is whether, in a case where the award of exemplary damages has not been authorized by statute and is not concerned with unlawful executive action, exemplary damages can be awarded only if "the defendant's conduct has been calculated by him to make a profit for himself which may well exceed the compensation payable to the plaintiff" [4] .
1. [1964] A.C., at p. 1226.
The first thing to be said is that in Australia, as in England prior to Rookes v. Barnard [5] , such a limitation upon the power to award exemplary damages had not been perceived, with the consequence that to accept the limitation now adopted by the House of Lords would involve a radical departure from what has been regarded as established law. It is not merely that in the authorities there is nothing to support the limitation adopted by the House of Lords but the law has from time to time been stated in different terms. See Whitfeld v. De Lauret & Co. Ltd. [6] ; The Herald and Weekly Times Ltd. v. McGregor [7] ; Triggell v. Pheeney [8] ; and Fontin v. Katapodis [9] . It is, perhaps, of more importance that it has always been taken for granted that damages beyond restitutio in integrum can be awarded to punish a defendant for reprehensible misconduct in cases falling outside the limits of the decision of the House of Lords in Rookes v. Barnard [5] . Thus, for instance, in cases of trespass "high-handed procedure or insolent behaviour" [1] , to use the language of the Earl of Halsbury L.C. in The Mediana [2] , has been regarded as warranting the award of exemplary damages. In Fontin v. Katapodis [3] , Owen J., with the concurrence of the Chief Justice, expressed this common understanding in Australia when he said in an assault case: "In a proper case the damages recoverable are not limited to compensation for the loss sustained but may include exemplary or punitive damages as, for example, where the defendant has acted in a high-handed fashion or with malice" [4] . Again, in libel cases what Farwell L.J. said in Jones v. E. Hulton & Co. [5] represents the general understanding of the law in Australia, viz. "Such newspapers as publish libellous statements do so because they find that it pays: many of their readers prefer to read and believe the worst of everybody, and the newspaper proprietors cannot complain if juries remember this in assessing damages" [6] . Thus, to use McTiernan J's phrase in Smith's Newspapers Limited v. Becker [7] , "the deserts of" the defendant in a libel action are not to be left out of account in assessing damages. Furthermore, breach of contract of marriage has always been treated as warranting exemplary damages in an appropriate case on the basis stated by Bowen L.J. in Finlay v. Chirney [8] where his Lordship said: "The question we have to decide today relates to a class of action which, though in its form and substance contractual, differs from other forms of actions ex contractu in permitting damages to be given as for a wrong. This double aspect of an action for breach of promise creates the perplexity in the present instance. On which side of the line is to fall an action which is based on the hypothesis of a broken contract, yet is attended with some of the special consequences of a personal wrong, and in which damages may be given of a vindictive and uncertain kind, not merely to repay the plaintiff for temporal loss but to punish the defendant in an exemplary manner? [9] " Must it now be said that Bowen L.J. was in error?
1. [1964] A.C. 1129.
2. (1920) 29 C.L.R. 71.
3. (1928) 41 C.L.R. 254.
4. (1951) 82 C.L.R. 497.
5. (1962) 108 C.L.R. 177.
6. [1964] A.C. 1129.
7. [1900] A.C., at p. 118.
8. [1900] A.C. 113.
9. (1962) 108 C.L.R. 177.
10. (1962) 108 C.L.R., at p. 187.
11. [1909] 2 K.B. 444.
12. [1909] 2 K.B., at p. 483.
13. (1932) 47 C.L.R. 279, at p. 315.
14. (1888) 20 Q.B.D. 494.
15. (1888) 20 Q.B.D., at p. 504.
My examination of the English and Australian authorities has not shown that before Rookes v. Barnard [10] the common law in relation to exemplary damages was as the House of Lords has now stated it to be. Indeed, the opinion of Lord Devlin recognizes that what is there stated to be the law is not what was previously understood to be the law and his Lordship's examination began with an inquiry whether the House could "remove an anomaly from the law of England" [1] . What the House did was not to remove an anomaly but, for reasons of policy, to limit what was regarded as an anomaly to cases "in which an award of exemplary damages can serve a useful purpose " [2] . Conceding that a line must be drawn somewhere, what the House of Lords has done is to draw a different line from that drawn previously by lower courts in England. Naturally enough, the law as it stood in Australia and in the United States of America—see Restatement of the Law of Torts, par. 908, Punitive Damages—seems not to have been considered.
1. [1964] A.C. 1129.
2. [1964] A.C., at p. 1221.
3. [1964] A.C., at p. 1226.
Upon full consideration, I do not think that the decision of the House of Lords should force this Court to conclude that the law here is other than what it has for so long been taken to be, viz. that where an action is based upon a personal wrong and the defendant has acted arrogantly, mindful only of its own interests and, to use the phrase of Knox C.J., "in contumelious disregard" of the rights of the plaintiff, "damages may be given of a vindictive and uncertain kind, not merely to repay the plaintiff for temporal loss but to punish the defendant in an exemplary manner" for his outrageous conduct (see Finlay v. Chirney [3] ). In Australia, no one could say that, if the vigorous assertion and application of this rule were to curb the malice and arrogance of some defamatory publications, it would not serve a useful purpose in vindicating the strength of that part of the law which protects people's reputations, and would afford that protection without encroaching in any way upon the liberty of the Press. A vigilant concern with freedom of speech is in no way inconsistent with the recognition that malicious and callous disregard for a man's reputation deserves discouragement: cf. New York Times Co. v. Sullivan [4] .
1. (1888) 20 Q.B.D., at p. 504.
2. (1964) 11 Law. Ed. 2d 686, Headnote 20.
In this case the direction of the learned trial judge was, in effect, that "the deserts of" the defendant should not be left out of account and that the "spirit and intention" of the defendant are matters for consideration in assessing damages, to use the language of Tindal C.J. in Pearson v. Lemaitre [5] . In the circumstances I consider that the defendant's spirit and intention could be regarded as warranting exemplary damages and that, in the result, the defendant got no more than, what the jury could properly think, were its deserts.
1. (1843) 5 Man. & G. 700 [134 E.R. 742].
I would therefore allow the appeal and restore the jury's verdicts of £5,000 and £8,000 damages.
Windeyer J.
The trial of this action at nisi prius took place not long after that of an action the plaintiff had brought against another defendant, Australian Consolidated Press Limited, for various publications in its newspapers, one of which was substantially the same as that in question in the present case. In each case the jury found for the plaintiff. Each defendant moved in the Full Court of the Supreme Court for a new trial. In each case one ground taken was that the damages awarded were excessive. And in each case one question argued was whether the jury had been misdirected by being told that they were at liberty to give exemplary damages. In this case the only issue fought at the trial was the quantum of damages, liability not being disputed.
The argument about damages became largely centred upon what was said in Rookes v. Barnard [1] . In the judgments in the Supreme Court the matter is discussed as raising a deep question of the doctrine of precedent and the authority in Australia of decisions of the House of Lords. I do not think it is necessary to sound these depths in this case. I recently stated, in Skelton v. Collins [2] , my belief on this. I shall not repeat what I said there. Some of the reasons given in earlier times for awarding exemplary damages for insulting words, such as the need to discourage duelling, have disappeared today. But law has often used its old weapons instead of forging new ones. If some passages in what was said in the House of Lords in Rookes v. Barnard [1] are to be understood in an absolute way, part of what had long been taken to be the common law has been overthrown in England. The House of Lords can of course overturn for England what had been thought to be established doctrine by declaring it to have been mistaken. But it indicates no disrespect for the high authority of their Lordships' House, no breaking of the ties light as air, if we, having a duty to abide by the law that we have inherited and having in mind the way it has been declared here, feel unable to join in this.
1. [1964] A.C. 1129.
2. (1966) 115 C.L.R. 94.
3. [1964] A.C. 1129.
Nevertheless, for myself, I accept what I take to be the broad principle that is stated in that part of Lord Devlin's judgment that relates to the law of defamation. That does not mean that I accept the narrow application of it that counsel for the newspaper companies urged upon us. If that were the effect of what the House of Lords has said I would only say, with respect, that we ought not to follow it. It would be to restrict the general principle, that exemplary damages may be given to make it clear that tort does not pay, to particular instances which Lord Devlin illustratively described. It is general conceptions that count in the development of the common law, and I respectfully adopt what his Lordship said of this in another case: "The general conception can be used to produce other categories in the same way. An existing category grows as instances of its application multiply until the time comes when the cell divides": Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1] . An attempt to subsume incongruous instances and anomalies under one rule may make obvious the need to redefine the rule and thus to limit a category. That is what has been done, it seems, for England in relation to exemplary damages: but not, as I understand it, so drastically as the argument supposed. I shall return to this later. First, it is necessary to notice that, whatever be the position in torts other than defamation, the distinction between aggravated and exemplary damages is not easy to make in defamation, either historically or analytically; and in practice it is hard to preserve. The formal distinction is, I take it, that aggravated damages are given to compensate the plaintiff when the harm done to him by a wrongful act was aggravated by the manner in which the act was done: exemplary damages, on the other hand, are intended to punish the defendant, and presumably to serve one or more of the objects of punishment—moral retribution or deterrence.
1. [1964] A.C. 465, at p. 525.
The difficulty of the matter lies in uncertainty of the basis on which damages for defamation are given; and in a still deeper uncertainty as to the fundamental principle of liability in the law of torts, compensation and fault competing for first place. The muddle the matter is in appears from an informative article "Problems of Assessing Damages for Defamation", by Mr. Samuels in the Law Quarterly Review [2] . The law of defamation and of damages for defamation has a complicated history: see the articles by Sir William Holdsworth in the Law Quarterly Review [3] . References to some aspects, presently relevant, appear in the sketch "Exemplary Damages for Defamation", by L. F. S. Robinson [4] . Compensation is the dominant remedy if not the purpose of the law of torts today. But fault still has a place in many forms of wrongdoing. And the roots of tort and crime in the law of England are greatly intermingled. Some things that today are seen as anomalies have roots that go deep, too deep for them to be easily uprooted.
1. Law Quarterly Review (1963) 7963.
2. Law Quarterly Review (1924) 40302, 397; (1925) Law Quarterly Review 4113.
3. (1929) 3 Australian Law Journal pp. 250, 292.
Defamation is a criminal offence and also a civil wrong. We heard in the course of the argument some complaint of a victim of a criminal act having an option to pursue his civil remedy and in this to seek punitive damages instead of seeking to set the criminal law in motion. But the law allows this, and not only for defamation; and perhaps wisely so. One lesson of eighteenth century events may be that libels, especially those arising out of private feuds and partisan political controversy, ought not, except in very gross cases, to be made the subject of criminal prosecutions.
When it is said that in an action for defamation damages are given for an injury to the plaintiff's reputation, what is meant? A man's reputation, his good name, the estimation in which he is held in the opinion of others, is not a possession of his as a chattel is. Damage to it cannot be measured as harm to a tangible thing is measured. Apart from special damages strictly so called and damages for a loss of clients or customers, money and reputation are not commensurables. It seems to me that, properly speaking, a man defamed does not get compensation for his damaged reputation. He gets damages because he was injured in his reputation, that is simply because he was publicly defamed. For this reason, compensation by damages operates in two ways—as a vindication of the plaintiff to the public and as consolation to him for a wrong done. Compensation is here a solatium rather than a monetary recompense for harm measurable in money. The variety of the matters which, it has been held, may be considered in assessing damages for defamation must in many cases mean that the amount of a verdict is the product of a mixture of inextricable considerations. One of these is the conduct of and the intentions of the defendant, in particular whether he was actuated by express malice. Yet in the abstract the harm that a plaintiff suffers cannot be measured by, nor does it necessarily depend at all upon, the motive from which the defendant acted or upon his knowledge or intentions. These, however, have always been regarded as important in estimating damages. Indeed, the common-law rule that truth is a complete defence seems to reflect this. It has been rationalized by saying that the law does not protect the reputation that a man has, but only the reputation that he deserves. But is it not a mistake to suppose that there is not a deeper explanation? The law of defamation descends from more than one source. Among these were the action on the case for words whereby the king's courts took over slander from the local courts, the ancient jurisdiction of the ecclesiastical courts, and the jurisdiction of the Star Chamber. The idea of wilful wrongdoing had a place in the first. It was of the essence of the second; for a man must not bear false witness against his neighbour, he must not of malice harm his neighbour. And it strongly influenced the law of libel in the Star Chamber. The Star Chamber was concerned with libel as a criminal act, a disturbance of the peace, yet in some cases it also allowed damages to the person defamed. It is enough to say here that when the law of libel was taken into the common law, although in a general sense compensation was the remedy given, the conduct of the defendant remained always a matter that the jury might consider. Damages being at large, it became in time indisputable that a jury could in all cases consider "not only what the plaintiff should receive, but what the defendant should pay". These words come from Forsdike v. Stone [1] . That was a case of slander, but the proposition was not new. It was applicable to defamation generally and has often been repeated.
1. (1868) L.R. 3 C.P. 607, at p. 611.
Accepting that a jury may weigh the conduct of the defendant either in mitigation or aggravation of damages, how, if they think it an aggravation, can it be said that no punitive element entered into the assessment? The theory is that in such a case the damages are still only compensatory because the more insulting or reprehensible the defendant's conduct the greater the indignity that the plaintiff suffers and the more he should receive for the outrage to his feelings. That defamation may produce indignity and humiliation and that these can attract monetary compensation is no new doctrine. It goes back to the early Middle Ages, to a time before the king's courts gave any remedy for defamation: see Pollock & Maitland, 2nd ed. (1923), vol. 2, pp. 536-538. In 1928 Higgins J. remarked that it "seems to be right so long as the theory stands that "the jingling of the guinea helps the hurt that honour feels" ": The Herald and Weekly Times Ltd. v. McGregor [2] . Insult, as well as injury to reputation, thus merits compensation. This Tennysonian explanation is convenient, but not altogether convincing. Two objections may be made. First, the satisfaction that the plaintiff gets is that the defendant has been made to pay for what he did. Guineas got from the defendant jingle more pleasantly than would those given by a sympathetic friend. Secondly, conceding that an indignity suffered must be paid for, why is the degree of the indignity that the plaintiff suffers to be measured by considering what was in the mind of the defendant, the malice or motive which moved him? It seems to me that in truth a punitive or vindictive element does lurk in many cases in which the damages were aggravated by the defendant's conduct.
1. (1928) 41 C.L.R., at p. 272.
What the House of Lords has now done is, as I read what was said, to produce a more distinct terminology. Limiting the scope of terms that often were not distinguished in application makes possible an apparently firm distinction between aggravated compensatory damages and exemplary or punitive damages. How far the different labels denote concepts really different in effect may be debatable. I suspect that in seeking to preserve the distinction we shall sometimes find ourselves dealing more in words than ideas. Telling the jury in a defamation action that compensation is to be measured having regard to aggravating circumstances the result of the defendant's conduct might not result in a verdict different from that which they would return if they were told that because of that conduct they could give damages by way of example. The judgment of Knox C.J., Gavan Duffy and Starke JJ., in The Herald and Weekly Times Ltd. v. McGregor [1] , points out that "it does not matter under what name or denomination the Judge classified the damages if he was right in instructing the jury that a particular fact was one for their consideration in assessing damages". But in that case the jury had been told that they could not give exemplary damages. It can never be right to tell a jury that they are at liberty to award exemplary damages if the case is not one in which it would be proper for them to do so. And I do not doubt that in some cases it might be necessary for the judge to tell them expressly that, while they could take various aggravating matters into consideration in weighing the compensation the plaintiff should have, they should not add anything simply to punish the defendant or by way of example to others.
1. (1928) 41 C.L.R., at p. 263.
Returning to Rookes v. Barnard [2] —It is not necessary to examine here the authorities to which Lord Devlin there referred. I would only say that I take leave to doubt whether what has been called the exemplary principle is of such recent appearance in the law as the second half of the eighteenth century, although it seems that it was then that the expression "exemplary damages" was first used. And I doubt whether the famous cases concerning Wilkes and the North Briton should be regarded as the origin of the idea. However, like any attempt to trace the lineage of an idea, much depends on how far you wish to go back and how much certainty you demand in the connecting links. Exemplary damages, so described, have been said to be given for assaults because of the insult involved. The relationship between the words "insult" and "assault" may perhaps have contributed to this, one meaning of insult being attack. For example, when Fitzherbert wrote, an action of trespass for assault and battery was quare in ipsum insultum fecit et ipsum verberavit. However that may be, it is noteworthy that in Merest v. Harvey [1] (one of the cases referred to by Lord Devlin) Heath J. said: "I remember a case where a jury gave £500 damages for merely knocking a man's hat off; and the Court refused a new trial It goes to prevent the practice of duelling, if juries are permitted to punish insult by exemplary damages."
1. [1964] A.C. 1129.
2. (1814) 5 Taunt. 442, at p. 444 [128 E.R. 761].
We were asked to read Lord Devlin's statement of the second category of cases fit for exemplary damages as if it were not descriptive, but exhaustively definitive. We were asked to construe it literally and rigidly as if it were a statute. We were asked to subordinate the statement of principle to an illustration of that principle. I understand the principle expressed by his Lordship to be that the law does not allow a man to do a wrong with impunity simply because he thinks that it will be worth his while to pay damages to the person wronged. I do not think that the principle is limited, or that his Lordship really intended to limit it, to cases where the advantage that the wrongdoer hopes to gain by his wrongdoing is money or some tangible thing. The law can ensure not only that the publication of defamation must be paid for, but also that the wilful publication of indefensible defamation is not made to pay. But this does not mean that, as was suggested, we are to suppose a deliberate calculation of profit and loss in terms of money, almost a pencil and paper affair, and that only in such a case can exemplary damages be given. An equally untenable proposition was put forward on the other side. Those who publish newspapers, it was said, do so with a view to profit: the profit depends, directly or indirectly, on, among other factors, the circulation of the paper: the publication of sensational matter, obviously defamatory, calculated to increase the circulation of the paper may therefore in all cases attract exemplary damages. There is no warrant for this.
What we should welcome in the decision in Rookes v. Barnard [2] is its emphasis that exemplary damages must always be based upon something more substantial than a jury's mere disapproval of the conduct of a defendant. This of course is old doctrine. The decision makes clear too, if it was ever in any doubt, that all matters that may aggravate compensatory damages do not of themselves justify the addition or inclusion of a further purely punitive element. But we should not, I think, treat the decision as excluding exemplary damages from any of those forms of wrongdoing for which, in the past, the Court has said they might be given. It is however not enough, and this Court has never said that it was enough, to justify an award of exemplary damages that the tort should be of a kind for which such damages are permissible. The wrong must be one of a kind for which exemplary damages might be given; and the facts of the particular case must be such that exemplary damages could properly be given. Quite apart from anything that has recently been said in the House of Lords and the Court of Appeal, there must (as Walsh J. pointed out in this case in the Supreme Court) be evidence of some positive misconduct to justify a verdict for exemplary damages. There must be evidence on which the jury could find that there was, at least, a "conscious wrongdoing in contumelious disregard of another's rights". I select that particular phrase out of many, because it has been used more than once in this Court. It appears in the first edition of Salmond on Torts, p. 102. It is not much removed in meaning from the cynical disregard of a plaintiff's rights by a calculating defendant in Lord Devlin's illustration. Whatever words be used there must be evidence to support them. Epithets without evidence will not suffice. Was there in this case evidence of conduct by the defendant which could merit punishing it by awarding a greater sum to the plaintiff? I think not. I agree, therefore, that the order of the Supreme Court for a new trial should stand. I do not mean that the libel was not a serious one. The defendant apparently recognized that it was, for it hastily withdrew it from the later editions of its paper. But it had appeared: the paper had a large circulation, and the defendant had advertised on television that a sensational story would appear in it. The mischief that was in the article as I see it I shall mention in my judgment in the other case, that of Australian Consolidated Press Ltd. v. Uren [1] . Substantial damages might be awarded by a jury; and I do not say that if the jury had been properly directed a verdict for the amount they awarded might not have been allowed to stand. It is because I think that unfortunately they were not properly directed that I consider a new trial to be necessary.
1. [1964] A.C. 1129.
2. (1966) 117 C.L.R. 185.
As to the evidence that the defendant had already recovered damages from another newspaper proprietor in respect of the publication of the same libel: Section 24 of the Act makes this evidence admissible in mitigation of damages. Since the purpose of admitting it is to mitigate damages, it seems to me plain that the amount of damages recovered may be proved and not merely the fact that some damages had been recovered. It is however probably desirable that the judge explain to the jury that the evidence is admitted to mitigate damage by shewing the extent to which the plaintiff has already been compensated for the harm done him by the publication of the defamatory statements, and that it is not admitted for the purpose of fixing a scale of damages. Unless this be done the evidence might inflate rather than mitigate damages.
As for the apology: It was not accompanied by a payment into Court or an offer of payment. It was for the jury to say what weight, if any, they would give to it in mitigation. It was for them to consider how far, if at all, it made amends. An apology can be a tricky thing in a libel action. I express no opinion at all about this one. The learned trial judge summed up the case to the jury carefully and fairly on this and other matters. Apart from his ruling about exemplary damages, no complaint is, I think, now made of what he said.
I would dismiss the appeal.
Owen J.
The plaintiff, the present appellant, brought an action of defamation against the defendant alleging that on 10th February 1963, in two successive editions of a Sunday newspaper published by it, it had libelled him. The declaration contained two counts, each setting out one of the publications of which the appellant complained. The only difference between them appears to be that in the first the headlines announced "Spy Duped Labor MPs—Canberra Charge" while the headlines in the second publication read "Labor Link with Red Spy—Canberra Charge".
At the trial it was conceded that, although the plaintiff's name was not mentioned in the publications, he was one of the persons to whom they referred and that they were defamatory of him. The only contested issue was one of damages and the jury returned a verdict in the plaintiff's favour on both counts, awarding £5,000 on the first count and £8,000 on the second. The evidence showed that at all relevant times the plaintiff, a man of good fame and character, was a member of the Commonwealth Parliament who had served overseas with the Australian Imperial Forces during the war and had been taken prisoner by the Japanese when the island of Timor was captured by them and the libels might well be regarded by a jury as casting serious reflections on him. Their substance was that two members of Parliament who had asked questions in the House seeking information on defence matters had, in doing so, been the dupes of a man named Skripov, a member of the Soviet Embassy staff in Australia who had, shortly before the publications appeared, been declared persona non grata by the Commonwealth Government because of his underground activities, an occurrence which had aroused much public interest and concern. It was conceded at the trial that the plaintiff had had no association with Skripov and the case was one in which the jury might well have taken the view that a substantial award of damages was called for.
In his summing up, however, the learned trial judge directed the jury that they might, if they thought fit, award "exemplary damages meaning merely damages that are awarded by way of example and discouragement" in addition to whatever amount they thought proper to award by way of compensation. The defendant appealed to the Full Supreme Court (Herron C.J., Walsh and Wallace JJ.) which ordered a new trial limited to damages and against that order the plaintiff, by leave, now appeals to this Court. In the Full Supreme Court, their Honours took the view that on the evidence the case was not one in which it was open to the plaintiff to recover exemplary—and by that I mean punitive—damages; that in this respect the learned trial judge had misdirected the jury; and that there should therefore be a new trial of the issue of damages. In so deciding their Honours were called upon to consider the recent decision of the House of Lords of Rookes v. Barnard [1] in which Lord Devlin, with whom the other members of the House agreed, laid down a number of propositions placing limits far narrower than those which had hitherto been thought to exist upon the right of a jury to award punitive damages in certain types of action. In the argument put to the Full Court on behalf of the defendant, much reliance was placed upon that decision and it was said that it should be followed and applied even if it was found to be in conflict with decisions of this Court. This necessarily involved a consideration of what had been said by Dixon C.J. in Parker's Case [2] , a statement with which every member of the High Court agreed. Walsh and Wallace JJ., and I think Herron C.J. also, were of opinion that whether Rookes v. Barnard [1] was applied or not, the case was not one in which, on the evidence as it stood, punitive damages could properly be awarded. But since the jury had been directed that they could award such damages and a new trial was therefore necessary they considered that they should deal with the arguments based upon Lord Devlin's speech. In the result a majority of the Court (Herron C.J. and Walsh J.) took the view that Rookes' Case [1] , which had been applied by the Court of Appeal in McCarey v. Associated Newspapers Ltd. [No. 2] [2] and Broadway Approvals Ltd. v. Odhams Press Ltd. [No. 2] [3] and by Widgery J. in Manson v. Associated Newspapers Ltd. [4] , should be followed notwithstanding the fact that what Lord Devlin had said conflicted with a number of decisions of this Court which proceeded upon the basis that the right to award punitive damages covered a wider field than that marked out in Rookes' Case [1] . The third member of the Full Court, Wallace J., was of opinion that the High Court decisions settled the law in Australia and should be followed.
1. [1964] A.C. 1129.
2. (1963) 111 C.L.R. 610, at pp. 632, 633.
3. [1964] A.C. 1129.
4. [1964] A.C. 1129.
5. [1965] 2 Q.B. 86.
6. [1965] 1 W.L.R. 805.
7. [1965] 1 W.L.R. 1038.
8. [1964] A.C. 1129.
The hearing of the appeal in this Court followed immediately upon the conclusion of the argument in an appeal in another defamation action of Australian Consolidated Press Ltd. v. Uren [5] in which the same plaintiff had recovered substantial damages for the publication of libellous statements in another Sydney newspaper. In that appeal, as in this, the decision in Rookes' Case [1] was debated at length and counsel for the defendant in the present case adopted the arguments of counsel for the defendant in the earlier one in support of his contention that this Court should apply that decision even if it conflicted with its earlier decisions. In both appeals counsel for the plaintiff submitted that we should not follow Rookes' Case [1] ; that it was inconsistent with a number of decisions in this and other Australian courts and that we should apply what, until that decision was given, was regarded, both here and in England, as being the common law governing the right to award punitive damages.
1. (1966) 117 C.L.R. 185.
2. [1964] A.C. 1129.
3. [1964] A.C. 1129.
It would be sufficient in the present appeal for me to say that whether Rookes' Case [1] be accepted and applied or not I have found no reason to differ from the conclusion reached by the Full Supreme Court that, on the evidence adduced, the case was not one in which it was open to the jury to award punitive damages and that in this respect the learned trial judge fell into error. Their Honours set out in considerable detail the material bearing upon the question and the reasons for their conclusion and I need not repeat what they said. But, since it is possible that on the new trial additional facts will emerge and arguments based upon Lord Devlin's speech may again be raised, I think I should state the views I have formed of that decision.
1. [1964] A.C. 1129.
It is not open to doubt that this and other courts in countries where the common law is in force have, time and again, recognized that there are certain types of tortious acts in which a jury may award damages over and above those required to compensate the plaintiff for the injury suffered by him if it forms the opinion, on evidence justifying that conclusion, that the defendant's conduct in committing the wrong was so reprehensible as to require not only that he should compensate the plaintiff for what he has suffered but should be punished for what he has done in order to discourage him and others from acting in such a fashion. "Vindictive", "penal", "punitive", "exemplary" and the like terms have been used to describe damages of this kind. In actions of defamation, for example, it has been said by this and other courts in Australia and on many occasions by the courts in England that if, in publishing defamatory matter, the defendant was actuated by malice or ill will towards the plaintiff, punitive damages may be awarded. So far as the Australian cases on defamation are concerned it is sufficient to refer to The Herald and Weekly Times Ltd. v. McGregor [1] and Triggell v. Pheeney [2] . The same principle has been recognized in the case of some other tortious acts as, for example, where a defendant is said to have maliciously induced another to commit a breach of a contract made by that other with the plaintiff. Whitfield v. De Lauret & Co. Ltd. [3] is such a case and in the judgment of Isaacs J. [4] will be found references to a number of the English authorities on the subject of punitive damages. More recent cases in England are Tolley v. J. S. Fry and Sons Ltd. [5] ; Knuppfer v. London Express Newspapers Ltd. [6] ; Loudon v. Ryder [7] ; Owen and Smith v. Reo Motors (Britain) Ltd. [8] and Williams v. Settle [9] , in all of which the same principle was recognized. Other cases in this Court to which reference may be made are Williams v. Hursey [10] where the defendants were alleged to have conspired to prevent the plaintiff from continuing in his employment, and Fontin v. Katapodis [11] , an action for trespass to the person. In England, however, the decision in Rookes v. Barnard [12] has put what, with all respect, appear to me to be unduly narrow limits upon what was formerly thought to be the law in order, as Lord Devlin put it, "to remove an anomaly from the law of England" [1] . The anomaly of which his Lordship spoke was that the purpose of awarding punitive damages was not to compensate but to punish and deter and that this confused the civil and criminal functions of the law. After examining a number of the authorities, he concluded, however, that "without a complete disregard of precedent" [2] it was not possible to refuse to recognize "the exemplary principle" and that there were "certain categories of cases in which an award of exemplary damages can serve a useful purpose in vindicating the strength of the law and thus affording a practical justification for admitting into the civil law a principle which ought logically to belong to the criminal" [2] . His Lordship proceeded then to state what, in his opinion, those categories were, agreeing, however, that there was "powerful, though not compelling, authority" [2] opposed to the limitations which he proposed. The categories were three in number. One is where there is statutory authority for the award of exemplary damages. That, of course, is plainly so and requires no discussion. The first of the other two categories, his Lordship said, consists of "oppressive, arbitrary or unconstitutional action by the servants of the government" [2] . Whether the employees of a statutory corporation set up, for example, to manage a country's railway system or to conduct its broadcasting and television services would be regarded as servants of the government for the purposes of this proposition is not clear to me, nor do I understand what exactly would be covered by the word "unconstitutional". His Lordship was, no doubt, not using that word in the sense in which it is used in a country which has a federal system of government and where government officials not infrequently take action in all good faith under what appears to be the law of the land only to find later that the enactment pursuant to which they have acted is not a valid law and that they have acted illegally. It is plain that in such cases an award of punitive damages would not be permitted. I mention these matters in passing since they serve to indicate difficulties that might arise if his Lordship's words are to be accepted as being the law of this country. He went on to say that he would not extend this category to cover action by private corporations or individuals using their power to oppress persons less able to protect their interests. If a powerful corporation or individual used its or his power to effect an unlawful purpose it or he must answer for the wrong done by paying compensatory damages, but such an offender, his Lordship said, is "not to be punished simply because he is the more powerful" [1] . I would agree that no tortfeasor should be punished simply because he is more powerful than the person he has wronged but, with great respect, it may be pointed out that he never is punished simply for that reason. Punishment is called for only if he has caused injury by using his power "in contumelious disregard of another's rights", to use the phrase of Knox C.J. in Whitfeld's Case [2] .
1. (1928) 41 C.L.R. 254.
2. (1951) 82 C.L.R. 497.
3. (1920) 29 C.L.R. 71.
4. (1920) 29 C.L.R., at pp. 80-82.
5. [1930] 1 K.B. 467.
6. [1943] K.B. 80.
7. [1953] 2 Q.B. 202.
8. (1934) 151 L.T. 274.
9. [1960] 1 W.L.R. 1072.
10. (1959) 103 C.L.R. 30.
11. (1962) 108 C.L.R. 177.
12. [1964] A.C. 1129.
13. [1964] A.C., at p. 1221.
14. [1964] A.C., at p. 1226.
15. [1964] A.C., at p. 1226.
16. [1964] A.C., at p. 1226.
17. [1964] A.C., at p. 1226.
18. [1964] A.C., at p. 1226.
19. (1920) 29 C.L.R., at p. 77.
The remaining category of cases in which his Lordship considered that punitive damages might be awarded is that in which "the defendant's conduct has been calculated by him to make a profit for himself which may well exceed the compensation payable to the plaintiff" [1] . That this is a type of case in which punitive damages may properly be awarded, assuming of course that the plaintiff can establish the necessary fact, is undoubted. In Broadway Approvals Ltd. v. Odhams Press Ltd. [No. 2] [3] however, the Court of Appeal pointed to some of the difficulties in applying this statement to the case of the publication of defamatory matter by a newspaper, which ordinarily prints and publishes its news items with a view to increasing its circulation and thereby increasing its profits. Lord Devlin went on then to refer to three of the decisions of the Court of Appeal, which I have mentioned earlier: Loudon v. Ryder [4] ; Owen and Smith v. Reo Motors (Britain) Ltd. [5] and Williams v. Settle [6] . The second and third of these decisions might, he thought, be justified in the result but not for the reasons which had been given while Loudon v. Ryder [4] could not be sustained at all and should be overruled.
1. [1964] A.C., at p. 1226.
2. [1965] 1 W.L.R. 805.
3. [1953] 2 Q.B. 202.
4. (1934) 151 L.T. 274.
5. [1960] 1 W.L.R. 1072.
6. [1953] 2 Q.B. 202.
With the greatest respect I am unable to agree with the reasoning which led his Lordship to impose such narrow limits upon the power of juries to award punitive damages. His purpose was, as he frankly said, to "remove" an anomaly from the law, a task which I would have thought was one for the legislature rather than for the courts. The propositions which he laid down are not in accord with the common law as it has always been understood in this country and I can see no good reason why we should now place such narrow limits upon the right of a jury to award punitive damages in appropriate cases, a right which is subject always to a considerable measure of control by trial judges and by appellate courts. The very fact that the right exists has provided in the past and will no doubt provide in the future a useful protection against the abuse of power and malicious and high-handed action by persons in disregard of the rights of others. In Skelton v. Collins [1] I endeavoured to state what, in my opinion, should be the policy which this Court should now follow where it is called upon to consider a decision of the House of Lords. I will quote one passage: "This statement"—that is the statement made by Dixon C.J. in Parker's Case [2] —"is not to be taken to have meant that judgments of the House of Lords are not to be treated by this and every court in Australia with all the respect that is rightly due to decisions of the ultimate appellate tribunal in England. But it does mean that if the High Court comes to a firm conclusion that a decision of the House of Lords is wrong it should act in accordance with its own views." [3] ; and add that where a conflict exists between a decision of the High Court and one of the House of Lords I am of opinion that other Australian courts should follow the decision of this Court.
1. (1966) 115 C.L.R. 94.
2. (1963) 111 C.L.R. 610.
3. (1966) 115 C.L.R., at p. 138.
In the present case and with all due respect to those who decided Rookes' Case [4] I am firmly of opinion that that case should not be followed. Since I am of opinion, however, that the learned trial judge misdirected the jury on the question of damages, I would dismiss the appeal.
1. [1964] A.C. 1129. |
high_court_of_australia:/showbyHandle/1/9437 | decision | commonwealth | high_court_of_australia | text/html | null | Wilson v McLeay [1961] HCA 56 | https://eresources.hcourt.gov.au/showbyHandle/1/9437 | 2024-09-13T22:54:52.413770+10:00 | High Court of Australia
Taylor J.
Wilson v McLeay
[1961] HCA 56
ORDER
Judgment for the plaintiff for £7,212 9s. 0d. with costs.
Cur. adv. vult.
Taylor J. delivered the following written judgment:—
Sept. 15
Taylor J
The plaintiff, who is a young woman nearly twenty-two years of age, sues the defendants in this Court for damages for personal injuries which she sustained whilst she was a passenger in a motor car of which the first-named defendant was the registered owner and which the second-named defendant was driving at the time of the accident. The plaintiff is a resident of the State of Queensland and the two defendants are residents of the State of New South Wales. Liability is admitted and the only issue is that of damages.
The accident happened whilst the plaintiff was holidaying in Sydney and her injuries were sustained when the motor car in which she was travelling collided with an electric light pole in Military Road, Neutral Bay. This was on 18th April 1960. She was thrown through the windscreen and seriously injured. The injuries which she suffered were extensive lacerations to the face including a laceration running for six inches across her forehead to the left eye, one about an inch long extending to the left eye and another which involved the left eyelid. There were also a number of abrasions and incisions mainly on the left side of the face and chin. Additionally, she sustained a comminuted oblique fracture of the lower third of the left humerus and a fracture of the right femur. She also had comparatively minor injuries to the left foot. After the accident she was taken to the Mater Misericordiae Hospital at North Sydney where she remained until 15th July 1960. On the latter date she was discharged and taken home to Queensland by her mother who had come to Sydney for that purpose.
Altogether the plaintiff was in hospital for something over twelve weeks on this occasion. Her right leg underwent traction for ten weeks of this period and her arm was in plaster for six weeks. Her facial injuries were treated by extensive plastic surgery and when she was finally discharged she left on crutches and with the greater part of her face in bandages.
There is no doubt that the plaintiff's injuries were serious and that she is left with considerable permanent impairment. The fracture of the arm has firmly united and she will be left with no disability as a result of that injury. But her leg, although firm union has taken place, reveals substantial angulation at the point of the fracture with the result that there appears to be considerable bowing of the thigh. Additionally the process of union has resulted in a shortening of the leg by as much as an inch or an inch and a quarter. According to the evidence the result will be that additional strain will be thrown on the joints of the leg and upon her lower spine. This, it is said, will render her more susceptible to the results of arthritic changes and periods of strain will probably result in backache. Also, as a result of the shortening of the leg she walks, and will continue to walk, with a perceptible limp. This, and the more general consequences of the shortening of the leg, may be alleviated by the wearing of a built-up shoe at appropriate times. Altogether the permanent loss of function of the right leg is estimated at something between twenty-five and thirty per cent. No suggestion is made that the plaintiff's injuries will result immediately in any future economic loss in the field of employment for which she has qualified herself and in which she is at present engaged. But it is clear that the condition of her leg means that she will be at some disadvantage in the general labour market if she wishes to advance herself. The injury to the leg was serious, it has resulted in a substantial loss of function which must, to some extent, limit her activities, the probable consequences of her general physical condition in the future are not without significance and it is said that the angulation of the fracture has produced a noticeable deformity.
The plaintiff's facial injuries have left her with extensive scars and notwithstanding a further operation performed in Sydney in December 1960 for the purpose of reducing them they are still visible. Furthermore, the healing process which followed the treatment to the left side of the face has resulted in some alteration of the natural contours of the face. The result is that there is some lack of symmetry in the face itself. There was evidence, which was not challenged, that prior to the accident the plaintiff was a most attractive looking girl and it was said that the injuries have resulted in a substantial change in her appearance. In addition to the matters already mentioned it is said that her facial complexion has also changed. Notwithstanding this the plaintiff has by no means lost all of her attractiveness and her temperament has permitted her to adjust herself in a considerable measure to her present condition. But she will bear the result of these injuries for the rest of her life and, in a young woman, are such as to call for substantial compensation. Taking into consideration the various matters to which I have referred I assess the plaintiff's general damages at £6,000.
In addition the plaintiff proved a loss of wages resulting from the accident between the time of the injury and 21st February 1961 amounting to £408 and various items of special damages for hospital and medical expenses, damages to her clothing and other incidental items amounting to £604 9s. 0d.
A further claim was made in respect of three items totalling £267 5s. 0d. In the main this amount represents the expenses incurred by the plaintiff's mother on two occasions and by her father and mother on one occasion in coming to Sydney from Queensland to see her. The first occasion was immediately after her injury when her mother flew down to Sydney while the plaintiff was still unconscious. Her mother remained on that occasion for a fortnight. A few weeks later her father and mother flew down to Sydney and remained for a week. Finally her mother again came to Sydney for the purpose of taking her home again, when she was discharged from hospital on crutches. The three items in question related to aeroplane fares to and from Sydney on the occasion of these visits, accommodation in Sydney and, in addition, the cost of trunk line telephone calls to the hospital whilst the plaintiff was an inmate. The plaintiff was asked by her counsel whilst she was in the witness box whether she would undertake to make a refund to her parents in the event of an amount representing these items being included in the damages awarded. She said she was prepared to give such an undertaking and, then, on the authority of observations made by Paull J. in Schnieder v. Eisovitch [1] I was asked to include this expenditure. The facts proved in that case showed that the plaintiff and her husband were involved in a highway accident whilst motoring with the defendant in France. The husband was killed and the plaintiff was injured. On being told of her husband's death the plaintiff suffered serious physical consequences and her brother-in-law and his wife came to France from England for the purpose of taking the plaintiff home to England. In her claim for damages in the subsequent action the plaintiff sought to include the expenses incurred by her brother-in-law. Paull J. found that the services so rendered by the brother-in-law and his wife were reasonably necessary as a consequence of the defendant's wrong and that the services so rendered were reasonable and, upon the plaintiff undertaking to reimburse her brother-in-law, he included the amount in question in his award. The course which the learned judge took was the subject of some mild criticism in the Law Quarterly Review ((1960) 76 L.Q.R. 187) and it seems to have met with the disapproval of Diplock J. in Gage v. King [2] . With respect to Paull J. I also feel difficulty in adopting his formula with respect to these items. Indeed, an acknowledgment that the extraction of such an undertaking is necessary as a condition precedent to recovery, constitutes, it seems to me, a confession that a plaintiff has no right at all to recover such expenditure. But my dissent from Paull J. does not mean that I think that the necessity for some such expenditure should not be taken into account in assessing general damages. As was pointed out in Graham v. Baker [3] a plaintiff's entitlement to damages accrues when he is injured by the negligence of the defendant. And if an assessment of damages were then to be made it would, it seems to me, be proper, in a case such as the present, to make some allowance to permit the plaintiff to provide for the reasonable attendance of her parents. She was in hospital many hundreds of miles from home, her injuries were serious and such as to call for such comfort and consolation as her parents' reasonable attention could provide. Of course, if at the trial it appeared that no expenditure for that purpose had, in fact, been incurred no allowance should be made. But that is not the position in the present case and the assessment of general damages should include some allowance on this account. I am fortified in this conclusion by the reasoning in the unreported case of Morgan v. Hosking [4] . That was a case where a young girl, fifteen years of age, was so badly injured that she was left "an inert paralysed wreck" and it was likely that the constant and expert nursing which she needed would require her confinement to hospital for the rest of her life. In dealing with the question of damages this Court considered that "she should be in a position to pay the expenses of the constant visits of her parents which, as the evidence shows, mean so much to her". Her parents' visits were no doubt considered to constitute part of the care and attention rendered necessary by the consequences of the defendant's negligence. The present case, though it does not present the tragic features of that case, is somewhat special and, according to the medical evidence, it was of some importance in the alleviation of her condition that she should have the comfort and assistance of her parents. Having listened to the evidence, I do not think the claim under this head should be quantified merely by taking the precise amount of the expenditure incurred; I think it will be sufficient to add to the amounts already specified the sum of £200. In the result I assess the plaintiff's damages at £7,212 9s. 0d. and there will be judgment for the plaintiff for that amount.
1. [1960] 2 Q.B. 430.
2. [1961] 1 Q.B. 188.
3. (1961) 106 C.L.R. 340.
4. (1960) 104 C.L.R. 667 (note). |
high_court_of_australia:/showbyHandle/1/11395 | decision | commonwealth | high_court_of_australia | text/html | null | Commissioner of Taxation (Cth) v St Hubert's Island Pty Ltd [1978] HCA 10 | https://eresources.hcourt.gov.au/showbyHandle/1/11395 | 2024-09-13T22:55:10.813108+10:00 | High Court of Australia
Stephen, Mason, Jacobs, Murphy and Aickin JJ.
Commissioner of Taxation (Cth) v St Hubert's Island Pty Ltd
[1978] HCA 10
ORDER
Appeal allowed with costs and assessment confirmed. Order of the Supreme Court of New South Wales set aside and in lieu thereof order that the appeal to that Court be dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
1978, April 18
Stephen J.
The taxpayer company, owner of the greater part of two small islands in inland waters north of Sydney, went into voluntary liquidation in March 1971, it having been resolved that its liquidator be empowered to distribute its assets in specie to contributories. Portuland Developments Pty. Ltd. ("Portuland") was the beneficial holder of the whole of the issued capital of the taxpayer and late in 1971 the liquidator of the taxpayer accordingly transferred title to these islands to Portuland.
The Commissioner then assessed the taxpayer to tax, treating this transfer as a disposal by it of trading stock within s. 36 (1) of the Income Tax Assessment Act 1936 and accordingly including in its assessable income an amount representing the value of the land transferred. The taxpayer was successful in an appeal against that assessment, the only issue in that appeal being whether s. 36 (1) was applicable in the circumstances.
Section 36 (1) is as follows:
36.—(1) Subject to this section, where—
(a) a taxpayer disposes by sale, gift, or otherwise of property being trading stock, standing or growing crop, crop-stools, or trees which have been planted and tended for the purpose of sale;
(b) that property constitutes or constituted the whole or part of the assets of a business which is or was carried on by the taxpayer; and
(c) the disposal was not in the ordinary course of carrying on that business,
the value of that property shall be included in the assessable income of the taxpayer, and the person acquiring that property shall be deemed to have purchased it at a price equal to that value.
Mahoney J., in the Supreme Court of New South Wales, in allowing the appeal, considered three distinct arguments: that the land was not trading stock, that even if it were it was not an asset of a business carried on by the taxpayer, and that in any event there had been no disposal of the land by it.
The Commissioner now appeals, contending that the land was trading stock to which s. 36 applies. The respondent not only contests this but also maintains its contention, unsuccessful below, that there was, in any event, no such disposal as s. 36 contemplates. It does not, however, seek to challenge the conclusion of Mahoney J. that the land was an asset of a business carried on by it.
The first matter to be decided is whether or not the land was "trading stock" within s. 36 (1). This resolves itself into two parts, a broad question whether land may ever be trading stock for the purposes of the Income Tax Assessment Act and, in particular, of s. 36 of the Act, and a quite narrow one, whether in the circumstances of this case this particular land was trading stock.
Section 36 (1) itself provides no clear answer to the broad question, save in the negative sense that there is nothing in its wording opposed to the inclusion of land in the term "trading stock". It is in other sections of the Act, especially in ss. 28-31, that there are said to occur indications which show that land cannot be "trading stock" for the purposes of the Act. Before examining those sections the particular meaning which the Act assigns to "trading stock" should be noticed. Section 6 (1) of the Act includes the following provision: " "trading stock" includes anything produced, manufactured, acquired or purchased for purposes of manufacture, sale or exchange, and also includes live stock".
The terms in which this statutory meaning are expressed throw little light upon whether land may be trading stock. I do not regard its use of the word "anything" as limiting the definition to chattels. "Anything" is a word of the widest meaning, as apt to describe land as to describe chattels; indeed it can also be applied appropriately enough to intangibles. One may speak of abstract ideas in this way, as in "Anything speculative attracted his mind". As the Oxford English Dictionary observes, the word is "A combination of Any and Thing, in the widest sense of the latter, with all the varieties of sense belonging to Any".
There is another aspect of this statutory meaning of trading stock which is of present relevance. It is whether it is a true definition, giving to "trading stock" when used in the Act an exclusive meaning, so that anything falling outside it will not be trading stock although answering that description according to common usage; or whether, on the contrary, it operates as merely expansive of what would otherwise be conveyed by the ordinary meaning of "trading stock".
In deciding this question one notes, at the outset, that the statutory meaning, by including in "trading stock" things acquired not only for purposes of sale or exchange but also for purposes of manufacture, enlarges the ordinary meaning of the term. Dictionary meanings of "stock", in the sense of stock-in-trade or trading stock, generally involve the concept of being kept on hand by a trader for sale by him and would not extend so as to include raw materials acquired for purposes of manufacture. The inclusion of live stock effects a further enlargement of the meaning of trading stock, a dairy farmer's milking herd, although "live stock", would not be trading stock as ordinarily understood. The statutory meaning uses the word "includes" rather than "means" and is, in that respect, to be contrasted with many of the other provisions of s. 6 (1). An examination of s. 6 (1) suggests that care has been taken to use "include" where it is not intended to substitute a statutory meaning for the ordinary meaning of words but, rather, to confer some meaning additional to the ordinary meaning. This intention has sometimes been obscured in s. 6 (1) by including meanings which would in any event be included in a word's ordinary meaning; the meaning given to "trading stock" provides an example of this. This is due, no doubt, to the draftsman's desire to avoid any possible doubt concerning the extent of the ordinary meaning. Nevertheless, in the case of a sub-section constructed as is s. 6 (1), using both "means" and "includes", a meaning which is expressed in terms of "includes" and which may be seen to be at least partially expansive in its operation should not, I think, be treated as an exclusive definition, but rather as operating cumulatively upon the ordinary meaning of the word or phrase in question and conferring added meaning for the purposes of the Act. This whole question of the effect to be given to "means" and to "includes" in definition sections was extensively discussed in this Court in Y. Z. Finance Co. Pty. Ltd. v. Cummings [50] . Nothing in the majority judgments in that case requires, I think, any different conclusion in the present case.
1. (1964) 109 C.L.R. 395.
The importance of this conclusion in the present case lies in the use made of the purpose of acquisition in the statutory meaning of trading stock in s. 6 (1); only that which is acquired for one of the specified purposes, "manufacture, sale or exchange", is given the statutory character of trading stock. Mahoney J. has held that the land here in question was not acquired with any such purpose. That would be enough to conclude the matter in favour of the taxpayer if the statutory meaning is an exclusive definition. However, if, as I believe, the statutory meaning only operates cumulatively upon the ordinary meaning of trading stock, it will be necessary to consider whether, at any time after acquisition, this land became trading stock, in the ordinary meaning of that term, in the hands of the taxpayer. Such inquiry belongs, however, to what I have called the second and narrower question concerning trading stock and must be deferred until the terms of ss. 28-31 of the Act have been examined for those indications which they are said to contain that when "trading stock" is used in the Act it is not intended to extend to land.
Three features of the drafting of these sections are relied upon. First, the repeated use of the phrase "on hand" to describe the trading stock in question is said to be inappropriate to land, which, unlike chattels, is not spoken of as being "on hand". Curiously enough, one of the examples given in the Oxford English Dictionary, in a passage from Lytton, uses "on hand" in the relevant sense in relation to an "abode which had so evidently hung long on hand"; I see no reason why it is inappropriate, when speaking of a trader in land, to refer to the various parcels of land which he has for sale as being land which he has "on hand".
Then the phrase "each article of trading stock", and variations of it, which appear in these sections, are said to be inappropriate to apply to land. The phrase appears in ss. 29 and 31 when reference is being made to the value of each distinct item or unit of a taxpayer's trading stock. It is used to describe each item, the sum of which make up a taxpayer's stock, and to each item of which a value is to be assigned. If that which is traded in happens to be land it is no less appropriate to speak of each parcel of land, capable of being separately dealt with and valued, as an article, than it is to speak in this way of units of any bulk commodity, be it wheat, wool, wine, coal or petrol. The use of "article" is, perhaps, not elegant, but if elegance of language is to be a criterion of what is intended by "trading stock", bulk commodities generally would seem also to be excluded. I regard the use of this phrase in these sections, used as it is to denote individual items of stock, as no sufficient indication that land is to be excluded from "trading stock".
The third feature relied upon is the use of the words "replaced", "obsolescence" and "of the same kind" in various parts of s. 31. It is said that any parcel of land is, inherently, both unique and incapable of obsolescence, so that these words are inapt to refer to land. An examination of the use made of the first two of these words in the section disposes of this argument: "replaced" and "obsolescence" each occurs in the description of only one of the three alternative courses open to the taxpayer or the Commissioner (as the case may be) and, if it be the case that the nature of land renders them inappropriate, the consequence is only that in the case of land the choice of courses is narrowed down to only two. The phrase "of the same kind", in the sense in which it is used in s. 31 (2) (c), is, I think, as readily applicable to some parcels of land, for instance some subdivisional lots, as it would be to some paintings or sculptures in an art-dealer's trading stock or to some jewellery, precious stones or bloodstock in the stock-in-trade of a jeweller or dealer in racehorses; no doubt in all these cases some items of stock would be unique: if so, par. (c) would be inapplicable but it does not follow that the whole of the provisions of the Act dealing with trading stock are thereby rendered inapplicable.
Since s. 36 itself contains nothing suggesting that "trading stock" is necessarily inapplicable to land and since the term, both in its ordinary meaning and in the extended meaning given by s. 6 (1), is wide enough to include, in appropriate circumstances, land, I reject the taxpayer's submission that land can never be trading stock for the purposes of the Act and, in particular, of s. 36. I am fortified in that conclusion by three considerations. The first concerns the nature of this legislation. As its short title indicates, it is a measure for the imposition, assessment and collection of a tax upon incomes. Except where specific provision is made for specific cases, the Act is concerned quite generally with income however derived and, except by express mention, does not discriminate between particular income-generating sources. To exclude from the concept of "trading stock" the parcels of land in which a dealer in land trades would be to make such a discrimination solely by reference to the particular subject-matter traded in; yet it is with the trader's income that the Act is concerned and not with the particular subject matter in which the trade is carried on. Clear words or compelling necessity would, I think, be required if the quite general provisions dealing with trading stock were to be made inapplicable to particular trades because of the nature of that which was traded in. I do not find either in the provisions of the Act.
The second consideration in a sense echoes the first. InCommissioner of Taxes (S.A.) v. Executor Trustee and Agency Co. of South Australia Ltd. (Carden's Case) [51] Dixon J. said "The basis of a trading account is stock on hand at the beginning and end of the period and sales and purchases." As his Honour explains [1] , it is impracticable to estimate income from trade otherwise than by means of a profit and loss account and the computation of profits from trading "has always proceeded upon the principle that the profit may be contained in stock-in-trade " Only by taking account of stock-in-trade in the conventional way can a correct reflex of the trader's income for the accounting period be obtained. Within the framework of the Australian tax system, with its assessment of tax upon the excess of assessable income over allowable deductions, it is the provisions of ss. 28-31 which ensure such a correct reflex in the case of stock-in-trade. To remove from the operation of these sections transactions in one type of trade, trade in land, would be anomalous. A land dealer who carries forward from one financial year to the next subdivisional lots as part of his stock-in-trade may wish to reflect in his accounts for tax purposes at the end of the first year their gain or loss in market value, as compared with cost, thereby "spreading" his ultimate realized gain or loss. If he does so his true financial position will have been the more acurately reflected in his taxable income. He may do this only because of the options afforded to him by s. 31(1) and then only if his land is "trading stock" for the purposes of the Act.
1. (1938) 63 C.L.R. 108, at p. 156.
2. (1938) 63 C.L.R., at p. 155.
In the judgment under appeal Mahoney J. [2] cited a passage from the speech of Lord Reid in Ostime (Inspector of Taxes) v. Duple Motor Bodies Ltd. [3] . Portion of that passage illustrates how integral in the computation of a trader's income is the reckoning of stock-in-trade on hand: his Lordship said:
long ago it became customary to take account of stock-in-trade, and for a simple reason. If the amount of stock-in-trade has increased materially during the year, then in effect sums which would have gone to swell the year's profits are represented at the end of the year by tangible assets, the extra stock-in-trade which they have been spent to buy; and similar reasoning will apply if the amount of stock-in-trade has decreased. So to omit the stock-in-trade would give a false result.
1. (1976) 6 A.T.R., at pp. 189-190; 76 A.T.C., at p. 4086.
2. [1961] 1 W.L.R. 739, at p. 751; [1961] 2 All E.R. 167, at pp. 172-173; (1961) 39 T.C. 537, at pp. 569-570.
The third consideration is that in Investment and Merchant Finance Corporation Ltd. v. Federal Commissioner of Taxation [4] this Court held that shares in the hands of a trader and held by him for sale were stock-in-trade, and this despite the fact that some of the phrases upon which the taxpayer has relied in the present case are no more apt when applied to shares than when applied to parcels of land. The decision in that case does, I think, present formidable difficulties for the taxpayer's present argument.
1. (1971) 125 C.L.R. 249.
In considering this question I have had reference to, although I have not specifically cited, those reported cases in which land has been spoken of in judgments as stock-in-trade, trading stock or the like. I have also had regard to those judgments in which passing but inconclusive reference has been made to the question whether land may be "trading stock" for the purposes of the Income Tax Assessment Act. That question has also arisen quite directly for decision on a number of occasions before Boards of Review and the reasons of Mr. Dempsey in Case F. 58 [5] provide ready reference to those instances. However in no precedent decision of an Australian court has the present question squarely arisen for decision.
1. (1974) 74 A.T.C. 326; 19 C.T.B.R. (N.S.) Case 76, 515.
It is for the foregoing reasons that I have concluded that land may be "trading stock" for the purposes of the Act and, in particular, for the purposes of s. 36.
I turn now to the narrower question whether this land on these two islands was trading stock when transferred to Portuland late in 1971. His Honour, in the course of this part of his judgment, referred to but did not decide whether for the purposes of the Act the statutory meaning given to "trading stock" by s. 6(1) was exclusive of the ordinary meaning of the term; instead he left the matter unresolved and referred to the Investment and Merchant Finance Corporation Case [6] where Walsh J. had done likewise. Nevertheless, as I would understand his Honour's judgment, he did in fact test the character of this land as trading stock of the taxpayer by reference both to the ordinary meaning of that term and to its statutory meaning. For the purposes of the first his Honour was, of course, concerned with the land in the state in which it was transferred to Portuland, having undergone some degree of transformation while in the taxpayer's hands.
1. (1971) 125 C.L.R. at p. 269.
The evidence showed that what the taxpayer had bought, the greater part of two low-lying islands in tidal waters, had to be very much altered in appearance and in facilities before it would reach a state in which it could be described, in the hands of the taxpayer, as anything resembling a number of marketable parcels of land such as the taxpayer intended to sell. To comply with Public Health Department requirements the entire surface of one of the islands had to be raised to a specified elevation above datum. In addition, in order to be permitted to subdivide and sell the land in residential lots, the taxpayer would have to undertake some major bridge construction work, albeit less than initially anticipated, the building of extensive sea walls and the construction of an entire system of canals; much dredging of sand had to accompany this work and all this had to be completed before carrying out the more normal clearing, levelling, draining, and road construction work usually involved in large scale subdivisional development. What the evidence did not disclose was precisely how much of this work had been undertaken, and with what effect upon the character of the land, by the time the taxpayer transferred it to Portuland. However, doing the best he could with the available evidence, his Honour concluded that at the time of transfer the land was still not in any state ready for sale in lots. The land was, he said [7] , referred to in argument, and without any qualification, as then being still "land in globo"; argument, it seems, proceeded before his Honour upon that footing. His Honour accordingly concluded that at the time of transfer the land had not "been converted into trading stock", that it was not then in such a state that subdivisional lots had been created and were available for sale.
1. (1976) 6 A.T.R., at p. 197; 76 A.T.C., at p. 4092.
To the extent to which his Honour was led to this conclusion by the common assumption of the parties during argument, his conclusion should not, I think, be lightly departed from on this appeal. It was, moreover, a conclusion open to his Honour upon such evidence as bore on the point and it should not now be disturbed.
I would not myself regard it as always conclusive of the question whether land owned by such a taxpayer as the respondent is "trading stock" according to the ordinary meaning of the term, that the land is not, at the relevant time, available for sale in subdivided lots. For assets of a taxpayer to form part of his trading stock they will, I think, generally speaking, require to possess the character of being substantially in the state in which the taxpayer intends to trade in them. For this reason the particular trade of the taxpayer will be critical. To a trader in broad acres his stock of broad acres will be trading stock, but if his trade, and by this I refer to that which he sells, is in subdivisional lots it will generally only be subdivided lots that qualify as his trading stock and they will become a part of that stock when, by whatever processes of improvement may be involved, they come substantially to answer the description of that which he trades in. However, it may be that cases will arise in which such a trader's stock can be shown to include not only lots ready for sale but also broad acres ready for prompt conversion into lots as and when the time is ripe for their sale; whether or not this will be so in any particular case will be a matter of fact for decision when the case arises.
Having regard to his Honour's understanding of how the case was put on the Commissioner's behalf, the present case is not, I think, one in which, on this appeal, this Court should entertain the view that, by the time of its transfer to Portuland, this land, although not yet subdivided, had reached a state in which it was trading stock in the ordinary meaning of that term. It was, in my view, clearly not in that state when acquired by the taxpayer. Despite the extensive work carried out on it while owned by the taxpayer, the parties apparently treated it as still devoid of any of the characteristics of subdivided land when it was transferred to Portuland. In the circumstances his Honour was, in my view, entitled, in the absence of any evidence that it fell within what I have suggested as a possible exception to the general position, to conclude that it was not then trading stock as ordinarily understood.
His Honour next turned to what was apparently the substantial contention urged on behalf of the Commissioner at the trial, that the statutory meaning of trading stock in s. 6(1) applied to this land so as to make it trading stock of the taxpayer. His Honour, correctly in my view, attached importance to the reference to "purposes" in the statutory meaning. He concluded that when the taxpayer purchased the land its condition was such that the taxpayer's purpose could not properly be described as then being that of sale. It was, rather, that of converting the land to a different condition by carrying out substantial work on it, of rendering it saleable in lots and only then of selling off those lots. His Honour regarded it as essentially a question of fact and degree in each case whether the work necessary to convert land into its intended saleable state was such as to preclude the land from being trading stock; he made it clear that not every case where land had to some extent to be worked upon to bring it into a saleable condition was for that reason to be excluded from trading stock as statutorily defined.
His Honour did, I think, correctly regard the critical time, so far as concerns the statutory meaning of trading stock, as the time of purchase since the statutory criterion of purpose is related to purpose at the date of purchase. The facts of this case, and in particular the very extensive nature of the work which had to be done before any question of subdividing the land could be entertained, do, in my view, provide ample grounds for his Honour's conclusion that, at the time of purchase by the taxpayer, the land did not answer the description in s. 6(1), that of land purchased by this taxpayer for purposes of sale.
It follows that I regard as correct his Honour's view that neither according to its ordinary meaning nor according to the meaning given to it by s. 6(1) was this land trading stock in the hands of the taxpayer.
This conclusion necessarily leads me to decide that the Commissioner was wrong in applying s. 36(1) of the Act to the value of the land transferred to Portuland. However before leaving this case I should deal briefly with one particular submission made on the Commissioner's behalf on this appeal. It was said that it was wrong to pay regard to the particular state or condition of the taxpayer's land at any particular time, that this mattered not at all in determining whether that land was trading stock. This was said to be so either because what is in question in the case of land is an estate in fee simple in respect of a particular area of the earth's surface, something incapable of being affected by changes in the condition of that surface: or else because, even if what is in question be regarded not as the legal estate but as the material substance, it is of a character which is inherently unaffected by changes in its condition. Either of these views may be well enough in many statutory contexts but not, I think, when trading stock is in question and is legislated for as it is in ss. 28 to 37 of the Income Tax Assessment Act. In such a context it is very much with practical matters, with dealings by merchants, that the legislation is concerned. It is the tax treatment of that which merchants keep for dealing in that is being legislated for, and then only so long as it is in substantially the condition in which it is to be dealt in, so that it forms part of the merchant's stock-in-trade, kept by him to meet his trading needs.
In view of my conclusions concerning the inapplicability of s. 36(1) to the taxpayer's land it is unnecessary that I should go on to deal with the submissions made as to whether there was here any such disposal as is contemplated by s. 36(1). I would dismiss this appeal.
Mason J.
Part of the problems which confront the Commissioner in this case might have been avoided had the definition of trading stock in s. 6(1) of the Income Tax Assessment Act 1936, as amended ("the Act") been altered so as to incorporate some of the elements of the statutory definition contained in the United Kingdom legislation. By s. 6(1) the expression is so defined as to include "anything produced, manufactured, acquired or purchased for purposes of manufacture, sale or exchange, and also includes live stock". The application of these words to virgin land acquired by a land developer for the purpose of substantial improvement, subdivision and sale is fraught with some difficulty.
The problem was solved in the United Kingdom forty years ago by the inclusion in s. 26 of the Finance Act, 1938 of a definition of "trading stock" which was subsequently re-enacted in s. 143 of the Income Tax Act, 1952, s. 137 (4) of the Income and Corporation Taxes Act 1970 and cl. 16 of Schedule 10 of the Finance (No. 2) Act 1975 which also includes work in progress. By these definitions "trading stock" means
property of any description, whether real or personal, being either—
(a) property such as is sold in the ordinary course of the trade, or would be so sold if it were mature or if its manufacture, preparation or construction were complete, or
(b) materials such as are used in the manufacture, preparation or construction of any such property as is referred to in paragraph (a) above.
What the United Kingdom definition makes plain the Australian definition leaves obscure. By virtue of the United Kingdom definition, land may form part of the trading stock of a taxpayer and unimproved land acquired for the purpose of improvement and sale may also form part of the trading stock of a taxpayer.
That the uncertainties arising from the Australian statutory definition have not been cleared up by legislation is the more surprising when we recall that for many years there have been conflicting expressions of opinion in the Boards of Review upon the question whether land may form part of trading stock for the purposes of the Act [7a] . The preferred view, with which I agree, has been that land may form part of a taxpayer's trading stock for the purposes of s. 36. It is a view which is not assisted by our statutory definition; it prevails in spite of the definition. The ordinary meaning of "trading stock" cannot be restricted by a definition which is expressed to be inclusive, not exclusive. No doubt it extends the ordinary meaning by its reference to "live stock" in the manner explained inFederal Commissioner of Taxation v. Wade [8] , but in other respects it may be doubted whether the definition does more than express inadequately what one might have gathered from the ordinary meaning of the term.
1. (1952) 3 C.T.B.R. (N.S.) Case 111, 702, at p. 704; (1958) 8 C.T.B.R. (N.S.) Case 48,230, at p. 234; (1974) 19 C.T.B.R. (N.S.) Case 76, 515, at pp. 527-531.
2. (1951) 84 C.L.R. 105.
It is generally accepted that land may become "trading stock" or "stock-in-trade" according to the common understanding of these expressions. Judges both here and in the United Kingdom have spoken of land as trading stock or stock-in-trade on occasions too numerous to mention them all. It is sufficient to refer to some of the many examples—see Melbourne Trust, Ltd. v. Commissioner of Taxes (Vict.) [9] ; Ruhamah Property Co. Ltd. v. Federal Commissioner of Taxation [10] ; London Investment and Mortgage Co. Ltd. v. Worthington (Inspector of Taxes) [11] ; Orchard Parks Ltd. (In liq.) v. Pogson (Inspector of Taxes) [12] ; and Snell (Inspector of Taxes) v. Rosser, Thomas & Co. Ltd. [13] . I reject the suggestion that in the English cases no more is said than that land acquired for trading purposes should be treated as if it were stock-in-trade. Likewise, I reject the suggestion that the English cases do no more than reflect the United Kingdom statutory definitions of "trading stock" to which I have referred. Earlier decisions such as Pearn v. Miller [14] and Hudson v. Wrightson (H.M. Inspector of Taxes) [15] reveal that land was considered to constitute trading stock or stock-in-trade in appropriate cases well before the introduction of the statutory definition to which I have referred. That definition to the extent to which it includes real property should not be regarded as extending the ordinary meaning but rather as confirming and giving specific effect to that meaning.
1. (1912) 15 C.L.R. 274, at p. 303.
2. (1928) 41 C.L.R. 148, at p. 156.
3. [1959] A.C. 199, at pp. 206, 210-211.
4. (1964) 42 T.C. 442.
5. [1968] 1 W.L.R. 295, at pp. 300-305; [1968] 1 All E.R. 600, at pp. 603-607; (1968) 44 T.C. 343, at pp. 349-354.
6. (1927) 11 T.C. 610.
7. (1934) 26 T.C. 55.
I acknowledge that some of the provisions contained in ss. 28 to 36 of the Act are so expressed that they cannot readily be given an operation in relation to land. But this is not enough in itself to sustain the conclusion that the provisions in their entirety were not intended to apply to land. A similar objection was made to the proposition that shares may constitute trading stock for the purposes of the Act; yet the Court overruled that objection in Investment and Merchant Finance Corporation Ltd. v. Federal Commissioner of Taxation [16] .
1. (1971) 125 C.L.R. 249.
It has been suggested that the definition contained in s. 6(1) of the Act, to the extent to which it refers to anything "acquired or purchased for the purposes of manufacture", represents an extension of the accepted meaning of the term. No doubt it is correct to say that historically "trading stock" and "stock-in-trade" denoted the stock of goods acquired by a trader or dealer and held for sale. Even today it would be correct to speak of the trading stock or stock-in-trade of Steptoe & Son. But whereas both expressions may have had this limited meaning in times gone by, trading stock has acquired a more extensive denotation in modern times. It is a commercial term, ordinarily employed by accountants and auditors and it is to usage by commercial men that we must look in determining what it signifies, rather than to standard dictionaries which so often fail to reflect current usage and just as frequently fail to reflect modern commercial usage.
As applied to the business of a manufacturer of goods, accountants and commercial men by their use of the expression "trading stock" denote not only the goods which he has manufactured and holds for sale but his stock of raw materials, components and partly manufactured goods. Whiteman and Wheatcroft on Income Tax, 2nd ed. (1976), p. 444, under the heading "Stock-in-Trade and Work in Progress", say—
A manufacturer who buys raw materials, processes them and sells the finished product will normally have on hand some unused raw materials, some partly manufactured goods and some finished goods awaiting sale. The first and last are stock, the partly processed goods being sometimes called stock and sometimes work in progress. In addition, a manufacturer may have on hand goods which he consumes in the course of his manufacture, such as coal; this is also regarded as stock.
See also Simon's Taxes, 3rd ed., (1970), vol. B, pp. 411 et seq.
The view expressed by Whiteman and Wheatcroft is not a mere outgrowth of the United Kingdom statutory definitions to which I have already referred. It is a reflection of commercial usage arising from the development of accounting principles over a long period of time. The authors refer, in support of the last sentence in the passage quoted, to the decision of Rowlatt J. in George Thompson & Co. Ltd. v. Commissioners of Inland Revenue [17] where a shipping company having contracted to purchase a quantity of coal for the purpose of running its ships subsequently transferred the benefit of the contract at a profit—when its ships were requisitioned in 1916, there being no need for the coal. It was held that the coal was bought on revenue account as consumable stores as part of the business and that therefore the profit was taxable. In effect the coal was treated as part of the taxpayer's trading stock.
1. (1927) 12 T.C. 1091.
The recognition by accountants and commercial men that raw materials used for the purpose of manufacture in a manufacturing business and partly manufactured goods form part of the trading stock of the business was an almost inevitable development. It enabled the value of raw materials and partly manufactured goods to be included in the value of trading stock at the beginning and end of an accounting period and by this means it led to the making of a more accurate calculation of the profit earned or the loss sustained in that period. It is not easy to see how an accurate calculation of profit or loss could be made unless the value of raw materials and partly manufactured goods was taken into account. Of course the value might be taken into account, even though by different means. Partly manufactured goods may be dealt with as "work in progress", as indeed they are sometimes, but this expression is no more than an alternative description except in so far as it is intended to introduce different methods of valuation.
In this respect I agree with Aickin J. that the House of Lords in Duple Motor Bodies Ltd. v. Ostime [18] did not treat work in progress as being essentially different from trading stock. Their Lordships used the expression "work in progress" as an alternative description for partly manufactured goods which, like raw materials and completed goods, form part of the trading stock of a business and which, as that case illustrates, give rise to special problems of valuation. Lord Reid, with whose judgment Lord Tucker and Lord Hodson agreed, said [19] :
Suppose that the manufacture of an article was completed near the end of an accounting period. If completed the day before that date the article, if not already sold, has become stock-in-trade, if completed the day after that date, it was still work in progress on that date.
1. [1961] 1 W.L.R. 739; [1961] 2 All E.R. 167; (1961) 39 T.C. 537.
2. [1961] 1 W.L.R., at p. 751; [1961] 2 All E.R., at p. 172; (1961) 39 T.C., at p. 569.
In Henderson v. Federal Commissioner of Taxation [20] , Windeyer J., after referring to this statement, said: "These propositions relate to "work in progress" as a synonym for tangible things, goods in process of manufacture from raw materials, things which when completed will become stock-in-trade." These observations were directed to the question whether the stock of partly manufactured goods is to be treated for taxation purposes in the same fashion as completed goods and to this question an affirmative answer was returned. The expression "work in progress" was used to differentiate goods in the former from those in the latter category. It is, I think, taking too much from what was said to conclude that these statements positively express the view that goods in process of manufacture are excluded from "trading stock". If they go so far, I would, with respect, disagree with them. The wide view of the ordinary denotation of "trading stock" is not something which is peculiar to the United Kingdom and foreign to Australia. In Case No. 120 [20a] the Chairman, Mr. Gibson, observed that he had little doubt that raw materials came to be regarded long ago commercially as trading stock.
1. (1970) 119 C.L.R. 612, at p. 635.
2. (1951) 1 C.T.B.R. (N.S.) 568, at p. 572.
It has been pointed out previously that, unlike the United Kingdom income tax legislation, the Act does not provide for the assessment of tax on the profits or gains of a business—see Commercial and General Acceptance Ltd. v. Federal Commissioner of Taxation [21] and the cases there cited; J. Rowe & Son Pty. Ltd. v. Federal Commissioner of Taxation [22] . One consequence of this difference is that some accounting principles and practices which have been held to be appropriate in the ascertainment of a taxpayer's profit may have no application here because our statutory provisions specifically instruct us as to what constitutes assessable income and as to the items that shall be allowed as deductions from that income. The trading stock provisions contained in ss. 28 to 36 are a case in point. Accounting principle and practice cannot prevail over them. However, as the definition of trading stock contained in s. 6(1) is not an exclusive definition, it requires us to give effect to the ordinary, and in this case that happens to be the commercial, meaning of the expression, notwithstanding that in part at least it is a meaning which may have derived from or may have been influenced by accounting principle or practice.
1. (1977) 137 C.L.R. 373.
2. (1971) 124 C.L.R. 421, at pp. 450-451.
If trading stock according to its ordinary meaning denotes land as well as goods and commodities, it must follow that land may form part of the trading stock of a business before it has been converted into the condition in which it is intended to be sold. Just as raw materials and partly manufactured goods form part of the trading stock of a manufacturer, so also virgin land which has been acquired by a land developer for the purpose of improvement, subdivision and sale in the form of allotments will form part of his trading stock. If the statutory definition of trading stock in s. 6 (1) were an exclusive and comprehensive definition it might be possible to draw a distinction between land and goods and to assert that the presence of the word "manufacture" in that definition has a restricted effect so as to exclude land acquired for the purpose of improvement and development antecedent to sale, thereby overcoming the argument that land so acquired is none the less land acquired for the purpose of sale within the meaning of the definition.
But the statutory definition is inclusive only and no distinction should be drawn between goods on which work is to be done before they are converted into the condition in which they are intended to be sold and land on which work is to be done before it is converted into the condition in which it is intended to be sold.
Once it is accepted that land acquired for the purpose of improvement and development as a preliminary to sale in allotments in its improved form constitutes part of the trading stock of the land developer's business, notwithstanding that the land as acquired differed in condition from the land as intended to be sold, the issue in the present case is whether the land in question was acquired by the respondent taxpayer for its business as a land developer, that is, for improvement and development as a preliminary to sale in subdivided allotments. That substantial work remained to be undertaken in connexion with the land before it would achieve the condition in which it was intended to be sold is an immaterial consideration. It is enough that the respondent was carrying on the business of a land developer and that it acquired the land in the course of carrying on that business. The facts as outlined by the primary judge make it plain that the land was acquired by the respondent taxpayer for this very purpose.
I do not accept the submission that had the respondent proceeded with its plan and sold the land after it had been improved and subdivided the respondent's profit arising on sale would have been assessable under s. 26 (a), not s. 25 (1). Whether the trading stock provisions can have any application to a case which would yield assessable income only because it falls within s. 26 (a) is questionable. In Investment and Merchant Finance Corporation Ltd. v. Federal Commissioner of Taxation, Barwick C.J. said [23] : "Section 26 (a) is intended in my opinion to deal with transactions which are entire in themselves and do not form part of a more extensive business." The Chief Justice went on to express his agreement with Menzies J. who said [24] :
the whole of the carrying on of a business of buying and selling is not to be comprehended within s. 26 (a), nor does that provision aptly apply to the particular dealings constituting, in total, the carrying on of a business. Section 26 (a) deals with particular transactions which might otherwise escape from the tax net and it brings into assessable income profits, after outgoings attributable to the particular transaction have been taken into account.
1. (1971) 125 C.L.R., at p. 255.
2. (1971) 125 C.L.R., at p. 264.
Thus a profit made on the sale of property acquired by a taxpayer, who does not carry on the business of dealing in land, for the purpose of profit-making by sale would not fall within s. 25 (1), but it would fall within s. 26 (a). The trading stock provisions do not readily apply to such a case. Section 28, which is the operative provision requiring that trading stock be taken into account in the ascertainment of a taxpayer's taxable income, applies only when the taxpayer carries on a business.
However, this is not a matter which needs to be pursued because, on the view which I take of this case, the respondent was carrying on a business and its business was such that the profits which it stood to make on the sale of the land in subdivision would have formed part of its assessable income under s. 25 (1).
The lands in question consisted of 110 acres on St. Hubert's Island and 100 acres on Riley's Island, each island being situated in Brisbane Water near Woy Woy. The lands were acquired by the respondent in a series of transactions. Although Riley's Island was purchased in its entirety from its former owner, the 110 acres on St. Hubert's Island were purchased in twenty separate parcels from individual owners. The two islands were sandy, situated a short distance from the mainland. The primary judge found, in accordance with the evidence, that the respondent was formed for the purpose of acquiring the lands, carrying out development work, subdividing and selling them as residential allotments.
The proposed undertaking was one of some magnitude and complexity. It involved, first, the rezoning of the lands because the existing zoning was not appropriate to residential development of the kind proposed. It then involved engineering and hydrographic work on a large scale. A bridge was to be constructed to connect the islands to the mainland, the level of the islands was to be raised to an acceptable height and canals were to be constructed in order to provide "marina or quay" type water frontages. Although the cost of the lands was of the order of $100,000, the cost of the proposed development greatly exceeded this amount and, by virtue of improvements carried out before the transfer of the land by the liquidator of the respondent to its sole shareholder, Portuland Developments Pty. Limited, the value of the land had risen to $2,250,000.
The features to which I have referred stamp the enterprise with the characteristics of a business which had as its object the making of a profit from the ultimate disposition of the land in subdivided form. The land was acquired in 1960 in a series of transactions as the first step in a substantial business undertaking which was to endure for some years. Indeed, it was a long way from completion in 1972 though it is fair to say that the respondent encountered some difficulties which may not have been foreseen. The land was not acquired as an investment and its development for subdivision and sale was not simply the realization of a capital asset. In these circumstances it is impossible to treat the proposed enterprise as one which lacked the characteristics of a business and to say that it constituted no more than an isolated transaction capable on yielding assessable income under s. 26 (a) rather than s. 25 (1).
The final question to be decided is whether the transfer by the respondent to its sole shareholder in the course of a voluntary winding up brings into play s. 36 (1) which provides that where "(a) a taxpayer disposes by sale, gift, or otherwise of property being trading stock ; (b) that property constitutes or constituted the whole or part of the assets of a business which is or was carried on by the taxpayer; and (c) the disposal was not in the ordinary course of carrying on that business," the value of the property shall be included in the taxpayer's assessable income. Unless this question is answered in the affirmative the value of the property transferred does not form part of the respondent's assessable income under the Act. In Rose v. Federal Commissioner of Taxation the Court said [25] :
In employing the words "dispose of" s. 36 doubtless meant to include every alienation of trading stock. "Disposition" and "dispose of" are expressions of the widest import. But the subject of the disposition must be considered as well as the ambit of the expression "dispose of".
Later, in Henty House Pty. Ltd. v. Federal Commissioner of Taxation [26] , Williams A.C.J., Webb, Kitto and Taylor JJ. said:
No doubt the notion primarily conveyed by the words "disposed of" is the notion of a disposition by the taxpayer; but it is not necessarily so confined, and the use of the passive voice, without specific words of restriction referring to the person by whose act the disposal takes place, leaves ample room for a construction in keeping with the general tenour of the section
The Court was there speaking of s. 59 which was in terms identical with s. 36 in the form in which it stood when Rose's Case was decided. However, in 1952 s. 36 (1) was amended so as to take its present form which, as its language shows, confines it to a disposition by the taxpayer. The respondent seized upon this circumstance and the change from the passive to the active voice to submit that the disposition now contemplated by s. 36 (1) does not extend to a transfer of assets in specie by a liquidator of a company to its sole shareholder. It seems to me that, measured against the generality of the language of s. 36 (1), these considerations are too frail to support the conclusion which the respondent seeks to sustain.
1. (1951) 84 C.L.R. 118, at p. 123.
2. (1953) 88 C.L.R. 141, at p. 151.
Next, it was submitted that, to fall within the sub-section, a disposition must be a voluntary disposition. The response to this contention is that the disposition by the liquidator to Portuland was a voluntary disposition. It was not deprived of its character as such a disposition by the circumstance that the liquidator was under a duty to make the transfer by virtue of s. 264 of the Companies Act, 1961, as amended, which requires that "the property of a company shall, on its winding up, be applied in satisfaction of its liabilities equally, and subject to that application shall unless the articles otherwise provide be distributed among the members according to their rights and interests in the company."
As it happened, Portuland was at the time when the transfer was executed a creditor of the respondent, its debt not having been paid by the liquidator. The transfer was executed in satisfaction of the rights of Portuland as a creditor and as the sole shareholder of the respondent.
The respondent then submitted that s. 36 (1) has no application to a disposition of the bare legal estate in property, that it cannot apply to a disposition of the legal estate in property the beneficial interest in which is already held by the transferee. In support of this submission the respondent relied on the observations of Lord Diplock, with whom the other members of the House of Lords agreed, in Ayerst (Inspector of Taxes) v. C. & K. (Construction) Ltd. [27] . There it was held that when a company was ordered to be wound up under the Companies Act 1948 U.K. the effect was to divest it of "the beneficial ownership" of its assets within the meaning of s. 17 (6) of the Finance Act 1954 U.K. since it could not use them for its own benefit. See also Shaw Savill and Albion Co. Ltd. v. Commissioner of Inland Revenue [28] : cf. Franklin's Selfserve Pty. Ltd. v. Federal Commissioner of Taxation [29] , where Menzies J. held that a company which owns shares beneficially in another company does not cease upon its liquidation to own those shares beneficially. It is unnecessary to examine this apparent conflict of opinion in order to resolve the issue which arises on the respondent's submission. It is sufficient for me to say that the language of s. 36 (1) is wide enough to embrace a transfer, executed by a liquidator on behalf of a company in the course of voluntary winding up, of its assets to a sole shareholder in satisfaction of its rights as a shareholder and creditor, even on the assumption which I am prepared to make that the company cannot be regarded as the beneficial owner of those assets.
1. [1976] A.C. 167, at pp. 176-180.
2. [1956] N.Z.L.R. 211.
3. (1970) 125 C.L.R. 52, at pp. 70-71.
Finally, it was contended that as a disposition by a liquidator of a company in favour of a shareholder falls within the statutory definition of dividend contained in s. 6 (1) of the Act it should not be regarded as a disposition for the purposes of s. 36 (1). I do not see that there is any inconsistency involved in treating a transfer by a liquidator as a disposition within s. 36 (1) as well as regarding it as a distribution constituting a dividend within the meaning of the statutory definition contained in s. 6 (1).
For these reasons the transfer by the liquidator was in my opinion a disposition by the respondent which fell within s. 36 (1).
In the result I would allow the appeal.
Jacobs J.
The facts and the relevant legislation appear in the reasons for judgment prepared by other members of the Court and I shall not repeat them. Two questions have been argued on the hearing of this appeal. First, was the land which the liquidator of the taxpayer company transferred in specie to its shareholder "trading stock" within the meaning of those words in s. 36 (1)? Secondly, did the taxpayer company "dispose of" the land when its liquidator transferred it to the sole shareholder, Portuland Developments Pty. Ltd?
I would answer both these questions in the affirmative. I therefore conclude that the appeal should be allowed. I agree with the reasons which have been expressed by Mason J. but on the question whether the land was trading stock I would express some reasons for myself. First, there is the question whether land may in any circumstances be trading stock. I agree with the conclusion of Stephen J., Mason J. and Aickin J. that it may be. I cannot usefully add anything to the reasons which they have expressed for that conclusion. That still leaves the question whether this land was trading stock of the taxpayer.
I do not find it possible to answer the question whether the land was trading stock except through an examination of the nature of the business of which the land may be the trading stock. Although it was submitted on behalf of the taxpayer in the Supreme Court of New South Wales that the land, even if it were found to be "trading stock", was not an asset of a business which was or had been carried on by the taxpayer, that submission was not pursued in this Court. Mahoney J. found that the taxpayer had been engaged in the conversion of the land into residential lots in a systematic manner with a view to the sale of those lots and he held that that activity constituted a business. That finding is not challenged but it leaves open the question whether that finding is the apposite finding in the context of s. 36 (1). I cannot separate the question whether the land was trading stock of the taxpayer from the question whether it was an asset of a business carried on by the taxpayer, as I shall attempt to explain.
The description "assets of a business" is not satisfied simply by examining as disparate questions whether the taxpayer carries on any kind of business and then whether the property is to be regarded as an asset of that business carried on by the taxpayer whatever it may be. In order to satisfy the requirement of s. 36 (1)(b) the property must bear the quality of its description in s. 36 (1)(a) in the business which must be found to be or to have been carried on by the taxpayer. For instance, a man may be a shopkeeper and out of the accumulated profits retained in the business he may purchase an area of land with the purpose of selling it at a profit at some time in the future. In one sense the land is an asset of the business, but not, I think, in the sense of s. 36 (1). There must be a relationship between the property and the business whereby it can be said that the property bears the description of one or another of the kinds enumerated, not in a general sense, but in specific relation to the business which was or is carried on. Thus property, being trading stock, must be an asset of a business of trading in that stock.
Even apart from the provision in s. 36 (1) (b) it is necessary to find the existence (present or past) of a business before the description "trading stock" can be applied to any particular property; and the definition in s. 6 must be read with that consideration in mind. There is no reference to the carrying on of business in the definition in s. 6 because the definition is concerned with the kinds of property which may be trading stock. The purpose of the definition is to ensure that not only that which is in a condition ready for sale but also that property (at any rate movable property) which is intended to be worked on or even used up in a process of manufacture will fall within the meaning of the words "trading stock" in the Act, as well as the things produced or manufactured and things acquired or purchased for purposes of sale and exchange. The definition must, however, be read in the light of the fact that it is trading stock in a business to which the definition will be applied in the substantive provisions of the Act. It is true that this observation cannot be as generally applied to livestock as it can to other kinds of property but otherwise it is of general application.
Once it is concluded that land may be trading stock, then I can see no reason to limit the application of the words to land which is in the condition in which it is intended that it should be sold. I am inclined to the view that land acquired or purchased for purposes of sale falls within the words of the definition whether or not the land is in the condition in which it is proposed that it shall be sold. The definition does not say otherwise. But whether this be so or not, the definition is by way of extension, not limitation, of the ordinary meaning of the words "trading stock"; and undeveloped and unsubdivided land acquired for the purpose of development, subdivision and sale is a stock of land in which the person acquiring it may be said to trade or to propose to trade. It may therefore properly be described as trading stock not only when the processes of development and subdivision have been carried out but also when it is acquired for the purpose of carrying out those processes upon it. Whether or not it will be held to be trading stock depends on whether the person carries on or had previously carried on the business of trading in that land.
I turn now to the facts of the present case. It can be accepted that the taxpayer was at a relevant time carrying on the business of developing and improving and of subdividing land with the intention of selling it in subdivided lots in its improved and developed state. But so to find does not answer the question whether the taxpayer was engaged in the business of trading in the land so that the land may be regarded as its trading stock. It seems to me that the essential question in the present case is—what must be found before it can be said that the taxpayer was carrying on the business of trading in the land? More particularly, did the taxpayer commence to carry on the business of trading in the land by acquiring the land for the purpose of developing and improving it, of subdividing it and of selling it off in subdivided lots? If it did not commence to carry on the business of trading in the land at that time of acquisition I do not consider that it can be said to have commenced to trade in the land or to carry on the business of trading in the land at any subsequent point of time. At the most it carried on the business (and I assume that it can be so described) of developing and improving and subdividing the land for the purpose of sale in lots. That is not the relevant business, nor is the land appropriately described as the trading stock of such a business.
I am prepared to accept that the acquisition of the land was an isolated or, more expressively, a "one-off" transaction even though various parcels were purchased at different times. There was no intention of "turning over" the land in a course of separate acts of buying and selling. The intention was to acquire a particular area of land in whole before any resale. The chance that this involved a number of separate purchases does not affect the quality of the activity which was being carried on. So the question is whether a "one-off" purchase of a quantity of land with the intention of improving and subdividing and selling it in subdivided lots can be the commencement of the business of trading in that land. If it can be, there seems to me to be no reason why there was not the commencement of such a business in the present case or why the land did not thereupon become the trading stock of that business.
The purchase in a one-off transaction of land or of a commodity which is personal property in bulk with the intention of reselling it in bulk is not of itself the commencement of a business of trading in that land or that commodity and neither the land nor the commodity is trading stock of a business. The concept of trading in this connexion involves at least repeated acts of selling, and the business of trading cannot be commenced unless at least there are intended to be repeated acts of selling. Again, the purchase in a one-off transaction of land or of a commodity in bulk with the intention of breaking down the bulk at some indefinite time in the future and of selling in broken down parcels does not appear to me to be the commencement of a business of trading in that land or that commodity, and the land or commodity cannot be regarded as the trading stock of a business of trading in that land or commodity. There is not then that continuity of activity which characterizes a business. The acquisition of the land or commodity is a first step in what may or may not develop into a business. Lastly, the intention to develop and sell off an asset not acquired for the purpose of so doing or the activity of development and sale of such an asset is not the carrying on of a business of trading in that asset. The asset must at least have been acquired for the purpose of resale before the question can arise whether the activities are trading activities.
But none of these cases is the present case. Here there was what I think should be treated as a "one-off" purchase of an area of land with an intention thereafter, as one continuous course of activity of which the purchase was the commencing act, to improve, develop, subdivide and sell in subdivided lots the area of land so purchased. Did the taxpayer thereby carry on the business of trading in that land? I have come to the conclusion that it did, and that the land became the trading stock of that business even though at the relevant time none of the land had been sold. The fact that none of the land had then been sold did not change the character of the business carried on or the character of the stock, the land, held as an asset with which it was intended to trade.
A contrary conclusion would appear to me to involve the proposition that a person can only carry on the business of trading if he does or intends to do repeated acts both of buying and of selling in the course of the business. Ordinarily to carry on the business of trading in a thing does involve repeated acts of buying and of selling. There is a turnover and the proceeds of sale of some thing are used in the business for the purchase of further stock which in turn will be sold. However, although this repetition of both buying and selling is a usual feature of trading I do not think that it is an essential feature. Even though the concept of trading involves repeated acts of selling a person will in ordinary language be described as trading if, having purchased a commodity in bulk for the purpose of resale he then proceeds to sell it on the occasions where and in the quantities for which there is a market. Such trading is not common but it is not unknown. A form of trade well known in the past was to charter a ship, load it with a cargo consisting of some commodity for which there was a market across the seas and carry that commodity to the various places where a market for that commodity could be expected to be found. The person who did that could properly be described as a trader and the cargo was his trading stock. It was not necessary, before he and his cargo could be so described, that he repeat or intend to repeat the venture. The one venture was a single trading operation. And that, it seems to me, is the position here. Once it is recognized that land may be trading stock then an acquisition of land for the purpose of resale, after development improvement and subdivision, in subdivided lots, and a continued activity in fulfilment of that intention brought into existence a trading operation. The company was carrying on the business of trading so long as it was pursuing its activities with an intention to sell off the land in subdivided lots and the land was its trading stock so long as the intention continued. That is sufficient to satisfy the conditions of s. 36 (1) (a) and (b). The property was trading stock which constituted assets of a business of trading in that land which had been commenced by the taxpayer. The use of the past as well as the present tense in s. 36 (1) (b) makes it clear that the relevant business did not need to be still being carried on at the time of disposition of the property.
Murphy J.
I agree with Mason J. and Jacobs J. The appeal should be allowed.
Aickin J.
This is an appeal from a decision of Mahoney J. in the Supreme Court of New South Wales in which he upheld an objection by St. Hubert's Island Pty. Ltd. (In liquidation) ("the taxpayer") against an assessment to income tax in respect of the year of income ended 30th June 1972 [30] .
1. (1976) 6 A.T.R. 183; 76 A.T.C. 4080.
The taxpayer was incorporated on 25th August 1960 and those who formed it had in mind that it should purchase two small islands, St. Hubert's Island and Riley's Island (situated in Brisbane Water) on the north coast of New South Wales.
The learned trial judge found that the immediate purpose which the participants, and therefore the company, saw in the acquisition of the islands was the carrying out of the necessary development works to enable the land to be subdivided and residential blocks sold, notwithstanding that one or both of them entertained views or hopes of the possibility of obtaining sand from the vicinity of the islands for sale or perhaps use in the development project, which involved substantially raising the level of the land.
There were however problems connected with the zoning of the land at that time and steps were taken to seek an alteration in the zoning to permit that kind of land development. Ultimately permission was obtained though it was subject to stringent conditions with respect to raising the level of the land on the islands, the construction of a bridge and the effecting of a variety of works with respect to draining, access and development generally. Substantial expenditure was incurred in the early stages of the project.
One of the original participants died in 1961 and subsequently discussions took place with a company called Hooker Rex Pty. Ltd. which ultimately undertook in 1964 to pursue the application for re-zoning on the basis that that company or a member of that group would purchase the whole of the shares in the taxpayer. On 29th August 1966 the shareholders granted an option to Hooker Town Developments Pty. Ltd. to purchase the whole of the issued shares. That option was exercised and the shares from the original holders transferred to Hooker Town Developments Pty. Ltd. That company subsequently disposed of the shares to another company which was described as a joint venture company in which the Hooker group had an interest. That company, Portuland Developments Pty. Ltd. ("Portuland"), acquired the whole of the shares in the taxpayer on 18th December 1968.
During the period up to the acquisition of the shares by Portuland substantial work had been done on the islands towards making them physically capable of being used for subdivision purposes, but there remained outstanding compliance with the requirements that the level of the land must be raised by some three feet before development permission would be available and that a bridge be constructed. That work had not been done prior to the sale of the shares to Portuland but work commenced in late 1968 or early 1969 and by 17th March 1971 substantial expenditure had been incurred, mostly financed by borrowings from Portuland, though the work was still incomplete and apparently no subdivisional plans had been approved.
On 17th March 1971 an extraordinary general meeting of the taxpayer resolved that it should be placed in voluntary liquidation and a liquidator was appointed. At that stage, it was indebted to Portuland in respect of amounts advanced for the cost of the work done on the island and for work done by Portuland on its behalf. It appears that at that stage there was no other creditor and the extraordinary general meeting authorized the liquidator to distribute the assets of the company in specie to the contributories. There was in fact only one contributory, namely, Portuland and shortly thereafter the liquidator, on behalf of the taxpayer, transferred the land in question to Portuland in specie, thereby discharging the debt owed to it by the taxpayer and satisfying Portuland's interest as a contributory. The details by which the amounts in question were arrived at are not material to the question now in issue.
The exact date of the transfer of the land by the liquidator to Portuland does not appear, but it evidently was after 1st July 1971 because the Commissioner assessed the taxpayer to tax in respect of the year ended 30th June 1972 upon the basis that the transfer of the land gave rise to assessable income and that its taxable income for that year was some $1.3 million. This assessment was made upon the footing that the transfer of the land by the liquidator constituted a disposal of trading stock by reason of s. 36 (1) of the Income Tax Assessment Act 1936, as amended.
The only point involved in the appeal to the Supreme Court of New South Wales from that assessment was whether s. 36 (1) was applicable to the circumstances. Three separate questions were argued in the Supreme Court, first, whether the land was trading stock within the meaning of the section; second, whether it was an asset of a business carried on by the taxpayer; and third, whether there had been a disposal of the land by the taxpayer within the meaning of the section. Mahoney J. found that the land was not trading stock, but that it was an asset of a business carried on by the taxpayer and that it had been disposed of by the taxpayer. In this Court, the Commissioner contended that the land was trading stock to which s. 36 applied. The taxpayer maintained its argument that the land was not trading stock and also argued that there was no disposal within the meaning of s. 36, though it did not pursue the point that the land was not an asset of a business carried on by it. In order to succeed the Commissioner must establish both that the land was trading stock within s. 36 (1) and that there was a disposal of it. The first of these two questions involves in itself two aspects, first whether land is capable of being trading stock within the meaning of s. 36, and second whether this land was trading stock.
The question whether land can be trading stock within the meaning of this definition and of s. 36 has been discussed on a number of occasions in this Court but there is no decision which settles the point. The relevant statutory provisions with respect to trading stock are the definition in s. 6 and the provisions of ss. 28-31, s. 36 and s. 51 (2). Section 6 provides that: " "trading stock" includes anything produced, manufactured, acquired or purchased for purposes of manufacture, sale or exchange, and also includes live stock". Section 28 contains provisions designed to bring into the assessable income of a taxpayer, or to provide for an allowable deduction equal to the difference between the value of trading stock on hand at the beginning of the year of income and at the end of the year of income. Section 31 (1) requires that the value of each article of trading stock (not being live stock) to be taken into account at the end of the year of income shall be, at the option of the taxpayer, its cost price or market selling value or the price at which it can be replaced. Sub-section (2) enables a different method of valuation to be adopted where the Commissioner is satisfied that the value of stock is less than the lowest value ascertained under sub-s. (1). It is to be that which is fair and reasonable having regard to a number of factors including "the quantity of the trading stock sold, exchanged or used in manufacture by the taxpayer after the end of the year of income and the prospects of sale, exchange or use in manufacture of further quantities to that trading stock".
Section 36 provides, so far as material, that where a taxpayer disposes by sale, gift, or otherwise of property being trading stock, and the property constitutes the whole or part of the assets of a business which is, or was, carried on by the taxpayer, and the disposal was not in the ordinary course of carrying on that business, then the value of that property shall be included in the assessable income. Section 51 (2) provides that expenditure incurred in the purchase of stock used by a taxpayer as trading stock shall be deemed not to be an outgoing of capital or of a capital nature.
The definition and the operation of ss. 28 and 31 show that the term "trading stock" and the adjustments in respect thereof as between the beginning and the end of the year of income are not confined to what may be regarded as the ordinary or basic meaning of "trading stock", i.e. goods purchased for re-sale in the course of a business which involves the carrying of a stock of goods of the relevant kind which are acquired, held and disposed of, either exactly as they are purchased or after no more than repacking in smaller quantities or packages, as would be the case with both wholesalers and retailers. The extension is involved in the notion that raw materials purchased for the purpose of use in manufacturing processes are treated as trading stock, notwithstanding that they may be consumed in the process of manufacture and replaced by a finished product, being goods of a different nature, which are then sold or enter into the trading stock at the end of the year. The definition makes this clear, although its precise operation may be a matter of some grammatical difficulty because the "purposes of manufacture, sale or exchange" must be read selectively in their application to the earlier words.
The questions which arise in determining whether land may be trading stock are whether it can be described as or brought within the ambit of the word "anything", and whether it can be made to fit the provisions of this group of sections so as to be capable of being described as being "on hand" or as an "article" of trading stock, being something which is capable of being "replaced" or becoming "obsolescent" or whether two parcels can be of "the same kind" within the meaning of these provisions. The word "thing" is not readily to be taken as including within its ambit land, but it is not necessarily right to read the word "anything" as if it were two words, though its primary meaning is a "thing of any kind". Neither land itself nor interests in land would ordinarily be thought of as being "things". The provisions to which I have just referred are sufficient to indicate at least that there are expressions used in relation to trading stock which are not readily applicable to land. No doubt occasions could arise in which one piece of land could be said to be "of the same kind" as another, as in the case of adjoining blocks in some subdivisions, and it may in some instances be possible to say that one allotment could be "replaced" by another in the same subdivision, or perhaps even some other subdivision. In the case of business premises the word "replaced" might be used by saying, e.g. that a branch at one location has been replaced by another at a new location.
It does not seem to me however that the conception of trading stock necessarily involves that the articles which are bought and sold must be identical or that what replaces one item of trading stock must be identical with that which it replaces. It is easy enough to formulate examples where this would be so. One such example is the case of an art dealer whose business comprises the buying and selling of paintings, including old masters. It would be as proper to describe each of the latter as being "unique", as it would be to use that expression in relation to a particular parcel of land. Yet it would be difficult to say that the art dealer does not have trading stock comprising pictures bought for purposes of sale and that when he sells a number of masterpieces and buys other paintings by other painters, or even of the same painter, that he is not replacing the stock which he has sold. The expression "of the same kind" cannot be read too strictly. It would be an affront to common sense to require absolute identity, particularly in sections of the Act dealing expressly with business transactions. Common sense alone would tell us that in the ordinary course of trade in goods one line may be discontinued but none the less accurately described as "replaced" by another.
These considerations are of course not to be looked at individually but should be looked at collectively in order to see whether the apparently wide word "anything" in its ordinary meaning includes land when used in this particular context. I am disposed to the view that land may in some circumstances be trading stock and it does not much matter whether it is because of the ordinary meaning of that expression or by reason of such extension as may be effected by the words which follow the word "includes". The definition is not perhaps very helpful because that which it "includes" would seem to be a greater part or, on one view, the whole, of that which is the ordinary meaning of the term "trading stock". There are difficulties with definitions of this kind where an ordinary well-known expression is taken and then said to include other things, some or perhaps all of which, fall within the ordinary meaning. This kind of problem was discussed in Y. Z. Finance Co. Pty. Ltd. v. Cummings [31] . I do not think that for present purposes it is necessary to decide whether the word "includes" in this definition has the meaning "means and includes" so as to make it exclusive as well as inclusive, even though to some extent different from the ordinary meaning.
1. (1964) 109 C.L.R. 395.
The decision in Investment and Merchant Finance Corporation Ltd. v. Federal Commissioner of Taxation [32] shows that stocks and shares may be "trading stock" in the hands of a share trader, notwithstanding earlier views that choses in action were outside that conception. The term "trading stock" thus extends beyond tangible movables. In such circumstances there seems no valid reason for excluding from the term "trading stock" any property which is capable of being bought and sold in the course of a business of buying and selling items of such property and maintaining a stock thereof for the purpose of such a business. It appears to me that there may be circumstances in which land, or interests in land, may be trading stock, but, for reasons which I shall indicate, the mere commercial purchase of land for resale, either in globo or in subdivided parts, is not sufficient to make such land trading stock.
1. (1971) 125 C.L.R. 249.
We were referred in the course of argument to certain English authorities which treat land as capable of being trading stock, but it was said that they were of no significance in the Australian scene because in the English income tax legislation there was a definition of trading stock which included land. This view is misconceived, because in the provisions of the English income tax legislation which require the ascertainment of the balance of profits and gains of a trade or business, there is no definition of trading stock and indeed no provisions corresponding to ss. 28-31. However the course of authority has there produced the result that trading stock must be taken into account in the ascertainment of the balance of profits and gains in much the same way as is expressly provided in ss. 28-31. Land has there been treated as trading stock and those principles applied in bringing it into account. See Pearn v. Miller [33] and Hudson v. Wrightson [34] . There are, however, certain parts of the Income and Corporation Taxes Act, 1970 U.K. which contain a definition of trading stock for special purposes. Thus in s. 137 (originally s. 26 of the Finance Act, 1938 U.K.) there is a definition to be used in ascertaining the profits and gains to be brought to tax where a business has been discontinued. That definition expressly includes real property and it also expressly includes "property such as is sold in the ordinary course of the trade or would be so sold if it were mature or if its manufacture, preparation or construction were complete" and "materials such as are used in the manufacture, preparation or construction of any such property " Again in the Finance (No. 2) Act, 1975 U.K. a definition is provided for the purpose of providing relief from the consequences of high level inflation on the value of trading stock. That definition expressly includes what is described as "work-in-progress", a term which itself is defined in a manner somewhat similar to the relevant part of the definition in s. 137.
1. (1927) 11 T.C. 610.
2. (1934) 26 T.C. 55.
These definitions are none the less instructive as reflecting the course of authority in the English courts. The general problem presented by the need to construct trading accounts for persons who buy and sell or buy raw materials from which they manufacture finished products for sale has been dealt with progressively by decided cases in England. The situation is succinctly described by the learned authors of Whiteman and Wheatcroft on Income Tax, 2nd ed., (1976), par. 9-28:
A trader who buys and sells goods will normally have on hand a quantity of goods which he has purchased but not yet sold. These are called his trading stock. A manufacturer who buys raw materials, processes them and sells the finished product will normally have on hand some unused raw materials, some partly manufactured goods and some finished goods awaiting sale. The first and last are stock, the partly processed goods being sometimes called stock and sometimes work in progress.
After giving other illustrations, the learned authors say:
Unless a trader is on a "cash basis" it is clear that at the end of his first trading period some figure must be added to the credit side of his accounts in respect of his stock and work in progress, otherwise his accounts would not fairly show the profit of the period. These items should normally be brought in at the end of the first trading period at their cost and deducted at the same figure in opening the account of the second trading period.
It does not seem to me to matter whether partly manufactured goods are called "work-in-progress" rather than trading stock but on the whole it seems preferable to regard them as trading stock because in truth they represent trading stock, namely raw materials, in the course of transformation into a different kind of trading stock, namely finished products. Something which arises out of work done on trading stock in order to produce other trading stock may be accurately described itself as trading stock. I am not able to agree with the observation of Mahoney J. that the House of Lords in Ostime (Inspector of Taxes) v. Duple Motor Bodies Ltd. [35] regarded work-in-progress as being essentially different from trading stock and to be treated by way of contrast with it. The reasons given by their Lordships demonstrated that the approach to work-in-progress is identical to the approach properly to be made to stock in trade in the sense of that which is purchased, or that which is manufactured. This, I think, is apparent from the speeches of Viscount Simonds [36] , Lord Reid [37] , and Lord Guest [38] . The case itself was concerned only with the proper method of valuing work-in-progress and took for granted the proposition that that which is truly work-in-progress should be brought into account in the ascertainment of the profits and gains in the same manner as raw materials and finished products, i.e. at cost or market value whichever is the lower, in accordance with principles long settled in relation to stock-in-trade in the narrower sense. The problem there was how cost should be ascertained in the case of work-in-progress. The case does not draw any distinction between the valuation of trading stock in the narrower sense of goods purchased on the one hand and work-in-progress on the other, save to observe that in the former case cost may be readily ascertained, whereas in the second, difficulties are encountered. The case is by no means authority for the proposition that work-in-progress is to be taken into account when it arises out of work done on property which is not itself trading stock in the sense of raw materials.
1. [1961] 1 W.L.R. 739; [1961] 2 All E.R. 167; (1961) 39 T.C. 537.
2. [1961] 1 W.L.R., at pp. 748-749; [1961] 2 All E.R., at p. 170; (1961) 39 T.C., at p. 567.
3. [1961] 1 W.L.R., at p. 751; [1961] 2 All E.R., at p. 172; (1961) 39 T.C., at p. 569.
4. [1961] 1 W.L.R., at p. 757; [1961] 2 All E.R., at pp. 176-177; (1961) 39 T.C., at p. 574.
If one were to carry the analogy of manufactured goods into the realm of real estate, it would require that land which was purchased as trading stock might, when work is done upon its development, be brought into account at the end of the year, if still retained, either at cost (which would include cost of all work done on it) or at market value under the English system, or at cost, market value, or replacement cost under ss. 28-31, but it would not follow that individual allotments of a subdivisional estate, which were ready for sale and which might lawfully be sold, would be trading stock when the work was completed in circumstances in which the original land acquired in globo was not trading stock.
Notwithstanding that I take the view that land is capable of being trading stock, I am satisfied that in the circumstances of the present case the land in question was not trading stock of the taxpayer and therefore that s. 36 of the Act has no application.
I have reached that conclusion for somewhat different reasons than those adopted by the learned trial judge. In my opinion items of property (including land) can only be regarded as trading stock in circumstances in which the business in which they are employed involves some continuity or repetition of both buying and selling, so that one is able to say in a real sense that the stock is being turned over by a process of buying and selling. That is the kind of business with which this group of sections is dealing.
A single purchase of land, however substantial in area, made, not as part of a continuing business of trading in land, but none the less with a view to its subdivision and development into a residential area, individual allotments in which will be sold, does not seem to me to have the qualities required for answering the description of trading stock, nor for the application of the processes for calculating its effect upon the taxable or assessable income which are prescribed by ss. 28, 29, 31 and 51 (2). If however a dealer or a "subdivider" were engaged in a continuous process of purchasing, holding and reselling subdivided land or of purchasing land for development, subdividing and selling in allotments and, as such subdivision and sales progressed, purchasing further land to hold in readiness for subdivision as and when the existing "stock" of saleable allotments approached its end, it would be proper to say that land from time to time unsold would be trading stock. Such a process is essentially different from a single operation involving the acquisition of a single area with a view to its physical development and subdivision with a view to sale in allotments. No doubt the initial step in the former kind of business may appear very similar to that in the latter and at that stage it would depend upon the intention with which the activity had been embarked upon. In dealing with the converse situation in Investment and Merchant Finance Corporation Ltd. v. Federal Commissioner of Taxation, Barwick C.J. said [39] :
In the first place it is an error in my opinion to think that the transactions of a business can be taken item by item and each treated as falling within s. 26 (a). The business must be regarded as a whole, its receipts being assessable income from which the permitted deductions are to be deducted. Section 26 (a) is intended in my opinion to deal with transactions which are entire in themselves and do not form part of a more extensive business. In that event they are regarded as yielding a profit which will be calculated according to the circumstances of the transaction, the profit only being assessable income.
In the second place, my earlier conclusion that the transaction formed part of the appellant's business of trading in shares denies any basis for treating it as an isolated transaction to which s. 26 (a) may apply.
Menzies J. made similar observations [40] .
1. (1971) 125 C.L.R., at p. 255.
2. (1971) 125 C.L.R., at p. 264.
The fact that an item of property ("any thing") is, in a commercial transaction, purchased for purposes of sale is not of itself sufficient to enable that thing to be characterized as trading stock. So to characterize it would be to give no force to the word "trading" and to produce the result that there is no room for the operation of s. 26 (a), a result not consonant with the general scheme of the Act.
In the present case there is no question that the taxpayer's objective was to improve, develop and subdivide only these two islands with a view to selling the allotments and thereby deriving a profit from the undertaking. There is no suggestion that it was part of any wider business operation or that there was any intention of maintaining a stock of land or of allotments, by purchasing new land for subdivision as the old was gradually sold off. The activity upon which the taxpayer embarked is no doubt a business activity and a profit-making venture, but that does not mean that the business is one to which ss. 28-31 and 51 (2) can apply. It is appropriately classified as being a profit-making undertaking or scheme within the second limb of s. 26 (a). Indeed it may be regarded as a characteristic example of the kind of situation with which the second limb deals.
If it were sought to say that such an undertaking would produce income in the ordinary sense of that term as used in s. 25 (1) it would be only the profit arising from the undertaking which would constitute such income. It does not seem to me however that it would be appropriate to deal with it under that section. If however such an enterprise were conducted as part of a larger continuing business in which land was being continually bought, held and sold, or bought, developed, subdivided, held and sold, it would be right to say that a true reflex of the taxable income would be better, or at least as well, ascertained by treating the land as trading stock, the original purchase price as an allowable deduction and the proceeds of sale of subdivided lots as assessable income, with appropriate adjustments in respect of land on hand at the beginning and end of each year and for development costs. However that is not this case.
It was suggested that land purchased in a manner and for a purpose such as the present will become trading stock where the process of development and subdivision has reached the stage where either the whole or some part (it is not clear which) of the total area is capable of sale in subdivided allotments. Mahoney J. concluded that at the time of the transfer of the land it had not been "converted into trading stock" in that subdivisional lots had not been created and none were available for sale. This view of the facts was apparently common ground at the hearing and was plainly open on the evidence. No reason exists for departing from that view of the facts. However, in so far as his judgment may suggest that the allotments which ultimately emerge from the development and subdivision of this land as saleable lots would, on completion of that process, have become trading stock of this taxpayer, I am unable to agree with it. The completion of that process would not have converted this land into trading stock of this taxpayer. In the case of land bought and sold in the course of a continuing business the analogy of manufactured products, though imperfect, may be helpful and a proper result may be arrived at by using it as a guide. The extension for income tax purposes of the concept so as to include raw materials acquired for the purpose of manufacture is no doubt a natural one. It enables one to regard as stock in trade raw materials purchased, not for the purpose of sale, but for consumption or transformation into manufactured goods, produced though not purchased as stock in trade and capable of being on hand at the end of a year. This recognizes the economic and accounting identity in a continuing business of goods purchased and goods manufactured, from raw materials purchased. This extension of meaning has occurred in England without legislation. The definition of trading stock in s. 6 of the Act likewise establishes that for Australian purposes raw materials purchased for the purpose of manufacture in the course of a continuing business are to be treated in the same way as in England.
If it is right to conclude in a particular case, as in my opinion the trial judge rightly concluded in this case, that the relevant land as purchased was not trading stock, then it must follow that the allotments which arise from the process of development and subdivision are likewise not trading stock, and that where the purchase is a business undertaking it falls to be taxed under s. 26 (a) and the provisions with respect to trading stock have no application to the process of ascertaining that profit.
It follows from the view which I take of the nature of the profit-making undertaking in this case that the land is not trading stock and that therefore s. 36 has no application. That is sufficient to decide the appeal in favour of the taxpayer.
It is accordingly not necessary to consider the question of whether what was done by the liquidator constituted a "disposal" of the land by the taxpayer. That depends in part upon the true nature of a liquidation, the rights and duties of a liquidator and the nature of the interest of a contributory. In Franklin's Selfserve Pty. Ltd. v. Federal Commissioner of Taxation [41] Menzies J. in dealing with the question of whether a company in liquidation was the beneficial owner of shares held by it in a subsidiary company, said that he did not think that liquidation of itself deprived the company of the beneficial ownership of the shares for the purposes of the required continuity of shareholding under s. 80 and associated sections. Since that decision the House of Lords has considered the effect of a winding up order on the beneficial ownership of assets of a company: see Ayerst (Inspector of Taxes) v. C. & K. (Construction) Ltd. [42] where their Lordships held unanimously that when an order for the compulsory winding up of a company is made the effect is to divest the company of the beneficial ownership of its assets. The only speech was that of Lord Diplock who drew no distinction between a winding up order and a voluntary winding up, although he did not expressly refer to voluntary winding up. In the light of my conclusion that this land was not trading stock, it is not necessary to consider whether a transfer by a liquidator of that which is at least a legal title of land to a sole creditor or a sole contributory constitutes a disposal of the land. In so far as there is a conflict between the views expressed by Menzies J. and those expressed by Lord Diplock, it must be resolved in other proceedings.
1. (1970) 125 C.L.R. 52, at pp. 68-70.
2. [1976] A.C. 167.
For the above reasons I am of opinion that the appeal should be dismissed. |
high_court_of_australia:/showbyHandle/1/9495 | decision | commonwealth | high_court_of_australia | text/html | null | Victoria v Sutton [1998] HCA 56 | https://eresources.hcourt.gov.au/showbyHandle/1/9495 | 2024-09-13T22:55:13.564927+10:00 | High Court of Australia
Gaudron, McHugh, Gummow, Kirby and Hayne JJ
Victoria v Sutton (M5/1997)
[1998] HCA 56
ORDER
1. Appeal allowed.
2. Set aside the order of the Full Court of the Industrial Relations Court of Australia.
3. Remit the matter to the Full Court of the Industrial Relations Court of Australia to determine any remaining issues under a Notice of Contention in or to the effect of that filed by the respondents in this Court and dated 1 April 1997.
Cur adv vult
The following written judgments were delivered:—
2 September 1998
Gaudron, Gummow and Hayne JJ.
1. On 30 March 1994, the Australian Building Construction Employees' and Builders Labourers' Federation (the BLF) entered into a written agreement (the amalgamation agreement) with the Construction, Forestry, Mining and Energy Union (the CFMEU). This was expressed to bring about "an amalgamation and/or merger of the BLF into the CFMEU" so that "all assets and liabilities of the BLF shall merge with the assets and liabilities of the CFMEU". At the date of the agreement the CFMEU was, and the BLF was not, an organisation of employees registered under the Industrial Relations Act 1988 Cth (the 1988 Act) [1] .
1. Since 25 November 1996 titled the Workplace Relations Act 1996 Cth. See s 2(1) and cl 1 of Sch 19 of the Workplace Relations and Other Legislation Amendment Act 1996 Cth.
2. This case concerns the effectiveness of the amalgamation agreement in light of Orders in Council previously made under Victorian legislation, the BLF (De-recognition) Act 1985 Vict (the De-recognition Act). A consideration of the issues requires some treatment of earlier federal legislation.
The Commonwealth legislation
3. For many years, the BLF was an organisation of employees registered under the predecessor to the 1988 Act, the Conciliation and Arbitration Act 1904 Cth (the 1904 Act). The benefit of registration to the BLF was, among other things, the gaining, by force of the legislation, of the legal personality of a body corporate [2] .
1. See Williams v Hursey (1959) 103 CLR 30 at 52 Dobinson v Crabb (1990) 170 CLR 218 at 233 Re McJannet; Ex parte Minister for Employment, Training and Industrial Relations (Q) (1995) 184 CLR 620 at 635, 645-646.
4. During the pendency of deregistration proceedings against the BLF under special provisions of the Building Industry Act 1985 Cth [3] , the Commonwealth Parliament enacted two further statutes dealing specifically with the BLF [4] . The first was the Builders Labourers' Federation (Cancellation of Registration) Act 1986 Cth (the Cancellation Act) which came into operation on 14 April 1986. As the name suggested, the Cancellation Act by its own force (s 3) cancelled the registration of the BLF under the 1904 Act.
1. The validity of the Building Industry Act 1985 Cth was upheld in R v Ludeke; Ex parte Australian Building Construction Employees' and Builders Labourers' Federation (1985) 159 CLR 636
2. Their validity was upheld in Australian Building Construction Employees' and Builders Labourers' Federation v The Commonwealth (1986) 161 CLR 88
5. The second statute was the Builders Labourers' Federation (Cancellation of Registration — Consequential Provisions) Act 1986 Cth (the Consequential Provisions Act). The Consequential Provisions Act took effect immediately after the Cancellation Act. It addressed the impact of cancellation of the registration upon, among other things, property belonging to the BLF. The Consequential Provisions Act provided essentially that, following the Cancellation Act, the property of the BLF was to belong to an unincorporated association and was to be held and applied in accordance with the constitution and rules of the unincorporated association. This was the effect of s 4(1) of that statute. This preserved in relation to the BLF the operation of s 143(6) of the 1904 Act [5] . Section 143(6) stated:
Upon the cancellation of the registration of an organization, the organization shall cease to be an organization and a corporation under this Act, but shall not by reason of the cancellation cease to be an association. The property of the organization shall, subject to any order which the Court, upon application by a person interested, may make with respect to the satisfaction of the debts and obligations of the organization out of that property, be the property of the association and shall be held and applied for the purposes of the association in accordance with the constitution and rules of the organization insofar as they can be carried out or observed notwithstanding the deregistration of the organization.
The term "association" was defined in s 4(1) of the 1904 Act to mean "any trade or other union, or branch of any union, or any association or body composed of or representative of employers or employees, or for furthering or protecting the interests of employers or employees".
1. The 1904 Act, including s 143(6), was repealed by s 3 of the Industrial Relations (Consequential Provisions) Act 1988 Cth. The effect of s 6 of that statute was, notwithstanding the commencement of the 1988 Act, to continue the application of s 143(6) in relation to the cancellation of registration of the BLF as if the 1904 Act had not been repealed.
6. At the time of the enactment of the Cancellation Act and the Consequential Provisions Act, the property of the BLF included funds on deposit [6] and parcels of land under the provisions of the Transfer of Land Act 1958 Vict [7] . The registered titles to the parcels of land (which were situated at 11 Lygon Street, 13-15 Lygon Street Carlton and 8-18 Orr Street Carlton) stood in the names of two (in one case) and three (in the other cases) officers or members of the BLF. Section 37 of the Transfer of Land Act forbade the entry in the register of any trusts.
1. It would appear that the value of the funds on deposit, as at 22 February 1995, was approximately $857,938.97.
2. It would appear that the value of the land was estimated at May 1988 as between $1.78 million and $1.95 million.
7. Section 143(6) is not without difficulties of application to the situation with respect to the BLF. The phrase therein "the property of the association" has no clear legal meaning if the body is unincorporated. Subject to any provisions of the rules of the organisation, for example providing for the vesting of property in trustees or in some other body, the property would be that of the members. The rules of the BLF, as they stood on 13 April 1986, spoke of the "supreme control" being "vested" in the members (r 8.1) and also provided (rr 15, 16) for the custody, control and management of the property of the BLF. However, as the Full Court of the Federal Court pointed out in Bacon v O'Dea [8] , whilst the BLF retained its corporate status, there had been no practical necessity to have the title to property vested in trustees or in any other body.
1. (1989) 25 FCR 495 at 503.
8. The better view is that upon cancellation of registration on 14 April 1986, the property then was held by those who were members at that date. That is consistent with the conclusion which was reached by the Full Court of the Federal Court in Bacon v O'Dea [9] after consideration of the terms of the rules of the BLF and of decisions upon the general law, including Bacon v Pianta [10] and Re Goodson, deceased [11] . Further, in Dobinson v Crabb [12] , Dawson and McHugh JJ said:
[I]n our view what s 143(6) does is to provide for the destination of an organisation's property upon deregistration. Thereafter, subject to any order of the Federal Court, the association, to which the property is destined by the sub-section, holds that property in accordance with the constitution and rules of the organisation, but subject to the common or statutory law applying to unincorporated associations. Obviously, since deregistration takes the association outside the mechanism of the [1904 Act], that law is primarily State law.
In the same decision, Gaudron J construed [13] s 143(6) as evincing an intention "that the specific provisions thereby made with respect to the property which previously belonged to the organisation should be supplemented by the general law, including applicable State law". We turn to consider the particular laws made in Victoria.
1. (1989) 25 FCR 495 at 504.
2. (1966) 114 CLR 634.
3. [1971] VR 801.
4. (1990) 170 CLR 218 at 230.
5. Dobinson v Crabb (1990) 170 CLR 218 at 246
The Victorian legislation
9. The De-recognition Act received the Royal Assent on 30 July 1985 and s 7 thereof commenced on 1 August 1986. Section 7(1) empowered the Governor in Council, by Order published in the Victoria Government Gazette, to "provide for the restriction of the use of funds or property of BLF and for the control of those funds or that property". Such an Order would, unless sooner revoked, cease operation on the expiration of six months from the date on which it came into force, although s 7(2) permitted the extension of the Order by further Order. Section 7(3) provided that [14] :
A person shall not contravene an Order made under sub-section (1).
Penalty: 100 penalty units.
Other relevant provisions of the De-recognition Act came into force before s 7, that is to say on 14 April 1986. This was the day the Cancellation Act and the Consequential Provisions Act came into operation.
1. Section 7(3) was later re-numbered s 7(5) by the BLF (De-recognition) (Amendment) Act 1987 Vict (the 1987 Act).
10. Significantly, in s 3 of the De-recognition Act "BLF" was defined to mean:
(a) the organization registered pursuant to the Commonwealth Act [15] and known as The Australian Building Construction Employees' and Builders Labourers' Federation;
(c) if at any time the registration pursuant to the Commonwealth Act of the organization referred to in paragraph (a) is cancelled —
(i) the association within the meaning of the Commonwealth Act which was the organization referred to in paragraph (a) immediately before the cancellation of that organization's registration pursuant to the Commonwealth Act.
1. The "Commonwealth Act" was defined in s 3 of the De-recognition Act to mean the 1904 Act as amended and in force for the time being.
11. The definition speaks of the present, although in some respects by reference to past events. The expression in par (c)(i) "the organization referred to" identifies the BLF as it existed before the cancellation of registration. The term "the association within the meaning of the [1904 Act]" identifies the consequences of the operation of s 143(6) of the 1904 Act and the general law upon the BLF. In this judgment, the term "BLF" is used to identify the organisation whose registration under the 1904 Act was cancelled and the unincorporated association in respect of which thereafter s 143(6) and the general law operated.
12. Section 11 of the De-recognition Act provided that, unless certain events had by then occurred, that Act was to cease to have effect on the expiration of one year from the Royal Assent on 30 July 1985. However, ss 2(2) and 6 of the 1987 Act operated to repeal s 11 of the De-recognition Act from 30 July 1985. Accordingly, the operation of the De-recognition Act was continued beyond 30 July 1986.
13. With effect from 13 October 1987, the 1987 Act amended s 7(1) of the De-recognition Act so that it read:
For the purpose of protecting the rights of persons who are or have ceased to be members of BLF, the Governor in Council may by Order published in the Government Gazette provide for the restriction or distribution of the use of funds or property of BLF and for the control, vesting and realisation of those funds or that property.
The opening words of s 7(1) disclose a particular statutory purpose.
14. In Dobinson v Crabb [16] , Gaudron J said:
The definition of "BLF" in the De-recognition Act is such that, when applied to s 7, s 7 operates on all property of the association, whether it previously belonged to the organisation or whether it was later acquired by the association in its own right. Property acquired by the association in its own right after deregistration of the organisation is unaffected by s 143(6) of the [1904 Act].
1. (1990) 170 CLR 218 at 243. See also at 224, per Brennan J.
The Order
15. In purported reliance upon the De-recognition Act, the Governor in Council made an Order on 13 October 1987 [17] . Clause 1 of the Order committed "[p]ossession, custody and control of the funds and property" of the BLF in a "Custodian", Dr Ian Gordon Sharp. Clause 7 required the Custodian "forthwith" to "take possession custody and control" of such funds and property and cl 5 restricted the ability of other persons to deal with such property [18] . At that stage, the Order did not provide for the vesting of funds and property in the Custodian. Clause 11 provided that no person was to "resist, hinder or obstruct" the Custodian performing his functions under the Order. Clauses 2 and 3 stated:
2. No person shall pay or dispose of any of the funds or property of BLF or of any interest therein, or create any encumbrance or charge in respect thereof, without the prior written consent of the Custodian. Any such payment disposition encumbrance or charge shall be void, at the option of the Custodian.
3. The Custodian may refuse to give consent referred to in clause 2 hereof if he in his absolute discretion is not satisfied that the payment disposition encumbrance or charge is desirable to be made for the carrying out of the ordinary and proper affairs of BLF and for the benefit of its members.
It is upon the construction of these provisions that the present litigation largely turns.
1. Victoria Government Gazette, No S39, 13 October 1987.
2. By further Order in Council dated 17 May 1988, cl 7 was amended by adding at the end of it the words "other than membership contributions or sustentation fees received by the Victorian Branch or the Federal office on or after 13 October 1987 or funds or property acquired by the use of such contributions or fees": see Dobinson v Crabb (1990) 170 CLR 218 at 224, 228.
16. The Order was made the day before the enactment of the 1987 Act and on the day of the deemed commencement of the 1987 Act (13 October 1987). However, s 5(b) of the 1987 Act inserted a new s 7(4) of the De-recognition Act. This stated:
The Order in Council declared to be made pursuant to section 7 of this Act and section 5 of the Police Regulation Act 1958 and published in the Government Gazette on 13 October 1987 is hereby declared to be and to always have been as valid as if enacted herein.
17. Approximately one month later, on 10 November 1987, the Governor in Council made a Supplemental Order [19] . Clause 2 thereof empowered the Custodian to "vest in himself as Custodian any funds or property of [the] BLF". The Supplemental Order conferred other additional powers on the Custodian, including a power to bring or defend legal actions (cl 3). A further Supplemental Order was made on 22 December 1987 [20] .
1. Victoria Government Gazette, No S45, 10 November 1987.
2. Victoria Government Gazette, No S59, 22 December 1987.
18. It is clear that technical words are not necessary to give effect to the intention of a settlor to vest property upon an express private trust for persons taking beneficial interests in that property [21] . "Equivalent" expressions will suffice [22] . The same may be taken to be the case where the trust is created by statute and the intention is that of the legislature [23] .
1. Re Armstrong, deceased [1960] VR 202 at 205
2. Richards v Delbridge (1874) LR 18Eq 11 at 14.
3. Registrar of the Accident Compensation Tribunal v Federal Commissioner of Taxation (1993) 178 CLR 145 at 166
19. The Supplemental Orders did not provide that the vesting of property in the Custodian was to be on "trust" for the members. Further, the Supplemental Orders did not use equivalent expressions to indicate, for example, that the property, when vested, was to be held "on behalf of" or for "the benefit of" the members [24] . The Custodian is thus not a trustee, in the ordinary sense, of the property which is vested in him. It nevertheless may have been the case that obligations in the nature of a trust not for beneficiaries but for statutory purposes [25] attached upon the vesting of the property in the Custodian. It is unnecessary to determine this question. What is of importance for this appeal is that, once any particular funds or other assets were vested in the Custodian by this means, they were beyond the reach of any purported disposition thereafter by the BLF. It could not then effectively deal in that which was already vested in the Custodian.
1. cf Workers Compensation Act 1958 Vict, s 35(1) and (4) considered in Registrar of the Accident Compensation Tribunal v Federal Commissioner of Taxation (1993) 178 CLR 145 at 165-166
2. See Harmer v Federal Commissioner of Taxation (1991) 173 CLR 264 at 274 Registrar of the Accident Compensation Tribunal v Federal Commissioner of Taxation (1993) 178 CLR 145 at 161-162, 165-168, 188-190.
20. As we have indicated earlier in these reasons, s 7(2) of the De-recognition Act placed a temporal limitation upon these Orders. It stated:
An Order made under sub-section (1) —
(a) shall come into force upon the date of publication of the Order in the Government Gazette; and
(b) shall, unless sooner revoked, cease to be in force at the expiration of 6 months from the date on which it came into force but may, at any time while it remains in force (including a time when it remains in force by virtue of a previous extension or previous extensions under this paragraph), be extended in duration by a further Order made by the Governor in Council and published in the Government Gazette.
The three Orders were extended (sometimes with variation) at intervals of approximately six months, with the last extension before the amalgamation agreement occurring on 17 March 1994 and operative until 16 September 1994. The latest extension after the amalgamation agreement which the evidence discloses occurred on 2 March 1995 and operated until 1 September 1995.
21. Pursuant to the first Supplemental Order, the Custodian took steps to vest in himself the funds on deposit of the BLF in Victoria. The Custodian did not obtain the registered title of the parcels of land. However, the Custodian caused the entry on the relevant certificates of title of Queen's caveats under s 106 of the Transfer of Land Act. These were lodged on 16 May 1988 and forbade the registration of any dealing by the registered proprietors "without the consent of the Custodian under the [De-recognition Act] first obtained (Order of the Governor in Council made 13 October 1987, Clause 2)". Yet, in circumstances apparently not disclosed by the evidence, by order of the Registrar of Titles dated 26 October 1993 [26] , the lands were "vested" in three persons who appear to have been officers or members of the BLF and were, it may be assumed, new trustees. The order was entered on each certificate of title on 9 May 1994.
1. Presumably made under the Transfer of Land Act, s 58.
22. Accordingly, even after the Supplemental Orders took effect, the legal title of the parcels of land was retained by the respective registered proprietors, although the Custodian had placed Queen's caveats on the titles. It would appear that the beneficial interest in the land was retained by the members of the unincorporated association collectively.
23. However, the funds on deposit in Victoria were vested in the Custodian and insusceptible of disposition by the unincorporated association. Thus, irrespective of any subsequent avoidance of the amalgamation agreement by the Custodian, the subject matter of that agreement could not have included the funds on deposit. They could not be included in the assets of the BLF of which that instrument spoke.
The BLF-CFMEU agreements
24. On 30 March 1994, the BLF and the CFMEU entered into the amalgamation agreement. At that time, the CFMEU was the product of a series of amalgamations of unions which were registered under federal law. Unlike the BLF, however, the CFMEU was a registered organisation of employees and thus possessed corporate status. The BLF appears to have executed the amalgamation agreement by affixing the "seal" of the BLF under the hand of the General Secretary and the Federal President.
25. The amalgamation agreement purported to do more than pass possession, custody or control of the assets of the BLF. It was a purported disposition thereof. The relevant provisions stated:
3. On and from 31 March 1994 all assets and liabilities of the BLF shall merge with the assets and liabilities of the CFMEU to be held and controlled in accordance with the rules of the CFMEU and this agreement and shall be treated as if such assets and liabilities were, at all times, the assets and liabilities of the CFMEU. Such funds shall, to the extent that prior to 31 March 1994 they were funds under the control of a BLF branch, other than the BLF, Victorian Branch, be and become funds under the control of the respective Construction Labourers' Divisional Branch established consequent upon this agreement and, otherwise, the funds of the BLF shall be held in accordance with paragraph 11 herein. In the case of the funds of the BLF, Victorian Branch they shall be and become funds under the control of the Building Unions Division, Victorian Divisional Branch.
4. For all purposes and in all proceedings, an asset or liability of the BLF existing immediately before 31 March 1994 is taken to have become and to have been at all times an asset or liability of the CFMEU on and from 31 March 1994.
7. On and from 31 March 1994 any and all members of the remaining branches of the BLF, if not already members of the CFMEU, shall be and become members of the CFMEU and be treated in the CFMEU as if all of the period of their membership in the BLF was membership in the CFMEU and all other persons who, prior to the day fixed for the amalgamation and/or merger, were members of the BLF, shall, on and from 31 March 1994 cease to be members of the BLF.
11. In relation to the funds of the BLF not under the control of any branch those funds shall also merge with the funds of the CFMEU and be and become the funds of the Building Unions Division of the CFMEU through its Divisional Office or funds under the control of the Building Unions Division of the CFMEU through its Divisional Office.
No provision of the amalgamation agreement referred to the circumstance that the funds on deposit were held by the Custodian nor did it deal with the Queen's caveats over the registered titles to the real estate. Significantly, the Custodian was unaware of the amalgamation agreement and so did not provide his consent to the disposition of any property of the BLF. The evidence of the Custodian in this respect was not challenged.
26. The rules of the BLF, as well as the rules of the CFMEU, were amended to enable both bodies to effect the amalgamation. State registered unions which were associated with the BLF also entered into agreements with the CFMEU in order to further achieve the purported amalgamation.
The proceedings
27. On 6 April 1994, Mr John Sutton, the National Assistant Secretary of the CFMEU, applied to the Industrial Relations Court of Australia (the IRC) for various orders and declarations. The application was based in part on s 258 of the 1988 Act and in part on the jurisdiction with respect to "associated matters" conferred by s 430 of that statute [27] . Section 258 empowered the IRC to determine whether an invalidity had occurred in the management or administration of a registered organisation. The relief sought by Mr Sutton included a declaration that no invalidity had occurred in relation to the merger of the BLF and the CFMEU; an order that the property of the BLF held prior to 31 March 1994 was now held by the CFMEU; and an order that the funds on deposit held by the Custodian be transferred to accounts held by the CFMEU. The Custodian, the State of Victoria, the CFMEU and certain officers and members of the BLF were named as respondents to the application. No registered proprietor of any of the real estate was joined as a party. Nor, as to the BLF, does there appear to have been any representative order in respect of members comprising the unincorporated association.
1. A motion for a declaration that the IRC had no jurisdiction to hear and determine the proceeding and for its dismissal was refused by Wilcox CJ on 12 October 1994: Sutton v Sharp (1994) 1 IRCR 259125 ALR 643; 57 IR 102.
28. On 5 May 1994, Mr Sutton amended his application to change the CFMEU from a respondent to the second applicant. On the same day, Mr Sutton and the CFMEU filed a detailed statement of claim. On 28 October 1994, the Custodian and the State of Victoria filed their defence. In response to the allegation that the CFMEU and the BLF had entered into the amalgamation agreement which took effect on 31 March 1994, the Custodian and the State of Victoria pleaded that the amalgamation agreement "was and is void". They placed reliance on the terms of the Order and the lack of consent from the Custodian to the disposition of the property.
The litigation in the IRC
29. Wilcox CJ concluded [28] that the intention of cl 2 of the Order made 13 October 1987 was to render a disposition of property without the consent of the Custodian void if the Custodian so elected. Wilcox CJ stated that, whilst the first sentence of cl 2 gave rise to the inference that any breach of the prohibition contained within it would be void, the second sentence prevented the inference by evincing what his Honour held was a clear intention that an unauthorised disposition would be void at the election of the Custodian. As the Custodian had not exercised the option, cl 2 did not render the disposition to the CFMEU void [29] .
1. Sutton v Sharp [No 2] (1995) 62 IR 121 at 147
2. Sutton v Sharp [No 2] (1995) 62 IR 121 at 148
30. On 24 August 1995, Wilcox CJ made various orders [30] . The Court declared that the amalgamation agreement "was and is valid and effective in law" (order 1), that "no invalidity has occurred in the management or administration of [the] CFMEU or any branch of [the] CFMEU" (order 2), and that the CFMEU was "beneficially entitled" to the funds or property in the possession, custody or control of the Custodian including any funds or property vested in him as Custodian under any Order in Council (order 3). The Court also made a mandatory order that, within sixty days or such further time as a judge allows, the Custodian "do all things necessary" to vest in the CFMEU those funds and property (order 4).
1. Sutton v Sharp [No 2] (1995) 62 IR 121 at 149
31. Pursuant to s 420 of the 1988 Act, the Custodian and the State of Victoria appealed to the Full Court of the IRC. The Custodian sought a stay of execution of order 4 pending the appeal. The Full Court granted a stay of the order so far as it related to the real estate but refused a stay in respect of the funds on deposit. The Custodian thereafter transferred to the CFMEU the funds on deposit.
32. However, as indicated earlier in these reasons, irrespective of the effectiveness of any subsequent avoidance by the Custodian under cl 2 of the Order, the subject matter of the amalgamation agreement could not and did not include in the first place the funds on deposit vested in the Custodian under cl 2 of the first Supplemental Order. That statutory title was superior to any rights which the BLF would otherwise have had under the general law to transfer to the CFMEU.
33. Between the decision at first instance and the appeal to the Full Court, Dr Sharp died. The Governor in Council made an Order which was published on 20 August 1996 [31] . The Order committed possession, custody and control of the funds and property of the BLF to the Honourable Stephen George Alley and provided that Mr Alley was to have the same functions and powers as were exercised or held by Dr Sharp immediately prior to his death. He is the second appellant in this Court [32] .
1. Victoria Government Gazette, No S95, 20 August 1996.
2. Pursuant to a grant of leave made on 6 November 1997 at the substantive hearing.
34. On 23 August 1996, the Full Court (Spender, Ryan and North JJ) dismissed the appeal [33] . On 14 February 1997, pursuant to s 432(2) of the Workplace Relations Act, this Court granted leave to appeal.
1. Sharp v Sutton (1996) 73 IR 185
The submissions
35. In this Court, the appellants made three principal challenges to the judgment of the Full Court: (1) the Full Court erred in treating a disposition of property of the BLF as voidable at the option of the Custodian and not void; (2) in the alternative, if the Order rendered any disposition of property of the BLF voidable, the Full Court erred in concluding that the Custodian had not elected to treat the disposition as void; and (3) it followed that there was lacking the necessary foundation for the declaratory and mandatory orders made by Wilcox CJ and affirmed by the Full Court. Submissions (2) and (3) should be accepted. The purported disposition of the BLF's interest in the real estate was voidable. The funds on deposit stand in a different position. They had been vested in the Custodian before the amalgamation agreement and thus, in any event, could not have been divested by the BLF, so no question of later avoidance by the Custodian arose. However, there remain for consideration certain grounds upon which, by notice of contention, the respondents seek to retain the orders in their favour made by Wilcox CJ and affirmed by the Full Court.
The construction of the Order
36. The Order is to be read with the De-recognition Act and, in particular, with s 7 which conferred the power to make the Order. The text of cll 2 and 3 is set out earlier in these reasons. The first sentence of cl 2 of the Order creates and imposes a norm of conduct. The relevant requirement is that no person shall pay or dispose of any of the funds or property of the BLF or of any interest therein, without the prior written consent of the Custodian. The Custodian may refuse consent if not satisfied, in his absolute discretion, of the matter referred in cl 3. The legal consequences of failure to observe the norm imposed by the first sentence of cl 2 are provided for elsewhere in the legislation [34] . One consequence is to engage the criminal law. Section 7(3) of the De-recognition Act makes it an offence to contravene an Order made under s 7(1).
1. cf Brown v Jam Factory Pty Ltd (1981) 53 FLR 340 at 34835 ALR 79 at 86; Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1988) 19 FCR 469 at 473
37. Secondly, cl 2 itself goes on to attach civil consequences to payments, dispositions, encumbrances and charges which are, respectively, paid, disposed of or created in contravention of the first sentence of cl 2. The dealings in question "shall be void, at the option of the Custodian".
38. Windeyer J said of the term "void" that it "has never been an easy word" and pointed out that it did not necessarily mean that the void act had no legal effect at all [35] . In particular, where (as here) a disposition between two parties is described as "void" at the will of a third, the preferred construction is to read "void" as "voidable" [36] . The submission to the contrary which was at the forefront of the appellants' submissions should not be accepted. However, in the alternative, the appellants proffered the construction which we would accept.
1. Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432 at 459
2. Davis v Bryan (1827) 6 B& C 651 at 655-656 [108 ER 591 at 592]; Hughes v Palmer (1865) 19 CB(NS) 393 at 407-408 [144 ER 839 at 845]; In re London Celluloid Co (1888) 39 Ch D 190 at 203.
39. The Order uses the expression "at the option of the Custodian". There is no specification of a temporal limitation upon the exercise of the "option". It is sufficient for the purposes of the present litigation to construe cl 2 as authorising the Custodian to exercise his "option" and communicate the fact of that exercise within a reasonable time of awareness of the facts giving rise to the right [37] .
1. cf Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622 at 633-634
40. In submissions, the term "election" was used as a synonym for "option" as it appears in cl 2. The true nature of "election" is the confrontation of the person electing with two mutually exclusive courses of action between which a choice must be made, for example, to terminate or keep a contract on foot [38] . In its setting in cl 2 of the Order, "option" is best understood as identifying a power, but not a duty, which is thereby conferred upon the Custodian.
1. Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26 at 41-42
41. Clause 2 of the Order prescribes no particular formality for the exercise of the power conferred therein. However, that power is supplemented by the power conferred by cl 2 of the first Supplemental Order. This enables the Custodian to "vest in himself any funds or property of [the] BLF". The avoidance by the Custodian, under the Order, of a disposition of the property of the BLF does not thereby vest in the Custodian any title which before the disposition was vested, not in the Custodian, but in the disponor. However, the disponor is to be treated as if the disposition had not taken place. In that state of affairs, the Custodian may exercise the power conferred by cl 2 of the first Supplemental Order to vest the property in himself. Clause 2 includes the taking of such steps as the notification of a debtor of an assignment of a debt and the securing of registration as a shareholder or as registered proprietor of land [39] .
1. cf Re McJannet; Ex parte Minister for Employment, Training and Industrial Relations (Q) (1995) 184 CLR 620 at 657
42. In the present case, no question arises as to the effect of the exercise by the Custodian of the power of avoidance upon third parties claiming through or under the CFMEU. Nor does any question arise of the taking of steps by the Custodian to get in a legal or registered title. Subject to the operation of the Order, the amalgamation agreement disposed of the rights and interests of the members of the BLF in the real property identified earlier in these reasons. The funds had been invested by the Custodian. The registered proprietors had remained on the titles to the land and at no stage did the Custodian vest the registered titles in himself. The consequence was that no legal title in respect of any funds or property of the BLF was transferred or made over to the CFMEU by the amalgamation agreement. The exercise of the power of avoidance under cl 2 of the Order did not call for any consequential vesting of legal title in the Custodian under cl 2 of the first Supplemental Order.
43. The Order does not stipulate any means for the communication to the parties to a disposition of the exercise of the power of avoidance conferred by cl 2 thereof. Any means will suffice, at least if it is apt to draw to the attention of the parties to the dealing in question the exercise by the Custodian of the power conferred by cl 2. A pleading in litigation in which the relevant actors are parties may be a sufficient vehicle. The respondents submitted that this could be so in the present litigation only if the pleading had been tendered in the appellants' case at trial. This submission should be rejected.
44. The Custodian became aware of what had been done only with the initiation by the CFMEU of the litigation in the IRC. The pleading by the Custodian in the defence on 28 October 1994 that "the purported amalgamation agreement was and is void" was sufficient exercise of the power of avoidance and communication of its exercise. It follows that on 24 August 1995 the IRC should not have granted a declaratory order that the CFMEU was "beneficially entitled" to funds or property vested in the Custodian. As to beneficial entitlement to real property, any such disposition in favour of the CFMEU had been avoided. As to the funds on deposit, they had been vested in the Custodian and his statutory title to them had not been divested by the amalgamation agreement.
Conclusion
45. The order of the Full Court was that the appeal to it be dismissed. The appeal to this Court from that order should be allowed and the order should be set aside. The matter should be remitted to the IRC for determination of any remaining issues under a notice of contention in or to the effect of that filed by the respondents in this Court and dated 1 April 1997. During argument in this Court, the parties concurred in that course. It will be for the Full Court of the IRC to determine what, if any, leave is required from it before those issues may be raised and whether any leave should be given.
46. If the appellants ultimately are successful in the Full Court, it will be for it to determine what, if any, order should or can be made in the proceeding itself to reverse the consequences of compliance with order 4 of the orders made by Wilcox CJ.
47. If the respondents ultimately are successful in the outcome of the appeal, it would still be for the Full Court to consider whether the relief given by Wilcox CJ requires variation to bring it into proper form. We refer, for example, to the absence of any representative order with respect to the members of the BLF and also to the making of a declaration as to the title to the real property in the absence of the registered proprietors.
48. Schedule 16 to the Workplace Relations and Other Legislation Amendment Act 1996 Cth provides in certain circumstances for the exercise by the Federal Court of Australia of the jurisdiction of the IRC with respect to acts or omissions occurring before the "transfer day" (25 May 1997). However, item 63 of Sch 16 provides that this transfer of jurisdiction does not apply to a proceeding (defined in item 62 so as to include an appeal) which had been completed in the IRC before 25 May 1997. The appeal to the Full Court of the IRC had been completed by the order dismissing it made on 23 August 1996. Indeed, the jurisdiction of this Court under s 73 of the Constitution had been enlivened by the grant on 14 February 1997 of leave to appeal pursuant to s 432(2) of the Workplace Relations Act. Schedule 16 does not operate by intervening between the grant of leave in this Court and the delivery of its judgment so as to require any remitter to be directed to the Federal Court rather than the IRC. It is to the IRC, not the Federal Court, that the remitter from this Court should now be directed.
49. Having regard to s 347 of the Workplace Relations Act, there will be no order as to costs in this Court or as to the proceedings to date in the IRC.
McHugh J.
50. The State of Victoria and the Honourable Stephen George Alley (the Custodian) appeal against an order of the Full Court of the Industrial Relations Court of Australia (the IRCA) [40] which dismissed their appeals against four orders made by Wilcox CJ in that Court [41] . By Order 1, the IRCA declared "valid and effective in law" an agreement made between the Australian Building Construction Employees' and Builders Labourers' Federation (the BLF) and the Construction, Forestry, Mining and Energy Union (the CFMEU) which transferred all the property and liabilities of the BLF to the CFMEU. By Order 2, it declared that "no invalidity has occurred in the management or administration of [the] CFMEU or any branch of [the] CFMEU". By Order 3, it declared that the CFMEU was beneficially entitled to property in the possession, custody or control of the Custodian of the property of the BLF. By Order 4, it directed the Custodian within sixty days to do all things necessary to vest that property in the CFMEU.
1. Sharp v Sutton (1996) 73 IR 185
2. Sutton v Sharp [No 2] (1995) 62 IR 121 at 149
51. The principal issue in the case is whether the whole or part of a purported transfer of property, then owned beneficially by members of the BLF, is void. The State and the Custodian contend that it was void because, acting under Orders in Council enacted before the transfer was made, the Custodian has elected to treat the transfer as void. In my opinion, the purported transfer of property to the CFMEU has been avoided by the Custodian in accordance with his powers under the Orders in Council and the CFMEU is not beneficially entitled to the property.
Factual background
52. The CFMEU is an organisation of employees registered under the Industrial Relations Act 1988 Cth. The BLF was formerly an association registered under the Conciliation and Arbitration Act 1904 Cth. Its registration was cancelled on 14 April 1986 pursuant to the Builders Labourers' Federation (Cancellation of Registration) Act 1986 Cth. Immediately before its de-registration, the BLF, as a federally registered organisation, held corporate status under the Conciliation and Arbitration Act. Upon de-registration, pursuant to s 143(6) of the then Conciliation and Arbitration Act [42] , the BLF lost its corporate status and its property reverted to "the association" to be dealt with according to the rules of the organisation [43] . That is, the property became the property of the members of the association collectively at the time of de-registration [44] .
1. Which continues to apply pursuant to the Builders Labourers' Federation (Cancellation of Registration — Consequential Provisions) Act 1986 Cth.
2. s 143(6) of the Conciliation and Arbitration Act provides that: "Upon the cancellation of the registration of an organization, the organization shall cease to be an organization and a corporation under this Act, but shall not by reason of the cancellation cease to be an association. The property of the organization shall, subject to any order which the Court, upon application by a person interested, may make with respect to the satisfaction of the debts and obligations of the organization out of that property, be the property of the association and shall be held and applied for the purposes of the association in accordance with the constitution and rules of the organization insofar as they can be carried out or observed notwithstanding the deregistration of the organization."
3. Dobinson v Crabb (1990) 170 CLR 218 at 220-221 Bacon v O'Dea (1989) 25 FCR 495
53. In 1985, in anticipation of the Commonwealth legislation, the Parliament of Victoria enacted a statute entitled the BLF (De-recognition) Act 1985 Vict which was to come into force after the Commonwealth legislation cancelling the registration of the BLF took effect. Section 7 of that Act provided that:
(1) For the purpose of protecting the rights of persons who have ceased to be members of BLF, the Governor in Council may by Order published in the Government Gazette provide for the restriction of the use of funds or property of BLF and for the control of those funds or that property.
(2) An Order made under sub-section (1) —
(a) shall come into force upon the date of publication of the Order in the Government Gazette; and
(b) shall, unless sooner revoked, cease to be in force at the expiration of 6 months from the date on which it came into force but may, at any time while it remains in force (including a time when it remains in force by virtue of a previous extension or previous extensions under this paragraph), be extended in duration by a further Order made by the Governor in Council and published in the Government Gazette.
(3) A person shall not contravene an Order made under sub-section (1).
Penalty: 100 penalty units.
54. Pursuant to the power conferred by s 7, the Governor in Council made an Order which was published in the Victoria Government Gazette on 13 October 1987.
55. The Order provided that:
1. Possession, custody and control of the funds and property of BLF is hereby committed to Ian Gordon Sharp (hereinafter called "the Custodian").
2. No person shall pay or dispose of any of the funds or property of BLF or of any interest therein, or create any encumbrance or charge in respect thereof, without the prior written consent of the Custodian. Any such payment disposition encumbrance or charge shall be void, at the option of the Custodian.
5. A person who is in possession of or who has the custody or control of any funds or property of BLF or of any document or title thereto :
(a) shall forthwith inform the Custodian thereof;
(c) shall not part with such possession, custody or control save to the Custodian or such authorised person.
56. On 10 November 1987, the Governor in Council made a second Order which empowered Dr Sharp to "vest in himself as Custodian any funds or property of BLF". After the decision of Wilcox CJ, but before the hearing of the appeal in the Full Court, Dr Sharp died. Subsequently, the Honourable Stephen George Alley was substituted as Custodian.
57. The Orders in Council were extended at intervals of about six months. At the date of the hearing before Wilcox CJ [45] the relevant extension was operative until 16 September 1994.
1. Sutton v Sharp (1994) 1 IRCR 259125 ALR 643; 57 IR 102.
The CFMEU and BLF agreements
58. On 30 March 1994, the CFMEU and the BLF entered into an agreement to effect an amalgamation or merger between it and various State registered unions. The CFMEU also entered into separate agreements with each of the State registered Unions including the BLF's Victorian Branch, which still existed as an unincorporated association. The Custodian was unaware that the BLF had entered into any of these agreements and has never consented to them. The relevant clauses of the CFMEU-BLF agreement read:
1. The BLF and CFMEU agree that on and from 31 March 1994 there shall be an amalgamation and/or merger of the BLF into the CFMEU.
3. On and from 31 March 1994 all assets and liabilities of the BLF shall merge with the assets and liabilities of the CFMEU to be held and controlled in accordance with the rules of the CFMEU and this agreement and shall be treated as if such assets and liabilities were, at all times, the assets and liabilities of the CFMEU. Such funds shall, to the extent that prior to 31 March 1994 they were funds under the control of a BLF branch, other than the BLF, Victorian Branch, be and become funds under the control of the respective Construction Labourers' Divisional Branch established consequent upon this agreement and, otherwise, the funds of the BLF shall be held in accordance with paragraph 11 herein. In the case of the funds of the BLF, Victorian Branch they shall be and become funds under the control of the Building Unions Division, Victorian Divisional Branch.
4. For all purposes and in all proceedings, an asset or liability of the BLF existing immediately before 31 March 1994 is taken to have become and to have been at all times an asset or liability of the CFMEU on and from 31 March 1994.
59. The relevant clause of the CFMEU-BLF Victorian Branch agreement reads:
4. On and from the amalgamation day the CFMEU shall assume control of and responsibility for all assets and funds which, immediately before the amalgamation day, comprised the Branch Funds of the Victorian Branch under Rule 17 of the rules of the BLF, and all liabilities of the Victorian Branch and/or the BLF in relation to the Victorian Branch, and such assets, funds and liabilities shall be managed and controlled in CFMEU by the CFMEU Building Unions Division, Victorian Divisional Branch.
60. In anticipation of these agreements, the BLF amended its rules in relation to the ownership of the property:
21b(ii) On and from the day fixed for the amalgamation and/or merger in paragraph (i) herein, all assets and liabilities of the Australian Building Construction Employees and Builders' Labourers' Federation ("the BLF") shall merge with the assets and liabilities of the CFMEU to be held and controlled in accordance with the rules of the CFMEU and shall be treated as if such assets and liabilities were, at all times, the assets and liabilities of the CFMEU
(iii) For all purposes and in all proceedings, an asset or liability of the BLF existing immediately before the day fixed for the amalgamation and/or merger is taken to have become and to have been at all times an asset or liability of the CFMEU on and from the day fixed for the amalgamation and/or merger.
61. It is common ground between the parties that, pursuant to these agreements, the BLF purported to transfer to the CFMEU certain funds on deposit and three parcels of land registered under the Transfer of Land Act 1958 Vict. The appellants contend that these funds and parcels of land were the property of the members of the Victorian branch of the BLF prior to the de-registration of the BLF and remain the property of those members.
62. It is also common ground that neither the BLF nor the CFMEU sought or obtained the Custodian's consent to the merger agreement or the purported transfer of the property. Since learning of the agreement, the Custodian has maintained that the transfer of property was void because his consent had not been obtained. In the defence, filed by the Custodian in the present proceedings, par 5(e)(iii) asserted that "the first respondent regards any attempt by the BLF to dispose of funds or property of the BLF to the second applicant as void".
63. On the view that I take of the construction of the Order in Council of 13 October 1987, the critical question in the appeal is whether this pleading constituted an exercise of the power to avoid dispositions of property of the BLF pursuant to cl 2 of that Order.
The history of the litigation
64. On 6 April 1994, Mr John Sutton, the Assistant National Secretary of the CFMEU, commenced the present proceedings in the IRCA. Later, the CFMEU was joined as an applicant for relief. The litigation gave rise to two main issues: the validity of the CFMEU and BLF merger and the entitlement of the CFMEU to the assets held by the Custodian pursuant to the BLF (De-recognition) Act 1985 Vict. The proceedings came before Wilcox CJ who held that on the proper construction of cl 2 of the Order of 13 October 1987 any transfer of property by the BLF was valid unless avoided by the Custodian and that the Custodian had not avoided the transfer of the property of the BLF to the CFMEU. His Honour declared that the CFMEU was entitled to the property and made the orders to which I have referred [46] .
1. Sutton v Sharp [No 2] (1995) 62 IR 121 at 149
65. The Full Court of the IRCA (Spender, Ryan and North JJ) dismissed an appeal by the State and the Custodian [47] . The Court agreed with Wilcox CJ that the CFMEU was entitled to the property because, on its proper construction, cl 2 of the Order in Council of 13 October 1987 merely gives the Custodian the right to elect to avoid a payment, disposition, or encumbrance made without his or her consent and does not make the payment, disposition, or encumbrance void ab initio. The Full Court held that on the evidence the Custodian had not elected to avoid the transaction. The Full Court raised the question whether the Custodian could still elect to avoid the transfer of property but declined to decide the issue [48] .
1. Sharp v Sutton (1996) 73 IR 185
2. Sharp v Sutton (1996) 73 IR 185 at 198
Effect of the BLF (De-recognition) Act and the consequential Orders in Council on the ownership of the property
66. The Order in Council of 13 October 1987 "committed" to the Custodian "possession, custody and control of the funds and property of BLF". The Order in Council of 10 November 1987 gave a discretion and power to the Custodian to "vest in himself as Custodian any funds or property of BLF". Pursuant to this Order, the Custodian vested in himself some of the property, namely those funds which he deposited in his name "as trustee for the BLF". However, the Custodian did not register the real property in his name. Instead the Custodian placed a Queen's Caveat on the title to each property. The effect of the caveats was to restrict dealings with the property, but not to transfer the title. The property remained registered in the name of certain members of the BLF, each of whom held the position of "trustee" under the BLF rules. They held it on trust for the members of the BLF. Nevertheless, although the Custodian did not hold the legal or beneficial title to the real property, he had a statutory right to control the disposition of that property and to avoid any disposition made without his written consent.
67. It is not open to doubt that the Custodian had the legal title to the funds which were invested in his name. Furthermore, in my opinion, he held those funds as trustee for the members of the BLF, notwithstanding that the BLF (De-recognition) Act and the Orders in Council vested the Custodian with a wide discretionary power to deal with the property of the BLF and does not mention the term "trust". Section 7 of the BLF (De-recognition) Act [49] emphasises that the restriction on use or distribution of the funds of the BLF was undertaken "[f]or the purpose of protecting the rights of persons who are or have ceased to be members of BLF". Further, cl 3 of the Order of 13 October 1987 provided:
The Custodian may refuse to give consent referred to in clause 2 hereof if he in his absolute discretion is not satisfied that the payment disposition encumbrance or charge is desirable to be made for the carrying out of the ordinary and proper affairs of BLF and for the benefit of its members.
1. As amended on 13 October 1987 by BLF (De-recognition) (Amendment) Act 1987 Vict.
68. It follows from these provisions that, when the Custodian took control of the funds and invested them in his name, he became the trustee and not the beneficial owner of the funds. It is true that neither the legislation nor the orders described the Custodian as a "trustee". However, the purpose of the legislation was to protect the property for the members of the BLF. That is a sufficient indication that the Custodian was to hold the property as trustee and not beneficially. In Registrar of the Accident Compensation Tribunal v Federal Commissioner of Taxation [50] , this Court found that a trust arose out of legislation which similarly did not expressly provide for a trust and allowed a wide discretion to the trustee. The Court said that [51] :
A trust may be created without use of the word "trust" [52] . And, unless there is something in the circumstances of the case to indicate otherwise, a person who has "the custody and administration of property on behalf of others" [53] or who "has received, as and for the beneficial property of another, something which he is to hold, apply or account for specifically for his benefit" [54] is a trustee in the ordinary sense.
To the extent that it is relevant, the Custodian also recognised that he held the funds as trustee and not beneficially, for he deposited the funds in his name "as trustee".
1. (1993) 178 CLR 145.
2. Registrar of the Accident Compensation Tribunal (1993) 178 CLR 145 at 165-166, per Mason CJ, Deane, Toohey and Gaudron JJ.
3. See In re Kayford Ltd [1975] 1 WLR 279 at 282; [1975] 1 All ER 604 at 607, per Megarry J; Tito v Waddell [No 2] [1977] Ch 106 at 211, per Megarry V-C. See also Brisbane City Council v Attorney-General (Q) [1979] AC 411 at 421
4. Taylor v Davies [1920] AC 636 at 651
5. Cohen v Cohen (1929) 42 CLR 91 at 100, per Dixon J.
69. It follows that, immediately before the amalgamation agreement, the beneficial interest in the funds was held collectively by the members of the BLF and was not transferred to the Custodian under the Orders in Council or the legislation. The real property and the beneficial interest in the funds were therefore available to be dealt with by the members of the BLF collectively in accordance with the BLF Rules. However, any dealing with the funds or property was subject to the statutory rights of the Custodian under the Orders in Council.
The effect of the Victorian legislation and the conduct of the Custodian on the purported disposition of property
70. Despite the earnest argument of the appellant, it is not open to doubt that cl 2 of the Order in Council of 13 October 1987 by stating that any "payment disposition encumbrance or charge shall be void, at the option of the Custodian" merely gives the Custodian a right to avoid a dealing made without the written consent of the Custodian. Clause 2 does not itself operate to avoid such a dealing. It does not regard a dealing without the consent of the Custodian as having no force and effect. On the contrary, it assumes that the dealing will be valid until the Custodian exercises his right to avoid the dealing.
71. By contesting the transfer of property before the primary judge and pleading that the transfer of property was and is void, the Custodian exercised his legal right to avoid the transfer. Nothing in the terms or purpose of cl 2 requires the Custodian to use the word "elect" before he can avoid a dealing made without his written consent. Clause 2 did not put the Custodian to an "election". That term is not used in the Order in Council. Moreover, when used for legal purposes, it ordinarily implies a duty on a person to choose between competing alternatives at a particular time or during a particular period. In its context and having regard to the purpose of the legislation, the better view of cl 2 is that it simply confers a power on the Custodian and does not put him to an election. It simply gives the Custodian power to avoid a disposition made without his written consent. Prima facie, the power may be exercised at any time while the Order in Council is in force. The fact that considerable time could elapse between a disposition of BLF property and the Custodian becoming aware of it strengthens the case for that construction.
72. The question in each case therefore is not whether the Custodian has elected to avoid a disposition of property, but whether he has manifested an intention to avoid the disposition. It may be that the power can be validly exercised whether or not the Custodian does or is able to inform the parties to the dealing that he has exercised the power.
73. The Custodian became aware of the transfer of property by the BLF only when Mr Sutton initiated the present litigation. Upon being met with the claim that the property had been transferred, the Custodian defended the claim by asserting that the transfer was void. That indicated in the clearest terms that, so far as he was concerned, he was treating the transfer as void. That was a sufficient manifestation of the exercise of the power invested in him by cl 2. It was not necessary, as the respondent contended, for the Custodian's pleading to be tendered in the action before it could be treated as an exercise of the power or, as the respondents would have it, as an election. Upon filing the pleading, the CFMEU became aware of the Custodian's decision to exercise the power with the result that, as against the CFMEU, the transfer of property to it was void.
74. The CFMEU was well aware of the risk that it was taking in entering into this agreement without obtaining the consent of the Custodian. It entered into the merger agreement fully aware of the provisions of the BLF (De-recognition) Act. That is evident from cl 5 of the agreement between the BLF, the BLF Victorian Branch and the CFMEU which provided:
CFMEU acknowledges that it enters this agreement with the knowledge of the actions taken in relation to the assets and funds of the Victorian Branch under the BLF (Derecognition) Act 1985 Vict.
75. The appeal must be allowed.
The question of parties
76. In addition to the reasons already canvassed for allowing the appeal, the failure to join the registered proprietors of the real estate and members of the BLF in a representative capacity as a party is a further reason for setting aside the orders of the Industrial Court. Some individual members of the BLF were joined as defendants. However, neither the Federal executive council, nor any other relevant officers were joined [55] .
1. Before Wilcox CJ and the Full Court the parties consisted of the applicants, Mr Sutton (Assistant National Secretary of the CFMEU) and the CFMEU (the second applicant). The respondents consisted of the Custodian (Dr Sharp), the State of Victoria and various sets of members or former members of the BLF being: the third respondents Atkinson and others (representing sixty-two respondents), the fourth respondents Ferguson and others (representing twelve respondents), the fifth respondents Young and others (five respondents). No officers or Trustees of the BLF were joined in the proceedings.
77. The rules of natural justice require that, before a court makes an order that may affect the rights or interests of a person, that person should be given an opportunity to contest the making of that order. Because that is so, it is the invariable practice of the courts to require such a person to be joined as a party if there is an arguable possibility that he or she may be affected by the making of the order [56] . That practice also assists in avoiding duplication of hearings on the same issues and in avoiding the spectre of inconsistent decisions by courts or the judges of the same court. InPegang Mining Co Ltd v Choong Sam [57] Lord Diplock, delivering the opinion of the Judicial Committee of the Privy Council, said:
In their Lordships' view one of the principal objects of the rule [58] is to enable the court to prevent injustice being done to a person whose rights will be affected by its judgment by proceeding to adjudicate upon the matter in dispute in the action without his being given an opportunity of being heard a better way of expressing the test is: will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?
1. News Ltd v Australian Rugby Football League (1996) 64 FCR 410 Grovenor v Permanent Trustee Co of NSW Ltd (1966) 40 ALJR 329This rule is derived both from the common law and by implication through the power of courts to join parties who are necessary and proper for hearing, for example, New South Wales Supreme Court Rules, Pt 8, r 8, High Court Rules, O 16, r 4.
2. [1969] 2 MLJ 52 at 55-56.
3. The precursor to O 6, r 8 in the Federal Court.
78. The test for determining whether a person is a necessary party has usually arisen in the context of a person seeking to join proceedings rather than a failure to join a relevant person. But the same principle must apply in both situations. Thus, in News Ltd v Australian Rugby Football League [59] , the Full Federal Court held that an order "which directly affects a third person's rights against or liabilities to a party should not be made unless the person is also joined as a party. If made, the order will be set aside." [60] The Full Court pointed out that O 6, r 7 of the Federal Court Rules [61] which states that proceedings will not be defeated by a misjoinder or non joinder was "intended to give effect to the abolition of the plea of abatement" [62] . The Court said that the rule was directed "to cases where there is a curable defect, for example the misnaming of a party" [63] .
1. (1996) 64 FCR 410.
2. (1996) 64 FCR 410 at 524. Note that the New South Wales Court of Appeal in Chappuis v Filo (1990) 19 NSWLR 490 at 511-512held that where a necessary party is not joined in the proceedings, the Court could determine the issues in the absence of the party although that party would, if prejudiced by the orders, have a right to apply to have the orders set aside.
3. A similar rule is present in many jurisdictions including the High Court Rules, O 16, r 4(1).
4. News Ltd (1996) 64 FCR 410 at 523.
5. News Ltd (1996) 64 FCR 410 at 524.
79. In the present case, the learned Chief Justice of the IRCA made several binding declarations of right, including that [64] :
3. CFMEU is beneficially entitled to the funds and property presently in the possession, custody or control of the first respondent, Ian Gordon Sharp, including any funds or property vested in him as Custodian under an Order in Council, subject to deduction therefrom of any costs, charges and expenses properly incurred by him as Custodian pursuant to an Order in Council.
1. Sutton v Sharp [No 2] (1995) 62 IR 121 at 149
80. The declaration as to the right of the beneficial entitlement to the property in par 3 clearly affects the interests of members of the BLF and the registered proprietors of the real estate. Prior to the amalgamation agreement, the members of the BLF were beneficially entitled to the property in question. In Bacon v O'Dea [65] the Federal Court held that the beneficial interest of the property was vested in all the members but that each individual member only holds a contractual right to have that property dealt with in accordance with the rules. That may be so, but a declaration concerning the entitlement to the beneficial interest in the property affects the interest of all of the members of the BLF.
1. (1989) 25 FCR 495.
81. Both before and after the filing of the Custodian's pleading, the beneficial interest in the property belonged either to the CFMEU or to the members of the BLF. Consequently, they were entitled to be heard and should have been represented in the proceedings. It may be that the interests of the BLF members could have been represented at trial by relevant officers of the federal executive council or a member in a representative capacity. However, the only members joined did not represent all members of the BLF. In addition, neither the Federal Executive Council nor the Trustees were joined as parties or heard in the proceedings. Accordingly, O 3 at least ought not have been made in the absence from the proceedings of the members of the BLF.
Conclusion
82. The appeal should be allowed and the orders made in the IRCA should be set aside. The proceedings should be remitted to the Full Court of the IRCA to deal with any outstanding issues between the present parties and the problems which derive from the failure to join the registered proprietors of the real estate and the members of the BLF as parties to the proceedings.
Kirby J.
83. This is the latest proceeding to arise out of the deregistration of the Australian Building Construction Employees' and Builders Labourers' Federation (the BLF). The deregistration deprived the BLF of the benefits of the then Conciliation and Arbitration Act 1904 Cth [66] . One of those benefits was recognition, in law, of a separate corporate identity. Those with a taste for the delicate intricacies of industrial litigation may read the background to the deregistration in earlier decisions of this Court [67] and of other courts [68] .
1. That Act was replaced by the Industrial Relations Act 1988 Cth under s 258 of which these proceedings were commenced. On 25 November 1996 the short title to that Act was changed to the Workplace Relations Act 1996 Cth by the Workplace Relations and Other Legislation Amendment Act 1996 Cth, s 3 and Sch 19, Pt 1. The principal Act was substantially amended at the same time. However, it was not suggested that these amendments altered the rights or obligations of any of the parties to the appeal.
2. R v Ludeke; Ex parte Australian Building Construction Employees' and Builders Labourers' Federation (1985) 159 CLR 636 Australian Building Construction Employees' and Builders Labourers' Federation v The Commonwealth (1986) 161 CLR 88 Re Australian Federation of Construction Contractors; Ex parte Billing (1986) 68 ALR 416 Re Building Workers' Industrial Union of Australia; Ex parte Gallagher (1988) 62 ALJR 8176 ALR 353; Dobinson v Crabb (1990) 170 CLR 218
3. Building Construction Employees and Builders Labourers' Federation (NSW) v Minister for Industrial Relations (1985) 1 NSWLR 197(1986) 7 NSWLR 372 Re Minister for Employment and Industrial Relations and Australian Building Construction Employees' & Builders Labourers' Federation (BLF Deregistration Case) (1986) 12 IR 442 Australian Building Construction Employees' & Builders Labourers' Federation v Master Builders' Association of NSW (1986) 18 FCR 18 Bacon v O'Dea (1989) 25 FCR 495
84. Now, by leave [69] , an appeal has been brought to this Court from a judgment of the Full Court of the Industrial Relations Court of Australia (the Full Court) [70] . By that judgment, the Full Court dismissed an appeal from a judgment of Wilcox CJ, sitting at first instance [71] . That judgment determined a large number of challenges to a purported amalgamation between the Construction, Forestry, Mining and Energy Union (CFMEU) and the unincorporated association and its members which continued to constitute what was left of the BLF. The CFMEU is an organisation of employees registered under the successive federal industrial relations statutes. It was, in its turn, formed out of earlier amalgamations. It is not unusual for the amalgamation of industrial organisations, such as the CFMEU and the BLF, to attract fierce opposition from industrial competitors and dissident members. Such litigation typically summons forth objections of exquisite technicality. Those who still find such matters fascinating will uncover a rich seam of the genre in the successive opinions of Wilcox CJ in this litigation.
1. Industrial Relations Act 1988 Cth, s 432(2).
2. Sharp v Sutton (1996) 73 IR 185
3. Sutton v Sharp [No 2] (1995) 62 IR 121Wilcox CJ had earlier rejected a motion for summary dismissal of the proceeding on the ground that he had no jurisdiction to entertain it: Sutton v Sharp (1994) 1 IRCR 259125 ALR 643; 57 IR 102.
85. Fortunately, in this appeal, this Court is confined to a relatively narrow set of questions. The appeal by the State of Victoria challenged one aspect only of the decision of the Full Court. After the hearing had commenced, the Court insisted that there be added to the proceedings, a second appellant, the Honourable Stephen Alley. He is the present office holder of the position of Custodian appointed under and pursuant to legislation of the State of Victoria. Mr Alley had been a party to the proceedings below. When joined in this Court, he made common cause with the State of Victoria.
86. The respondents to the appeal are Mr John Sutton, an officer of the CFMEU and the CFMEU itself. Within the CFMEU, Mr Sutton is described as an Assistant National Secretary and the Divisional Secretary of the Building Unions Division. The apparent purpose of the amalgamation between the CFMEU and the BLF was to permit the CFMEU, through the Division, to represent the industrial interests of the remaining members of the BLF. It was thereby to bring them out of the industrial wilderness, in which they had existed as members of an unincorporated association, into the federal industrial relations system within which the CFMEU is a registered organisation.
87. This purpose was apparently uncongenial to the State of Victoria and to Mr Alley's predecessor as Custodian, the Honourable Dr Ian Sharp. It was the latter's death on 26 July 1996, after the conclusion of the proceedings before Wilcox CJ, which occasioned the appointment of Mr Alley as Custodian. However Mr Alley has merely succeeded to the rights (if any) of Dr Sharp. Dr Sharp's objections at first instance, supported by the State of Victoria, raised no fewer than nine grounds to contest the amalgamation [72] . Only one of those grounds is still alive. It concerns the effect of the amalgamation agreement between the CFMEU and the BLF for the transfer of certain assets in Victoria [73] to the CFMEU. The contest turns on the provisions of the Victorian law which had been made long before the amalgamation and indeed before the deregistration of the BLF in anticipation of the federal legislation enacted to achieve that end. The Victorian law is the BLF (De-recognition) Act 1985 Vict (the De-recognition Act). It is pursuant to s 7(1) of that Act [74] that the Governor in Council was empowered, by order published in the Victoria Government Gazette, to "provide for the restriction or distribution of the use of funds or property of BLF and for the control, vesting and realisation of those funds or that property". The section went on to provide, in sub-s (2), that an order made under its terms, unless revoked, would cease to be in force at the expiration of six months from the date on which it came into force although it might be extended by further order.
1. Sutton v Sharp [No 2] (1995) 62 IR 121 at 122
2. The amalgamation agreement also provided for the transfer of liabilities. Its terms are set out in Sutton v Sharp (1994) 1 IRCR 259 at 264-267125 ALR 643 at 647-650; 57 IR 102 at 104-107.
3. As amended by the BLF (De-recognition) (Amendment) Act 1987 Vict, s 5(a). At first instance, the respondents questioned the application of the amendments (which came into force on 14 October 1987) to the Order in Council made on 13 October 1987. This issue was determined against them: Sutton v Sharp [No 2] (1995) 62 IR 121 at 142It was not re-agitated before the Full Court. As I have stated below, it was agreed during the hearing in this Court that, should it become necessary to deal again with the issue, it would be remitted to the Industrial Relations Court.
88. Acting in purported compliance with s 7 of the De-recognition Act (and other powers), the Governor in Council made an order duly published on 13 October 1987 (the Order), the effect of which is the principal concern of this appeal. Clauses 2 and 3 of that Order provided:
2. No person shall pay or dispose of any of the funds or property of BLF or of any interest therein, or create any encumbrance or charge in respect thereof, without the prior written consent of the Custodian. Any such payment disposition encumbrance or charge shall be void, at the option of the Custodian.
3. The Custodian may refuse to give consent referred to in clause 2 hereof if he in his absolute discretion is not satisfied that the payment disposition encumbrance or charge is desirable to be made for the carrying out of the ordinary and proper affairs of BLF and for the benefit of its members.
The issues
89. From the issues raised in the original notice of appeal, as elaborated by a proposed amended ground of appeal which the appellants tendered during the hearing, four questions fall to be considered:
1. On a true construction of cl 2 of the Order, did the Full Court err in confirming the opinion of Wilcox CJ that "void" in the context of the Order meant subject to be avoided at the option of the Custodian and not void ab initio? (The void ab initio point.)
2. If, on its true construction, "void" in cl 2 of the Order did not mean void ab initio but conferred on the Custodian an option to avoid any payment, disposition, encumbrance or charge ("disposition") relating to the funds or property of BLF, did the Full Court err in holding that the Custodian had not in fact exercised his option to avoid such disposition? (The exercise of the option point.)
3. Whatever the answer to the foregoing points, should the appellants at this stage be permitted to rely on a ground of appeal challenging the declarations of right and orders made by Wilcox CJ upon a basis not raised before the Full Court, namely that "the CFMEU did not acquire any legal or beneficial interest in the funds and property in the possession, custody or control of the former Custodian"? This point was tendered to this Court on the footing that no-one on behalf of the BLF had any power to pay or dispose of any such funds or property. (The power of disposal point.)
4. Are there any other reasons, notably the form of the declarations of right and the relevant orders made by Wilcox CJ, which would occasion the intervention of this Court? (The form of the orders point.)
90. The grounds upon which the State of Victoria initially, and later also Mr Alley, were granted leave to appeal to this Court were confined to the first two points just stated. To that stage, the principal argument against the judgment of the Full Court was (as, on this issue, it had been at trial) that the Industrial Relations Court had misconstrued the Order. When the Order said "void" it meant "void" and not "voidable" at the option of the Custodian. However, in the Full Court and in the appeal to this Court, the case of the appellants was presented in the alternative. If, in the context, "void" did not mean void ab initio as primarily asserted, the Full Court had erred in holding that "the learned Chief Justice was correct in finding nothing in the pleadings capable of constituting an election by the Custodian to treat the disposition as void." [75]
1. Sharp v Sutton (1996) 73 IR 185 at 198
91. The other two points relating to the power of disposal and the form of the orders were not initially raised in argument by the appellants. These points arose out of questioning from the Court. The power of disposal point, at least, was embraced by the appellants, as evidenced by an amended ground of appeal. In response to the original grant of leave to appeal, the respondents filed a notice of contention asserting that the De-recognition Act as amended [76] and cl 2 of a Supplemental Order in Council [77] (the Supplemental Order) were invalid. Amongst other grounds, constitutional objections were raised in opposition to these Victorian laws. Notices were duly given under the Judiciary Act 1903 Cth. However, it was agreed during the hearing that if the need arose to deal with those issues they should be remitted to the appropriate court. If the appellants failed in their appeal, the need for remitter would not arise. For the respondents, the points were defensive. They were designed to support the declaration and orders so hard won at trial.
1. By the BLF (De-recognition) (Amendment) Act 1987 Vict.
2. Of 10 November 1997. Clause 2 empowered the Custodian, relevantly, to "vest in himself as Custodian any funds or property of BLF". Other clauses in the Order also conferred on him additional powers to bring and defend legal proceedings, conduct investigations and otherwise.
Common ground
92. Before turning to the four stated issues, it is worth recording a number of points which were common ground, or which are at least not now in issue:
1. Before Wilcox CJ, there was a major attack on the invocation of the jurisdiction of the Industrial Relations Court. It was argued that the matters at stake were basically the application of Victorian law to the members of an unincorporated association which should proceed in the State courts. It was suggested that the jurisdiction of the Industrial Relations Court was merely colourable. The submission that that Court lacked jurisdiction was rejected at first instance [78] as was the request to decline the exercise of federal jurisdiction on discretionary grounds [79] . These points were not re-agitated before the Full Court. I will assume that the Industrial Relations Court had jurisdiction. The assumption is safe enough having regard to the reasons given by Wilcox CJ to support that conclusion and the absence of a continuing challenge by parties not adverse to technicalities.
2. The substantial subject matter of the dispute concerns a number of parcels of real property in Carlton, in Melbourne, in the State of Victoria. The registered titles to those properties stand in the names of persons who are said to be members of the BLF. It was not contested that those persons held such interest as trustees for the BLF prior to its deregistration. Since then, by inference, they continued to do so presumably for the members of the unincorporated association which continued in existence after the deregistration of the BLF was effected [80] . The Court was told that the properties and funds were valuable, being worth around $3 million to $4 million. If, apart from the dispute as to the devolution of the assets and liabilities of the BLF, the unincorporated association has now successfully achieved amalgamation with the CFMEU, it was not clear what the Custodian, consistent with his limited duties under the Order, would propose should be done with the valuable properties. If they did not pass to the amalgamated organisation (the CFMEU) it is uncertain who would take the benefit of them. From the evidence at trial it appears that the properties, or most of them, had been occupied as BLF premises by the continuing association. Their natural terminus would seem to be, as Wilcox CJ observed, with the industrial organisation which will henceforth represent the industrial interests of the erstwhile members of the BLF [81] . The appellants shrank from a submission that, after the amalgamation had been effected, the funds and properties were bona vacantia or without a lawful owner. However, no hint was given by them as to the alternative disposition which either the Custodian or the State of Victoria had in mind. By the same token, it was not contested (as Dr Sharp had stated in an affidavit filed at first instance) that the Custodian had never been consulted about, nor had he consented to, any disposition of the BLF funds or property in terms of the amalgamation agreement signed by the office-holders of the CFMEU and the BLF [82] . When the purported dealings in the funds and property of the BLF came to the notice of Dr Sharp he did not exhaust the powers afforded to him by the Order, to get in all of the assets of the BLF. Specifically, in relation to the real property, he failed to secure the vesting in his own name, as Custodian, of the legal title to the several properties in Carlton. Instead, he appears to have been content to rely upon the filing of Queen's caveats [83] which were lodged to signify his interest in the title to the properties. He also relied on his construction of the Order. That construction was that "void" meant void ab initio and hence that any dealings whatever by the trustees, or anyone else on behalf of the BLF or its members, would be void as against the Custodian. When under the amalgamation agreement between the BLF and the CFMEU [84] , it was agreed that the assets and liabilities of the BLF should "merge with" the assets and liabilities of the CFMEU and be taken to have become assets and liabilities of that body, the Custodian promptly objected. But he did so on the basis that the purported disposition of funds and property were "void" [85] .
3. Notwithstanding the deregistration of the BLF, the property formerly belonging to the corporation was, by federal law [86] to be held and applied by the continuing "association" [87] , for its purposes, in accordance with its constitution and rules, so far as these could be "carried out and observed notwithstanding the deregistration". The association continued to exist. In Dobinson v Crabb , this Court accepted two points presently relevant. The first was that the federal Act had placed the BLF "back in the position of an association existing within a legal framework outside that of the Conciliation and Arbitration Act " [88] . The second was that the constitution and rules of the association were not immutable but subject to change in accordance with any applicable laws governing unincorporated associations [89] . So long as the BLF association acted within its rules, and was not forbidden by any State law, it was entitled to resolve to amalgamate with another body, such as the CFMEU. Nothing in the appeal to this Court raises a doubt concerning the validity of the amalgamation. It was apparently approved by the federal body of the BLF, by members of that association in several Australian States as well as by the Victorian Branch of the association [90] . The only issue now raised by the appeal is whether, in the case of the BLF in Victoria, the valuable property rights will follow the members into the CFMEU (as the Industrial Relations Court held) or remain in the possession, custody and control of the Custodian under Victorian law to await his disposition in his absolute discretion (as the appellants argued).
1. Sutton v Sharp (1994) 1 IRCR 259 at 270-279125 ALR 643 at 653-661; 57 IR 102 at 111-119. Reliance was had on ss 258 and 430 of the Industrial Relations Act 1988 Cth.
2. Sutton v Sharp (1994) 1 IRCR 259 at 279125 ALR 643 at 661-662; 57 IR 102 at 119-120.
3. See Bacon v O'Dea (1989) 25 FCR 495 at 503-505
4. Sutton v Sharp [No 2] (1995) 62 IR 121 at 148
5. Sutton v Sharp [No 2] (1995) 62 IR 121 at 147
6. Pursuant to Transfer of Land Act 1958 Vict, s 89.
7. The relevant terms are set out in the reasons of other members of the Court.
8. Defence to amended statement of claim, filed 28 October 1994, par 5(e)(iii).
9. Conciliation and Arbitration Act 1904 Cth, s 143(6). The terms of the sub-section are set out in the reasons of other members of the Court.
10. As defined in Conciliation and Arbitration Act 1904 Cth, s 4(1).
11. Dobinson (1990) 170 CLR 218 at 231
12. Dobinson (1990) 170 CLR 218 at 230-231See also at 236-237.
13. The Court was informed, without objection, that at the time of the amalgamation, there were between 18,000 and 20,000 members of the BLF, of whom only ninety members, financial and unfinancial, were resident in Victoria and twelve in New South Wales. Prior to the amalgamation a ballot was conducted of all members in Western Australia, South Australia, Queensland and Tasmania where the vast majority of members resided. In Victoria, the decision was made by the branch. By that stage there was no branch in New South Wales. According to evidence given below by Mr Owens, membership in New South Wales and Victoria was negligible because most of the former members of the BLF had joined the CFMEU instead.
The amalgamation agreement about assets is not void
93. I return to the appellants' primary argument. This was that the purported disposition of funds and property of the BLF's Victorian Branch, made without the prior written consent of the Custodian, was void in the sense of void ab initio. It had no legal effect. As a consequence the declarations of right and orders made by Wilcox CJ required correction. In support of this argument, the appellants relied upon four features of the Order of 13 October 1997:
1. The use of the word "void" instead of the word "voidable" which might otherwise have been suggested by the reference to the "option of the Custodian".
2. The use of the imperative verb "shall" which, it was submitted, indicated an unequivocal insistence upon avoidance ab initio.
3. The use of the comma after the word "void", signifying (as it was put) a prima facie avoidance against which the option of the Custodian lay only to provide ex post relief by way of subsequent validation.
4. The general principle of construction that where a statute imposes a penalty for the doing of an act in breach of its terms, as the De-recognition Act did [91] , this may be taken as an indication that Parliament intended to render that act void [92] .
1. See s 7(3), dealing with contravention of an Order made under that Act.
2. Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 at 423But see Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 at 454 Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 428
94. From these considerations, the appellants argued that the preferable construction of the Order was that "void" meant what it said. They urged that such a construction would reinforce the apparent policy of the Order. Against the background of the history of the BLF, this was to preserve to the Custodian an absolute discretion to ensure that the residual property of the association and its members was disposed of for the designated purposes, principally "the benefit of its members" (Order, cl 3). Nothing would reinforce that objective more effectively, so it was argued, than the absolute avoidance of any dealings in funds or property without the prior written consent of the Custodian.
95. Although the appellants' arguments are not meritless (as I hope I have indicated), like everyone else who has passed upon the meaning of this Order, I prefer the construction urged for the respondents:
1. The word "void" is inherently ambiguous [93] . It sometimes means that the act in question has not, and never has had, any legal effect (void ab initio). But sometimes it means that the act becomes void as against the world or against those who cannot enforce or take advantage of it subsequently (void ex post facto). "Void" is in some contexts treated as synonymous with "voidable" or voidable at the election of the party for whose benefit a legal rule makes the transaction void [94] . The task of a court, in differentiating between the available meanings of the word, is to ascertain the objective of the lawmaker in the particular circumstances [95] . It is to discover the meaning to be attributed to the word which is natural to its context. Many past cases demonstrate that the use of the word "void" presents a problem of statutory construction. There is no settled meaning [96] .
2. When the context of the word in the Order is examined, it is relevant to take into account, most especially, the words which immediately follow the word "void". Thus, the disposition here is only void "at the option of the Custodian". Without the exercise of that option, the disposition must therefore be other than "void". Were it not so the reference to "the option of the Custodian" would be surplusage. This unpleasant reality being brought home to them, the appellants argued that, "at the option of the Custodian" was equivalent to providing the Custodian with a power to "validate" dispositions made without his prior written consent. This is an unattractive argument given that the word used is "void" not "valid". On either approach to the meaning of the Order, the Custodian enjoyed very considerable powers. Subject to any arguments which might arise as to the lawful exercise of his statutory power, the Custodian had the last say on whether a disposition would be rendered void or not. The very reference to his "option" suggests that a specific power had been conferred to make a choice on the effectiveness of any disposition made without the Custodian's prior written consent. That choice could not be excised from the Order without removing the option of the Custodian or altering the character which it apparently takes from its language.
3. The fact that contravention of the requirements of an Order attracts in this case a criminal penalty is not determinative of the meaning of the word "void". That penalty arises, in an appropriate case (relevantly), from a breach of the first sentence of cl 2 of the Order. But the civil consequences of a breach are expressly provided for in the second sentence which envisages the exercise of the Custodian's option. Any general principle of construction [97] must therefore be read as subject to the express terms of the Order dealing with such civil consequences.
4. Considerations of legal policy also support this construction. If "void" meant void ab initio, the results could be devastating to innocent third parties who took funds or property in ignorance of the requirements of the Order. The fact that, as was argued in the present case, the officers of the Victorian Branch of the BLF and the trustees of the real estate were not "innocent" of knowledge of the obligation to secure the prior written consent of the Custodian is irrelevant to the meaning of cl 2 of the Order. The provision of a power ex post facto to render dispositions void may readily be explained by the need to protect innocent third parties dealing in good faith with those paying or disposing of funds or property in which the BLF or its members had a legal or beneficial interest. In such a case, the Custodian retained the power of avoidance. But that consequence did not flow automatically. Whether it was appropriate and just in the circumstances to opt for that consequence could be safely left to the Custodian's decision.
5. A number of contextual arguments also support the foregoing conclusion. The De-recognition Act and the Order apparently contemplated the provision to the Custodian of transitional powers expected to endure for a limited time only [98] . It was envisaged by the successive Orders that the Custodian could enter and seize property. After the Supplemental Order, he had additional powers to bring the legal estate of what might be called BLF property under his control so that he might vest himself with the legal estate [99] . The Order, as thus supplemented, appears to have contemplated that the Custodian would actually put himself in a position of control with vested rights so as to minimise the risk of damage to the "ordinary and proper affairs of BLF" and harm to the members. Although this was not in fact done by the Custodian, at least in relation to vesting in himself the legal estate in the real property, it is appropriate to read the exceptional power of avoidance in the context of a scheme which envisaged that the Custodian could effectively take control of the BLF's assets, retaining the option of avoidance for any residual funds and property over which effective control had not been exerted.
6. The construction which I favour also helps to avoid the curious result which would otherwise flow from the appellants' argument. Thus, if the amalgamation of the CFMEU with the Victorian Branch of the BLF were (as has been held) validly effected, the purpose for the performance by the Custodian of his function to refuse to give consent under the Order (cl 3) may have been eliminated. There would be no apparent foundation for concluding that the disposition of the funds and property was not then desirable "for the carrying out of the ordinary and proper affairs of BLF and for the benefit of its members" (Order, cl 3). The BLF, as such, would have ceased to exist being merged by amalgamation in the CFMEU. The "benefit of its members" would cease to have any reality once the BLF itself had effected its amalgamation with the CFMEU.
1. See Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432 at 459
2. Brady v Stapleton (1952) 88 CLR 322 at 333-334 Amatruda v Roberts [1938] VLR 154 at 156, per Gavan Duffy J; cf the opinion of Priestley JA (with whom Clarke JA concurred) in National Acceptance Corporation Pty Ltd v Benson (1988) 12 NSWLR 213 at 218The context requires a result different from that which I there expressed (at 214). In a contractual context, see Raysun Pty Ltd v Taylor [1971] Qd R 172 at 181 Carpentaria Investments Pty Ltd v Airs [1972] Qd R 436 at 441
3. Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 at 423
4. This is partly because the word may arise in so many different contexts. See, eg, In the Marriage of Teves and Campomayor (1994) 122 FLR 172 at 176-177; 18 Fam LR 844 at 849; [1995] FLC ¶92-578 at 81,734-81,735, dealing with the meaning of "void" in the Family Law Act 1975 Cth.
5. Relevantly, that explained in Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 at 423
6. As indicated by the limited duration of the orders made under s 7 of the De-recognition Act. Section 7(2)(b) provides that the Order shall "cease to be in force at the expiration of 6 months from the date on which it came into force but may be extended in duration by a further Order".
7. Supplemental Order, cl 2.
96. The Full Court correctly dismissed the appellants' arguments on the void ab initio point. The disposition of the property of the BLF, and specifically of the Victorian Branch, in terms of the provisions of the amalgamation agreement which the appellants attacked, was not void ab initio. The appellants' persistent argument to that effect should once again be rejected.
The Custodian did not exercise the option to avoid
97. In light of this conclusion, it is necessary to address the alternative argument. The appellants presented it to this Court as a second preference. The argument went thus. If, contrary to the primary argument, "void" in the Order meant "voidable", or some notion akin to that, the Custodian, by his conduct, had exercised the option to render the disposition of funds and property referred to in the amalgamation agreement void. What was in issue was not his subjective intention or understanding of his conduct but whether such conduct amounted to an exercise of the "option" which the Order had been construed as allowing. The conduct relied upon by the appellants was (a) the pleading of the defence to the respondents' application which initiated these proceedings; (b) the defence of, and resistance to, the proceedings; and (c) the action of the Custodian in lodging the Queen's caveats and thereby taking steps to ensure that he was given notice of any dealings in real estate as well as his action in bringing under his control the funds of the BLF association in Victoria.
98. In the Full Court, the reference in the Order to the "option of the Custodian" (cl 2) was read as akin to the provision to him of a right to elect to treat the disposition as void. From this, guidance was sought from those authorities which deal with election, namely where a facility is granted to choose between alternative and inconsistent rights [100] . I am prepared to agree that some assistance may be found, by analogy, in such authorities. But the purpose of the option provided to the Custodian by the Order must be kept steadily in mind. It was an option to render void a disposition of property. Obviously, the exercise of such an option might potentially have serious disruptive effects for those concerned in the disposition, as well as for the "ordinary and proper affairs of BLF" and "the benefit of its members" (cl 3). I find it hard to accept that the "option" could be exercised by the Custodian although unaware of it, or whilst denying its very existence. However, assuming this to be possible, it is clear enough that the exercise of the option could not, once performed, be kept locked in the Custodian's mind. It would have to be conveyed to those who were affected. No other construction would carry into operation the intended purpose of avoidance of dispositions for which the Order provided. Where the Custodian acted adversely to a person's property interests, it is essential to the kind of option for which this Order provides that the exercise would be effected promptly and promptly made known to those whose rights were altered.
1. Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 655
99. Having regard to this analysis of the nature and purposes of the option afforded to the Custodian, and with respect to those of a different view, I cannot accept that any of the factual matters relied upon by the Custodian constituted the exercise by him of the option whose existence he so long mistook:
1. No express avoidance of any disposition occurred. It would have been easy for the Custodian, referring to his powers under the Order, to notify the officers of the CFMEU, the BLF, the trustees and anyone else concerned, in terms, that he was exercising the option provided in the Order. This was never done. The exercise, if it truly occurred, was left to nothing but inference and implication.
2. The reason for this course is not hard to find. It lay in the fact that the Custodian, from the first, asserted that the disposition was, by the Order, void ab initio without any action on his part. In that sense, the taking of steps to exercise an option to secure avoidance of the disposition was inconsistent with the interpretation of the Order which he upheld. Although it might have been possible for him to assert his preferred interpretation and, in case it was wrong, to opt for avoidance, this was never attempted. The Custodian, doubtless on advice, persisted in this Court with a course of conduct based on his preferred construction of the Order. That construction excluded the possibility of the exercise of an option ex post to invalidate dispositions of funds and property.
3. One reason why contractual analogies are of doubtful validity in this context is that the Custodian is not exercising a private right. He is fulfilling a function as a donee of statutory powers. To exercise those powers, he had to do so in the way proper to such an office-holder. Relevantly, he was required to fulfil the purposes for which the powers in question were granted [101] . He was obliged to take into account considerations relevant to the exercise of the power, ignore considerations irrelevant and to act honestly, fairly and reasonably. This can scarcely be done in a state of absence of mind. The difficulty of interpreting the conduct pursued by the Custodian for other purposes as a discharge of his statutory powers to avoid a disposition of BLF funds or property is that the Order itself provided criteria for the exercise of his powers. It directed the Custodian's attention to a consideration of what was "desirable for the carrying out of the ordinary and proper affairs of BLF" and "the benefit of its members" (Order, cl 4). Unless the Custodian turned his mind to these considerations, he would not be discharging the option in terms of the Order. The explanation for his failure to do so clearly lies in the fact that he misconstrued the Order. He did not consider that it was necessary for him to exercise an option so as to render the disposition void. His conduct should be construed by reference to that stand. It should not, retrospectively, be reinterpreted to accord with an opinion as to his powers which he had at all relevant times resolutely rejected. The Court should not re-write history to save the Custodian from his legal error, obdurately adhered to even into this appeal.
4. Even if, contrary to the foregoing, it was possible to reinterpret the Custodian's conduct in filing pleadings and defending proceedings as an exercise of the option provided for in the Order, such conduct would, on the face of things, only constitute an exercise of the option in relation to the parties to the proceedings. As the trustees were not parties, it is difficult to see how the pleadings or proceedings could amount to an election effective against them. The Custodian's defence, in any case, represented an assertion of his primary interpretation of the Order. It did not convey on its face any decision of the Custodian to exercise an option to avoid the disposition of transactions which he was asserting were already void. During the hearing before Wilcox CJ, counsel for the respondents made it plain that, if a different position was asserted for the Custodian, they required him to "elicit" it. The written submissions for the Custodian took a position which could not have been clearer. They said:
No situation has arisen or can arise whereby the Custodian is called upon to exercise his powers under paragraph 2 to treat a disposition as void.
At several later points in the trial, the issue was raised again. The respondents repeatedly made it plain that, if an "election" by the Custodian was asserted, that claim ought to be made clear and evidence adduced. If such a claim was to be made, the respondents at trial insisted on the right to cross-examine Dr Sharp about it. To permit the appellants, after the trial, to change their position and to assert that the Custodian's conduct was actually directed at exercising an option which he had at all times disclaimed, presents at least two elements of procedural unfairness to the respondents. The first is that they have lost the chance of cross-examining the late Dr Sharp: a right which they had expressly reserved. The second is that they have almost certainly lost remedies which they might have pursued under the Administrative Law Act 1978 Vict to obtain judicial review of the Custodian's purported exercise of his statutory powers. This Court should not permit such procedural unfairness over the objection of the respondents [102] . There are perfectly good explanations for the conduct of the Custodian which do not betoken the exercise of an option to avoid the dispositions of funds or property of the BLF in terms of the power conferred on him by the Order.
1. See Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 39-42
2. Coulton v Holcombe (1986) 162 CLR 1 at 7-8
100. The Custodian until a very late stage of these proceedings adhered to his opinion that the dispositions of BLF property to the CFMEU were already void. That opinion was wrong. The Custodian never exercised his option under the Order. It would be unfair to permit him, retrospectively, to suggest that his conduct may now be reinterpreted to amount to such an exercise. In any case, when analysed, the conduct referred to falls far short of establishing that the Custodian's statutory powers were invoked by him for the purposes for which they were given. The appellants therefore fail on the exercise of the option point.
The BLF's powers of disposal
101. During the hearing the appellants sought leave to add an amended ground of appeal to the effect that the Industrial Relations Court had erred in making the declaration and order complained of "because by virtue of the Orders in Council made pursuant to [the De-recognition Act] the CFMEU did not acquire any legal or beneficial interest in the funds and property in the possession, custody or control of the former Custodian". In order to understand this and the next point of complaint concerning the form of the orders of the Industrial Relations Court, it is necessary to set out the terms of those orders. Wilcox CJ made the following binding declaration of right [103] :
3. CFMEU is beneficially entitled to the funds and property presently in the possession, custody or control of [the Custodian] including any funds or property vested in him as Custodian under an Order in Council, subject to deduction therefrom of any costs, charges and expenses properly incurred by him as Custodian pursuant to an Order in Council. [Declaration 3]
The succeeding orders were:
4. Within sixty (60) days or such further time as a judge may allow, [the Custodian] do all things necessary to vest in CFMEU the said funds and property, subject to any deduction as aforesaid; and [Order 4]
5. All parties have liberty to apply. [Order 5]
1. Sutton v Sharp [No 2] (1995) 62 IR 121 at 149
102. Two objections, relevant to power, were taken to Declaration 3 and Order 4. The first was that the clear purpose of the Order was to reserve dispositions of BLF funds and property to those which had the prior written consent of the Custodian. On that footing, the officers and the trustees of the BLF had no power to act as they did, unilaterally and without the prior written consent of the Custodian. Secondly, if in relation to the real property the Custodian had not put himself in "possession, custody or control", for example by failing to vest in himself the legal title to such property after the Supplemental Order permitted that course, this limited the effectiveness of Order 3, according to its terms. All that the CFMEU was "beneficially entitled to" was the "funds and property presently in the possession, custody or control of [the Custodian]". If, then, he was not in "possession, custody or control" of the legal estates in the real property, the principal subject matter of this litigation, Declaration 3 was silent as to such property. Accordingly, so the argument ran, Order 4 should not have required the Custodian to "do all things necessary to vest in CFMEU" such funds and property.
103. There are several answers to these arguments. I shall deal first with those which concern their substance. It is true that the Order contemplated that "[p]ossession, custody and control of the funds and property of BLF" were committed to the Custodian (Order, cl 1). However, it also proceeded to recognise that certain dispositions of such funds and properties might continue to be made subject (as I have held) to being avoided at the option of the Custodian (Order, cl 2). The Custodian was armed with powers under the Order to take possession, custody and control of the funds and property [104] and under the Supplemental Order to "vest in himself as Custodian any funds or property" (cl 2). Until such powers were exhausted, the differentiation between the legal and beneficial interests in the property of the BLF in Victoria was virtually assured. The legal interest in the real property held by the trustees might be in their name. The beneficial interest would be enjoyed by the BLF association and its members. By the Order, that beneficial interest was committed to the Custodian. It was that interest with which Wilcox CJ was concerned. Having found that (by the amalgamation agreement) such BLF interests had merged with the assets and liabilities of the CFMEU, his Honour was understandably minded to provide, by his orders, for the beneficial interests in the funds and property. The reference in the terms of Order 4 to the funds and property makes it plain that all that the Custodian was required to do was to "vest in CFMEU the said funds and property" (emphasis added). As the beneficial interest in the real estate committed to the Custodian was all that he then held, and as that interest was notified by the Queen's caveats lodged by the Custodian, by inference, "all things necessary" would involve the removal of such caveats. Only then would it be open to the trustees, in accordance with a lawful resolution of the BLF, to convey the legal title to the real property to the CFMEU or to such persons as under the rules of the CFMEU were entitled to hold real property on behalf of that organisation. In the event that there was any uncertainty concerning the requirements of Declaration 3 and Order 4 they could be clarified, as Order 5 contemplated, by a single judge of the Industrial Relations Court. It is not appropriate that such a matter should concern this Court.
1. cl 7. See also cll 4, 5, 6 and 8.
104. If there were more substantial arguments as to the powers of the officers of BLF, on behalf of that association and its members, to enter into those provisions of the amalgamation agreement which dispose of the funds and property of the BLF and its members in Victoria, which I have failed to appreciate because of the way this ground of appeal so belatedly arose following suggestions from the Court, there is a readier answer to it. In this intricate and hard-fought litigation, the appellants should not, in my opinion, have leave to raise in this Court, for the first time, a completely new issue. Amongst all of the many technical objections which were argued at first instance, this one was not. It was not even argued in the Full Court. It was not suggested on the leave application. It was not even conceived of by the appellants themselves. It is unreasonable, therefore, at the death knock, to permit the enlargement of the appeal (which is not by way of rehearing [105] ). Any matter which is within the liberty reserved by Order 5 may still be raised in the Industrial Relations Court. Any matter outside that liberty should now be taken as spent. There must be an end to litigation. It is not as if this was a case in which the appellants lacked legal representation of a high quality or in which they are otherwise deserving of protection from oversight of a legal technicality. Were such a point now permitted, the respondents could not be protected, at least in the Industrial Relations Court, by an order that the appellants pay the costs incurred to date [106] . Although I am far from convinced that the power of disposal point is a good one, it is my view that this Court should decline the appellants' application for leave to add the proposed new ground of appeal.
1. Victorian Stevedoring & General Contracting Co Pty Ltd and Meakes v Dignan (1931) 46 CLR 73 at 87, 110-111, 113; Petreski v Cargill (1987) 18 FCR 68 at 77
2. Industrial Relations Act 1988 Cth (now Workplace Relations Act 1996 Cth), s 347.
The form of the orders and other issues
105. Questions were also raised by members of the Court concerning the form of Declaration 3 and whether such a declaration ought to have been made. Specifically, it was suggested that the declaration obliged the joinder, as parties to the proceedings, of the trustees vested with the legal estate of the real property in which the BLF association and its members originally had the beneficial interest. Whilst various criticisms can be made of the form of Declaration 3, I have elsewhere expressed my view that this Court should resist attempts to involve it in such interlocutory matters. They properly belong to the practice of another superior court [107] . Least of all should this Court yield to any temptation to do so where the point has never been raised before the appeal reached the Court and where liberty is specifically reserved to all parties to apply to the Industrial Relations Court should clarification or elaboration of its orders be deemed necessary.
1. Re JJT; Ex parte Victoria Legal Aid (1998) 195 CLR 184 at 211-213cf Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 at 47-48
106. There is no merit in the suggested failure of the Industrial Relations Court to ensure that all persons potentially affected by its orders (notably the trustees) be joined as parties to the proceedings before the orders were made affecting them. The proceedings before that court were unusual. They involved an application by the CFMEU pursuant to s 258 of the Industrial Relations Act 1988 Cth for a determination, by declaration, of a question as to whether an invalidity had occurred, relevantly, in connection with the amalgamation effected between the CFMEU and the BLF.
107. The predecessor to s 258 [108] was enacted following the report of the Committee of Inquiry on Co-ordinated Industrial Organisations [109] . It was the product of widespread frustration with the invalidation, following litigation, of the actions of industrial organisations performed by the officials of those organisations in good faith, but in a manner that rendered them technically invalid [110] . Such litigation had caused enormous dislocation. It encouraged expensive and often meritless proceedings which the Parliament, advised by the Committee, was determined, where appropriate, to remedy. Although the terms of the provision enacted by Parliament differed from what was proposed by the Committee [111] , it is nonetheless appropriate to have regard to the history and purpose of s 258. This background makes it clear that the provision should not be given a narrow construction. Nor should its operation be defeated by the same kind of meritless technicalities which gave birth to the enactment in the first place. By s 258(6), the Industrial Relations Court was empowered to determine what notices should be given to other persons of the intention to make an application for an order under the section. Pursuant to that provision, the Industrial Relations Court in these proceedings ordered notices to be given to individuals and, through newspaper advertisements, to the public. Notices were specifically given to the trustees. As this Court was informed, the trustees appeared before the Industrial Relations Court. They consented to the making of the declarations and orders by that Court. In such circumstances, their absence from the record, and for that matter the absence of other officers and members of the BLF, is now immaterial. If, belatedly, it were considered in some way material and that could be shown, the party contending as much could doubtless chance its arm under Order 5 reserving liberty to apply. Neither the objection to the form of the orders nor to the parties in the proceedings before the Industrial Relations Court has any merit which this Court needs to address. The form of the orders point also fails.
1. Conciliation and Arbitration Act 1904 Cth, s 171C, inserted by Conciliation and Arbitration (Organizations) Act 1974 Cth, s 16.
2. Sweeney, Report of the Committee of Inquiry on Co-ordinated Industrial Organisations (1974), p 57.
3. Sweeney, Report of the Committee of Inquiry on Co-ordinated Industrial Organisations (1974), pp 38-40.
4. Sutton v Sharp (1994) 1 IRCR 259 at 271-272125 ALR 643 at 654; 57 IR 102 at 112.
Conclusion
108. None of the challenges to the declaration and orders of the Industrial Relations Court succeeds. I need not address several other issues which were raised during argument. These included whether, even now, the Custodian could exercise the option to avoid the disposition of BLF funds and property to the CFMEU. The appellants properly conceded that it was inherent in cl 2 of the Order that the Custodian would be bound to exercise his powers reasonably. That would presumably include within a reasonable time of being aware of circumstances giving rise to their exercise. Were an exercise of the option now attempted serious questions would arise as to its validity, the amalgamation agreement otherwise being declared valid and effective [112] . For example, it would be necessary for the Custodian to show that a foundation still existed for the exercise of his powers, or the extension of the Order, beyond the date of the amalgamation. These questions were not determined in the proceedings giving rise to this appeal. I would give no encouragement to fresh proceedings. But that is where any such matters would now have to be agitated. Not in this Court. Not on new grounds added at the end of extended litigation. Not on points unconceived by a well advised governmental party but arising for the first time during argument before this Court.
1. Declaration 1 of Wilcox CJ read "The amalgamation that was effected on and from 31 March 1994 between CFMEU and the Australian Building Construction Employees' and Builders Labourers' Federation (the BLF) was and is valid and effective in law": Sutton v Sharp [No 2] (1995) 62 IR 121 at 149
Order
109. The appeal should be dismissed. |
high_court_of_australia:/showbyHandle/1/9129 | decision | commonwealth | high_court_of_australia | text/html | null | Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd [1972] HCA 36 | https://eresources.hcourt.gov.au/showbyHandle/1/9129 | 2024-09-13T22:55:14.449077+10:00 | High Court of Australia
Barwick C.J. McTiernan, Walsh, Gibbs and Stephen JJ.
Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd
[1972] HCA 36
ORDER
Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd.: Appeal allowed with costs. Order of the Supreme Court of New South Wales set aside and in lieu thereof order that the questions asked in the originating summons be answered as follows:—
Question 1 — By majority "No"
Question 2 — "No".
The defendant to pay the plaintiff's costs of the suit. Jongar Investments Pty. Ltd. v. Kanangra Park Pty. Ltd.: Appeal allowed with costs. Order of the Supreme Court of New South Wales set aside and in lieu thereof order that the questions asked in the originating summons be answered as follows:—
Question 1 — By majority "No".
Question 2 — "No".
Question 3 — By majority "No".
Question 4 — "No".
Question 5 — By majority "No".
Question 6 — "No".
The defendant to pay the plaintiff's cost of the suit.
Cur. adv. vult.
The following written judgments were delivered:—
June 30
Barwick C.J.
Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd. The respondent, on 25th June 1970, entered into a contract to sell to the appellant certain land the title to which was under the provisions of the Real Property Act, 1900-1970 NSW. The contract was in the printed form approved by the Law Society of New South Wales and the Real Estate Institute of New South Wales, with details typed in at appropriate places. The contract did not provide for settlement to take place at any particular time. Though the land was vacant, the contract provided that the appellant as purchaser should be entitled to the rents and profits of the land as from the date of the contract but should pay interest to the respondent vendor on the balance of the purchase money at six per cent per annum. The contract contained the following relevant clauses—
7. The purchaser shall be deemed to have waived all objections or requisitions which he has not made and delivered to the Vendor or to the Vendor's Solicitor within 21 days from the delivery of the said abstract or particular. Within 28 days from delivery of the said abstract or particular, or, in any case where a consent as mentioned in clause 5 (d) of this agreement is required to the transfer of the whole or part of the property, within 14 days of the Purchaser or his Solicitor being notified of the granting of such consent, the Purchaser shall at his own expense tender to the Vendor or to his Solicitor for execution the appropriate assurance of the property.
1. If the Vendor shall be unable or unwilling to comply with or remove any objection or requisition which the Purchaser has made and shall not waive within fourteen days after the Vendor has given him notice of intention to rescind this Agreement, the Vendor, whether he has or has not attempted to remove or comply with such objection or requisition, and notwithstanding any negotiation or litigation in respect thereof, and whether the Purchaser has or has not taken possession shall be entitled by notice in writing to rescind this Agreement.
Prior to entering into the contract of sale with the appellant, the respondent had sold the land to one Parkinson. Upon Parkinson's delay in settlement, the respondent had given to Parkinson a notice to complete and on Parkinson's failure to do so had rescinded the contract. However, Parkinson entered a caveat with the Registrar-General with respect to the land after she had received the notice to complete and before the respondent had given notice of rescission. The Registrar-General placed a notification of the caveat on the relevant certificate of title. The contract with the appellant was made some days after the notice of rescission had operated according to its terms. On 31st July 1970, Parkinson commenced a suit against the respondent for specific performance of the contract which the respondent claimed by the said notice to have rescinded.
The appellant, having received particulars of title, delivered to the respondent what were said to be "requisitions on title". Two of them are central to the present matter and should be quoted in full—
2. At settlement, the Vendor should be registered as proprietor of the subject property free from encumbrances and caveats, other than the undermentioned mortgage.
20. Caveat No. L877733 should be removed from the Vendor's title. Would you kindly give us details of this Caveat.
The respondent's replies to these two "requisitions" were as follows—
As to No. 2 — Noted and subject to contract.
As to No. 33 — Noted. The subject Caveat was lodged by Doris Parkinson claiming Estate or interest under Contract of Sale dated 31st October, 1969. Our Client Company unilaterally cancelled the above matter because Parkinson failed to comply with the Notice to Complete. A summons has been served on our Client Company by your firm, acting for Parkinson and a defence has now been filed. As yet the matter has not been listed for hearing by the court. A section 73A Application No. L950536 has also been lodged at the Registrar General's Department.
The appellant thus became aware of this suit. Apparently it was prepared to stand by and await the conclusion of the suit provided the respondent respited the interest which the contract required the appellant to pay on the balance of the purchase money pending completion. The appellant's view was that the respondent could not complete the contract until the suit brought by Parkinson had been disposed of and therefore ought not to charge interest on the balance of purchase money; that he was not being kept out of the purchase money by the appellant but by his, the respondent's, own inability to settle. I gather that neither the appellant nor the respondent thought that Parkinson would succeed in the suit. In the event they were right. She did not. But, failing the respondent's willingness to forego interest on the balance of purchase money whilst that suit was still pending, the appellant on 8th March 1971 gave to the respondent a notice to complete the contract by 30th March. Thereupon, the respondent gave to the appellant a notice in purported pursuance of cl. 14 of the contract requiring the respondent to waive the "requisition" that the caveat be removed and giving notice that in default of such waiver the respondent would rescind the contract. On receipt of this notice the appellant withdrew its notice to complete. The respondent nonetheless on 7th April 1971 purported to rescind the contract for failure on the part of the respondent to waive the "requisition" as to the removal of the caveat.
An originating summons thereafter brought by the appellant in the Supreme Court of New South Wales (in Equity) sought the determination of two questions, namely—
(1) Was the notice dated 7th April 1971 given by the defendant to the plaintiff's solicitors pursuant to cl. 14 of the contract for sale?
(2) Did the notice dated 7th April 1971 given by the defendant to the plaintiff's solicitors rescind as from the date thereof the contract to which the said notice relates?
The Supreme Court (Street J.) decided that the rescission was valid, the respondent not having acted unconscionably in giving the notice to rescind in exercise of the power reserved to it in cl. 14 of the contract. By a decretal order the Supreme Court answered both questions in the affirmative.
Upon this appeal it has been contended that the two paragraphs from the appellant's requisitions on title, numbered 2 and 33, were not requisitions within the meaning of cl. 14 of the contract or, alternatively, that if they were, they were not requisitions of a kind which the vendor was entitled under cl. 14 to call upon the appellant to waive. Thirdly, that in any case the action of the respondent in rescinding was unconscionable within the case law developed in connexion with clauses such as cl. 14 of this contract.
It is perhaps difficult to apply to the examination of title to land held under the Real Property Act all the concepts current in connexion with the examination of title to land held under common law title. A vendor of a fee simple of which he is the registered proprietor does not face the uncertainties of title which might obtain in the case of land held under common law title. He should have no difficulty in showing title or of making it. If there is a caveat lodged against dealings with his land, he must know of it at the time he sells unless he should chance to sell in the interval between the lodgment of the caveat and the Registrar's notification of it to him pursuant to s. 97 (1) of the Real Property Act. Consequently, the occasions for resort to cases decided on sales on land held under common law title must indeed be rare in the case of sales of land held under Torrens title. But, nevertheless, I think that it is possible to maintain the distinction between an objection to title and an objection to conveyance in respect of land held under the Real Property Act. An objection to title involves an assertion that there is a defect in the vendor's title to the estate in the land which he has sold. An objection or requisition as to conveyance is an objection or requirement as to the form of the memorandum of transfer as, for example, the absence of or the need for parties to join in the transfer. But solicitors are accustomed, it seems to me, to make both demands and inquiries which cannot be fitted into either of these categories. Some of these requisitions may relate to structures on the land or to physical features connected with it which may not accord with the contractual terms as, for example, the connexion of water or sewerage services through common facilities. These are, in my opinion, truly requisitions demanding something of or some action on the part of the vendor. Other "requisitions" are merely inquiries for information. Some of this information the purchaser might have been able to ascertain by his own endeavours: perhaps he really seeks the vendor's admission of the facts. Then, it seems to me, that there are other so-called "requisitions" which are no more than reminders to the vendor of his obligations under the contract. Paragraphs 2 and 33 of the appellant's requisitions in this case, in my opinion, form a good example of this class of so-called "requisition". They are not objections to title nor demands as to the form of conveyance, nor do they relate to the physical condition of the land or the structure thereon. They do no more than remind the vendor of what is expected of him according to the terms of the contract as a performance of his obligations. The respondent's answers to requisitions so treated them.
It is important to bear in mind that the obligation of a vendor of an estate or interest in land held under the Real Property Act, 1900-1970 NSW is, on settlement, to place his purchaser in a position to be registered in respect of that estate or interest. For example, on a settlement of a contract of sale, taking place at the Registrar-General's Office, if required, the vendor, in exchange for the purchase money, should hand to the purchaser documents or secure for him their immediate production which, being passed immediately to the Registrar-General, would secure the purchaser's registration on the certificate of title for the estate or interest contracted to be sold. That quite clearly was the obligation of the vendor under this contract. Section 57 (1) of the Conveyancing Act, 1919-1970 NSW is corroborative of this obligation.
A caveat against dealings, such as the caveat in the present case, is not a defect in a vendor's title. It is in its nature a notice to the Registrar-General, which he is bound to observe, not to register any dealings without notice to the caveator. I have pointed out elsewhere (see J. & H. Just (Holdings) Pty. Ltd. v. Bank of New South Wales [1] ) that the purpose of such a caveat is not to give notice of an interest claimed by the caveator in the land, though the Real Property Act requires the caveator to state the nature of the interest on the footing of which he claims to be entitled to lodge the caveat—see s. 72 (2) of the Act and the form of caveat in the 16th Sch. But the purchaser is clearly entitled to refuse to settle until the caveat has been removed or its removal certainly assured.
1. (1971) 125 C.L.R. 546.
It therefore seems to me that the two "requisitions" which I have quoted from the appellant's so-called requisitions on title were not requisitions within the meaning of cl. 14. They were no more than mere reminders to the vendor of one of his fundamental obligations under the contract to the performance of which the purchaser was entitled at or before settlement. They were not requisitions which the vendor was entitled to require a purchaser to waive on pain of losing his contract. The facts of the present case illustrate the matter very clearly. Here a vendor, unable to complete because of the caveat and the currency of the suit for specific performance, endeavoured to require his purchaser on pain of losing his bargain to be prepared to settle, paying over the purchase money, whilst the caveat against the registration of the unencumbered transfer to which he was entitled on settlement was still effective. To so require was to seek the removal from the contract of the fundamental obligation of the vendor. It seems to me that to regard the statement in the appellant's "requisitions" in cll. 2 and 33 as requisitions within cl. 14 is virtually to construe the contract as one which was only to be performed at the discretion of the vendor. The removal of a caveat against dealings, such as was on the certificate of title in this case in which an unencumbered fee simple in the land was sold, is not required, in my opinion, by s. 57 (1) of the Conveyancing Act, 1919-1970, to be the subject of an objection or requisition.
The provisions of cl. 7 of the contract are also relevant to the nature of a requisition in cl. 14. I can see no reason why the meaning of "requisition" should be different in cl. 7 to what it is in cl. 14. It would indeed be a strange construction of a contract of sale of land under the Real Property Act that the purchaser must settle whilst a caveat against dealings is on the title simply because he had not "requisitioned" its removal. But this would be the result if the so-called "requisition" 33 is held to be a requisition; and, because of the terms of cl. 7, an indispensable requisition if the purchaser is to be entitled on settlement to be placed in a position to be registered on the certificate of title for the estate or interest sold.
In my opinion, therefore, the notice given by the respondent on 12th March 1971 requiring the waiver of "requisition" 33 was not authorized by cl. 14 of the contract in the circumstances and the consequential notice of rescission was ineffective.
If the matter be approached, as in my opinion it should not, by assuming that what the appellant had said in his "requisitions" 2 and 33 were requisitions within the meaning of cl. 14 of the contract, it ought, in my opinion, to be held that it would be unconscionable for the respondent to have attempted to exercise his powers under cl. 14, in the circumstances. I would have thought clearly it was so, because what he would be doing would be to deny to the purchaser the performance of an essential obligation which he had undertaken when entering into the contract with knowledge of the existence of the caveat. In this connexion I find no need to refer to decisions on the use of this type of clause in connexion with land under common law title. The title to this land is under the Real Property Act. The caveat was lodged and presumably notified before the sale was made. To allow the vendor to rescind in the circumstances would be to afford him the right, in substance, to say that the sale was in reality no sale at all: only a transaction conditional on his own willingness to perform.
In connexion with the argument as to whether or not the conduct of the respondent was unconscionable, on the footing that the requisitions within cl. 14 had been made, the appellant submitted that the caveat was invalid for lack of a sufficient description in it of the caveator's interest in the land, and that therefore the respondent ought to have taken steps to have it removed from the register as being invalid, irrespective of the suit for specific performance. I find no need to pass upon the question whether or not the caveat was invalid, in the sense of being void and capable of being ignored by the Registrar-General, because, in my opinion, with the suit for specific performance on foot, it would have been a futility for the respondent to have taken any steps for the removal of the caveat upon any ground. Either an interim injunction in the suit or a new caveat would have resulted.
In my opinion, the appeal should be allowed, and the order of the Supreme Court set aside. Both questions asked in the Originating Summons should be answered in the negative.
Jongar Investments Pty. Ltd. v. Kanangra Park Pty. Ltd. In my opinion, all the questions in this case should be answered in the negative for the reasons given in my judgment in Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd. which has been handed down today.
McTiernan J.
Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd. In my opinion the appeal should be allowed for the reasons stated by the Chief Justice.
Jongar Investments Pty. Ltd. v. Kanangra Park Pty. Ltd. In my opinion the appeal should be allowed for the reasons stated by the Chief Justice.
Walsh J.
Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd.; Jongar Investments Pty. Ltd. v. Kanangra Park Pty. Ltd. The appellant Godfrey Constructions Pty. Ltd. filed an originating summons in the Supreme Court of New South Wales in Equity for the determination of two questions relating to a contract for the sale of land made between it and the respondent. The appellant Jongar Investments Pty. Ltd. filed an originating summons relating to three contracts for the sale of land made between it and the respondent. It sought the determination of six questions of which questions 1 and 2 related to one contract, questions 3 and 4 to another, and questions 5 and 6 to a third contract. The questions which referred respectively to the contracts to which the second suit related were in similar terms. It was agreed at the hearing of the first suit that the decision in it should govern the disposal of the second suit. The questions asked in the first suit were:
(1) Was the notice dated 7th April 1971 given by the defendant to the plaintiff's solicitors pursuant to cl. 14 of the contract for sale?
(2) Did the notice dated 7th April 1971 given by the defendant to the plaintiff's solicitors rescind as from the date thereof the contract to which the said notice relates?
The learned judge who heard the suit answered both questions "Yes". In conformity with the agreement, to which I have referred, an order was made in the second suit by which all six questions asked therein were answered "Yes".
The appellant Godfrey Constructions Pty. Ltd., by its notice of appeal to this Court, challenged the answer given to the second question in its suit and asked that the order of the Supreme Court be varied by substituting for it a declaration that the second question should be answered "No". The appellant Jongar Investments Pty. Ltd., by its notice of appeal, challenged the answers given to the second, fourth and sixth questions in its suit and asked for an order that those questions should be answered "No". The appeals have been heard together. Except in framing its formal orders, there is no need for this Court to deal separately with the two appeals. I shall confine my attention, therefore, to the facts and the questions asked in the first suit and I shall refer to the plaintiff in that suit as the appellant.
The events which led to the suit may be stated as follows. On 31st October 1969 the respondent agreed to sell certain land, of which it was the registered proprietor under the provisions of the Real Property Act, to one Doris Parkinson. According to an allegation made by the respondent in a subsequent suit between it and Doris Parkinson, the respondent gave notice on 12th May 1970 calling on her to complete the agreement on or before 2nd June 1970. On 4th June 1970 Doris Parkinson lodged a caveat. On 17th June 1970 the respondent purported to rescind its contract with her. On 25th June 1970 it entered into the contract which is the subject of the present proceedings. I shall refer later to some of the terms of that contract. On 10th July 1970 the respondent's solicitors gave formal particulars of title. On 31st July 1970 Doris Parkinson commenced a suit against the respondent for specific performance of the agreement of 31st October 1969. On 6th August and 17th August 1970 the respondent entered an appearance and put on a statement of defence and counterclaim, by which it sought a declaration that that agreement had been duly rescinded. On 27th August 1970 the appellant's solicitors sent requisitions to the respondent's solicitors. The relevant parts of this letter and of the reply sent on 2nd September 1970 are set out in the judgment of the Chief Justice herein. Correspondence took place between the solicitors for the parties concerning a request that an obligation to pay interest should be waived. This continued from September 1970 to January 1971. The respondent did not accede to the request. On 8th March 1971 the appellant gave notice to the respondent that the appellant was ready and willing to complete the contract and required the respondent to complete it on or before 30th March 1971. It stated that should the respondent fail to comply the appellant would institute proceedings to enforce the contract and to recover damages with respect to any breach of it. On 12th March 1971 the respondent advised the appellant that the respondent—
is presently unable to have Caveat No. L. 877733 removed from the Register book and accordingly pursuant to Clause 14 of the Contract and Section 56 (1) of the Conveyancing Act hereby gives you notice of intention to rescind the Contract dated 25th June 1970, if you do not waive your objection within 14 days from the date hereof.
On 24th March 1971 the appellant gave notice that it wished to withdraw its notice to complete. On 7th April 1971 the respondent gave a notice of rescission in the following terms:
Whereas
By notice in writing dated 12th March, 1971 you were notified that the Vendor intended to rescind the Contract dated 25th June, 1970 failing you removing your objection to title within 14 days from that date.
You have failed to remove your objection, viz. Caveat No. L. 877733 lodged by Doris Parkinson, by the said date.
Now take notice that the Vendor in accordance with its rights under Clause 14 of the Contract and Section 56 (1) of the Conveyancing Act hereby rescinds as from the date hereof the Contract to which the said notice relates and will refund the deposit paid in due course.
It is necessary now to refer to some of the provisions of the contract. It contained no reference to the caveat. It did not fix a date for completion. It provided that the purchaser was to pay the balance of purchase money ($7035) "together with interest thereon at the rate of 6 per cent on daily balances calculated from the date of this Agreement in cash on completion of this Contract". There was a proviso that if the full balance of purchase money should be paid within ninety days of the date of the agreement the vendor agreed to waive the payment of interest. The contract was on the printed form approved by the Law Society of New South Wales and the Real Estate Institute of New South Wales. It contained the printed cll. 7 and 14 which are set out in the judgment of the Chief Justice. It contained also a clause (cl. 8) providing that compensation should be made or given in respect of an error or misdescription of the property and that cl. 14 should not apply to any such claim for compensation. It contained a clause (cl. 10) precluding the purchaser from making any "objection or requisition or claim for compensation" in respect of any of certain enumerated matters.
The notice of 7th April 1971 has features upon which some comments are appropriate. It treats the appellant as having made an objection to title. But cl. 14 is not restricted to such objections and if that was not an apt description of the matter that had been raised by the appellant, that would not necessarily preclude the respondent from relying on the width of the expression "any objection or requisition which the Purchaser has made". The statement to the appellant that it had failed to remove its "objection, viz. Caveat No. L. 877733 lodged by Doris Parkinson", is an inaccurate description of what had occurred. The reference to s. 56 (1) of the Conveyancing Act in a way which suggests it is a source of a right in the respondent is also inaccurate. It has been submitted that having regard to a clause in the contract providing that if it should be rescinded under the provisions of cl. 14, or of certain other clauses, such rescission should be deemed to be a rescission ab initio, the notice was defective in stating that the respondent rescinded "as from the date hereof". In my opinion, however, none of these points is of any real significance in the decision of the appeal.
During the hearing of the appeal a question was raised which was not argued before the learned primary judge and, in my opinion, was not raised by the notice of appeal to this Court. It was submitted that the appellant did not make "any objection or requisition" within the meaning of cl. 14 of the contract. The appellant sought leave to amend its notice of appeal so as to include in it this contention. That was opposed and it was submitted for the respondent that, in so far as it was necessary to determine the scope of the terms "objection" and "requisition" in the contract, evidence of expert conveyancers might have been relevant and might have been obtained if the question had been raised at the hearing.
It seems plain that the term "requisition" is not always used in what has been said to be its strict sense, namely, a demand addressed to the vendor in relation to some specific matter arising out of the title shown by the vendor or some objection taken to that title: see Voumard, The Sale of Land, 2nd ed. (1965), p. 449. The term is used in varying senses. Its meaning in cl. 14 is a question of the construction of the contract upon a consideration of all its terms, including cll. 7 and 10. In the present case it is not necessary, in my opinion, to decide whether or not cl. 14 includes within its scope the statements by the appellant that at settlement the vendor should be registered as proprietor of the property "free from encumbrances and caveats" and that the caveat "should be removed from the vendor's title". If that question had to be decided, I should not feel satisfied that it would be correct to hold that the words used in cl. 14 can have no application to any request made to a vendor, if by that request he is merely called upon to do something which he would be obliged in any event to do in order to fulfil his obligations in accordance with the terms of the contract. In my opinion such a view would not be in accordance with authorities of long standing dealing with such a clause, some of which were discussed by Isaacs J. in Gardiner v. Orchard [1] . It has been doubted, however, whether such a clause should be construed as applying to an objection or requisition which goes "to the root of the whole subject matter of the contract": see Baines v. Tweddle [2] , per Lord Evershed M.R. [3] and Pearce L.J. [4] . But I need not pursue the question whether or not cl. 14 does apply to the "requisitions" made in this case by the appellant. If it be assumed that the appellant did make an objection or requisition within the meaning of cl. 14, I am of opinion that the respondent was not entitled to exercise the power of rescission, which on that assumption was conferred by the clause, at the time at which and in the manner in which the respondent purported to exercise that power.
1. (1910) 10 C.L.R. 722, at pp. 738-739.
2. [1959] Ch. 679.
3. [1959] Ch., at p. 687.
4. [1959] Ch., at p. 698.
The principles by which limitations have been imposed upon the right of a vendor to exercise the power conferred by such a clause as cl. 14 are well known and they were of course recognized by the learned primary judge, who referred in his judgment to some of the authorities on this subject. But with due respect to his Honour I am of opinion that he did not give sufficient weight, in deciding whether the respondent did attempt to use the power arbitrarily or unreasonably, to some features of the case to which I shall now refer. In the first place, the contract into which the parties entered was one under which it was plainly the duty of the respondent to have the caveat removed: see s. 57 (1) (d) of the Conveyancing Act and see Thomson v. Richardson [5] . Secondly, if the appellant had waived its objection, as proposed by the respondent's letter of 12th March 1971, the consequence would have been that the appellant would have become obliged to complete the contract paying the full purchase price, in return for a memorandum of transfer executed by the vendor which could not have been registered so long as the caveat remained in force: see Real Property Act, s. 74. If the contract had been completed on those terms, the respondent would have had no further interest requiring it to defend the pending suit in which Doris Parkinson was plaintiff and the appellant could have been placed in the position of embarking upon litigation to establish that a contract to which it was not a party had been validly rescinded and that Doris Parkinson was not entitled to any beneficial interest in the property. It has been argued that in form the caveat was defective and that on that ground its removal could have been procured without litigating the substantial question as to the validity of Doris Parkinson's claim to be entitled to specific performance of the contract made with her. But even if that could have been done, the removal of the caveat on that ground would not have extinguished any equitable estate to which she was entitled and in any event it was the respondent's obligation to have the caveat removed: see Taylor v. Land Mortgage Bank of Victoria [1] , where there is a useful discussion of the duty of a vendor upon whose title a caveat against dealings has been lodged. The respondent endeavoured to use cl. 14 to require the appellant, either to give up its contract altogether without any recourse against the respondent for breach of it, or to complete the contract upon radically disadvantageous terms. I do not mean to assert that the circumstance that the waiver of an objection will have drastic consequences will always be sufficient to make it unreasonable for a vendor to exercise a power of rescission under such a clause. But it is an important circumstance, to be weighed with the other facts of the case, in determining whether or not the respondent was disentitled to make that use of the clause.
1. (1928) 29 S.R. (N.S.W.) 221.
2. (1886) 12 V.L.R. 748, at p. 754.
The next important fact is that the respondent was fully aware when it made the contract with the appellant that Doris Parkinson had lodged her caveat and had done so after the expiry of the time fixed in the notice to complete which the respondent claimed had been given to her. This provides one important ground of distinction between the present case and that of Woolcott v. Peggie [2] , and on appeal to the Privy Council [3] . The learned primary judge recognized the principle that the freedom of a vendor to rely upon such a clause may be affected by his conduct before and at the time of entry into the contract. But he observed that the respondent had consistently maintained the validity of the notice of rescission which it claimed to have given to Doris Parkinson. In my respectful opinion that has little bearing upon the question which has to be resolved. It may be that a vendor who enters into a contract without disclosing an earlier contract can be considered less reckless if he believes that the earlier contract has been validly rescinded than he would be considered if he believed it to be still in force. But whatever his belief may be in that regard, it remains no less true, in my opinion, that if he enters into a contract under which it is his responsibility to carry out the task, whether it turns out to be easy or difficult, of getting rid of a caveat which has already been lodged, his knowing acceptance of that obligation has an important bearing upon the reasonableness of his subsequent attempt to use cl. 14 to rid himself of it. The learned judge observed also that the caveat represented what might be described as a blot on the respondent's title, but he said it was "a blot that was there for all to see". But, in my opinion, the respondent can obtain no assistance from the fact that a search of the title would reveal the existence of the caveat. It is well settled that the conduct of a vendor may disentitle him to exercise the power of rescission although he is not guilty of fraud or dishonesty. It may disentitle him, although there is no ground for suggesting that he hoped to be able to pass off a title having a defect which would not be discovered before completion. It should be observed also that the fact that the caveat was there to be seen upon a search of the title was not a fact which placed any responsibility or obligation upon the appellant. It has been said that a caveat is not a blot on the title: see Thomson v. Richardson [1] . The respondent's title was defective only if Doris Parkinson had a valid and subsisting equitable interest in the land. If she did not the respondent's title was entirely good. But whilst the caveat remained that title could not be effectively transferred to the appellant. Webb J. said in Taylor v. Land Mortgage Bank of Victoria [2] , that a caveat throws a cloud on the title. Whether or not that is a useful metaphor, the importance of a caveat for present purposes is, as Webb J. there observed, that "it forms, until removed, an effectual obstacle to making a good title to (a purchaser)". It forms an obstacle to making a title, in the sense that it prevents registration of a transfer and registration is necessary to vest the estate in the land in the purchaser. If the vendor carries out his obligation to remove the caveat, as the purchaser is entitled to expect, there is no difficulty. But if the purchaser waives that requirement, what he obtains upon completion of the contract is something very much less than that which he agreed to buy.
1. (1888) 14 V.L.R. 444.
2. (1889) 15 App. Cas. 42.
3. (1928) 29 S.R. (N.S.W.) 221, at p. 223.
4. (1886) 12 V.L.R., at p. 755.
Subject to one matter to which I must yet refer it seems plain to me that the respondent, if acting reasonably, would have proceeded with the litigation in which it was engaged with Doris Parkinson. If successful in that litigation, it would then have completed the contract with the appellant. If successful, it would have been unable to complete that contract. There is no need now to consider whether it would have been entitled in that event to be relieved of liability to pay damages for breach of the contract, either under its terms or by the application of the rule in Bain v. Fothergill [1] . I am of opinion that what the respondent could not do, if acting reasonably, was to exercise the power under cl. 14 to get rid of its contract with the appellant whilst the litigation with Doris Parkinson was still pending. The respondent was not engaged in that litigation because it had made the contract with the appellant. The case is not one in which the existence of that contract involved, or might involve, the respondent in expensive litigation of which otherwise it would have been free and which it was reasonable for it to avoid by exercising its power of rescission.
1. (1874) L.R. 7 H.L. 158.
It is necessary to consider whether the appellant's conduct placed the respondent in such a position that it was reasonable for it to act, in order to extricate itself, in a way which would otherwise have been unreasonable. I have referred to correspondence concerning the payment of interest on the balance of the purchase money. I am of opinion that the appellant's requests for the waiving of the obligation to pay interest were quite reasonable and afforded no justification to the respondent for taking any action to bring the contract to an end. The appellant on its part may have felt aggrieved at being required to pay interest during a long period of delay for which it was not responsible. But it was not thereby justified, in my opinion, in taking up the attitude that the respondent must complete the contract within a short time, when it was known that this could not be done until the litigation with Doris Parkinson had come to an end. If the appellant had persisted in its demand made in the letter of 8th March 1971 for the completion of the contract by 30th March and in its threat that upon failure to comply with that demand it would take proceedings to enforce the contract, there would have been a great deal to be said for the view that the appellant tried to force the respondent into a corner in such a manner as to justify the use of cl. 14: see Woolcott v. Peggie [2] . It may well have been the delivery of the notice to complete that provoked the respondent into giving the notice of 12th March 1971 to the appellant. But the appellant did not persist in its demand for the completion of the contract by 30th March 1971. On 24th March it withdrew that demand. Ultimately it is the reasonableness of the action taken by the respondent on 7th April 1971 that has to be assessed. The question is not whether it was justified on 12th March 1971 in giving the notice which was then given. By 7th April it was known that the notice of 8th March 1971 was of no effect. It had been withdrawn before the time for completion mentioned in it had elapsed. It was not operative to create an obligation to complete the contract on a specified day. Still less was it effective to make completion within a specified time the essence of the contract. In these circumstances, I am of opinion that it was the duty of the respondent under its contract with the appellant to abide the outcome of the pending suit, doing what it could reasonably do to expedite the hearing of that suit. It was not entitled, in my opinion, to rescind the contract at a time when it had not yet been established whether it would be able or unable to carry it out, but when, as the respondent was found always to have maintained, it expected to be successful in resisting the claim of Doris Parkinson.
1. (1888) 14 V.L.R., at p. 451.
In my opinion the appeals should be allowed.
Gibbs J.
Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd.; Jongar Investments Pty. Ltd. v. Kanangra Park Pty. Ltd. In my opinion, it was unreasonable for the respondent on 7th April 1971 to attempt to exercise the power of rescission given by cl. 14 of the contracts and the attempt was accordingly ineffectual. I concur with what my brother Walsh has said in his judgment in relation to this aspect of the case. Taking this view, I need not discuss the other questions raised as to the application of cl. 14 and in particular would not decide whether the appellant had made an objection or requisition within the meaning of that clause. I would therefore not disturb the declaratory orders in so far as they answered in the affirmative the first question in the originating summons issued by Godfrey Constructions Pty. Ltd. and the first, third and fifth questions in the originating summons issued by Jongar Investments Pty. Ltd., but I would answer the other questions in the negative. I would allow the appeal.
Stephen J.
Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd. I have had the advantage of reading the judgment delivered by the Chief Justice and to avoid repetition will not attempt again to state the material facts of this case and the form which the relevant letters, contract and other documents take, which are all set out in that judgment.
This case deals with a matter of some general importance since it concerns the effect of a condition of sale commonly occuring in contracts for the sale of land. The question for decision involves the circumstances in which a vendor of Torrens system land may, under a condition of sale to that effect, elect to rescind rather than satisfy the purchaser's requirement that a caveat by an earlier purchaser, whose contract had been rescinded by the vendor, be removed before settlement; more particularly, whether the vendor may do so if he both knew of the caveat when he contracted to sell and he is also currently defending a suit brought by the original purchaser and has, in those proceedings, counter-claimed for a declaration that the contract with the original purchaser had been effectively rescinded by him.
Because the ability of a vendor to make good title to land was inherently uncertain in view of the peculiar complexities of the English law of real property, there early developed in English contract law an exceptional rule relating to damages for breach of a contract for the sale of land. A purchaser was prevented from recovering from a vendor damages for loss of his bargain in an action for breach of contract if the sale went off because the vendor could not make good title to the land sold. In such a case the only damages recoverable were, and still are, such as are attributable to expenses incurred by the purchaser: Flureau v. Thornhill [1] ; Bain v. Fothergill [2] .
1. (1776) 2 W.B1. 1078 [ 96 E.R. 635].
2. (1874) L.R. 7 H.L. 158.
Owing its origin to those same complexities of the English law of real property is that now common condition of sale which Sir Lancelot Shadwell V.C. described in 1840 as being new in his experience—Tanner v. Smith [3] —and which entitles a vendor to rescind the contract should he be unable or unwilling to comply with or remove objections or requisitions insisted upon by his purchaser. Clause 14 of the present contract of sale, the effect of which is in issue in this case, is just such a clause.
1. (1840) 10 Sim. 410, at p. 411 [59 E.R. 673, at p. 674].
The common origin of the rule in Bain v. Fothergill [2] and of this type of condition of sale is significant; over the years each has, by judicial decision, been kept within quite narrow limits so as to confine its operation to its original purpose and to prevent it being invoked by vendors for improper and extraneous purposes. The restrictions in each case resemble each other; I am not here concerned with the restrictions imposed upon the rule in Bain v. Fothergill [1] , some of which are referred to in the judgments in Noske v. McGinnis [2] , but only with the way in which the courts have, over the years, given a quite restricted operation to clauses of the nature of cl. 14.
1. (1874) L.R. 7 H.L. 158.
2. (1874) L.R. 7 H.L. 158.
3. (1932) 47 C.L.R. 563.
Courts have approached the task of confining the operation of such clauses within what are regarded as proper limits in one or other of two ways; the vendor has been denied the right to rescind either upon the basis that, as a matter of construction, the circumstances of the particular case do not fall squarely within the terms of the clause or else because, although, on its proper construction, the clause applied, nevertheless, the vendor having attempted to use the rights conferred upon him for an improper purpose, he could not be permitted to rely upon its terms. In Webster's Conditions of Sale, 3rd ed., p. 356, the learned author concludes that: "It is not really a question of construction—the court interferes with the contract to prevent a fraud being committed." It perhaps matters little which of these two approaches be preferred; there may, on analysis, be no very clear distinction between them. I do not propose in this judgment to adhere to any clear distinction between the two approaches.
Turning then to the contract of sale in the present case and to the circumstances of the parties to this contract, there appear to me to be, consistently with the authorities as I understand them, at least two reasons why the vendor could not validly rescind the contract under the powers conferred upon him by cl. 14.
First, cl. 14 only applies if the vendor is "unable or unwilling" to comply with the purchaser's requisition. There was in the present case, as the admitted facts demonstrate, neither inability nor unwillingness in any relevant sense. The vendor, in its notice of 12th March 1971 advising the purchaser of its intention to rescind unless the purchaser's requirement concerning the caveat was waived, did not rely on unwillingness and asserted only inability and that only in a qualified way since the notice described the vendor as being "presently unable" to have the caveat removed from the register book.
The original requirement of the purchaser was, as I interpret pars. 2 and 33 of the purchaser's requisitions on title, only that the caveat should be removed before settlement; at the time when these requisitions were delivered, in August 1970, there was no settlement date fixed and thereafter, until the purchaser gave its notice to complete, the parties were apparently content to defer settlement until Mrs. Parkinson's suit against the vendor had been disposed of. The position changed in March 1971, when the notice to complete was given by the purchaser, and it then became appropriate enough for the vendor to regard the purchaser's original requirement as now calling for removal of the caveat by the settlement date fixed by the purchaser's notice, 30th March 1971. It was this view to which the vendor's notice of 12th March 1971, gave effect. However, on 24th March 1971, the purchaser withdrew its notice to complete and that withdrawal appears to me to have been effective to place matters in statu quo ante. Thenceforth the purchaser's requirement resumed its former significance, namely as a requirement that the caveat be removed at or prior to settlement, which was only to take place on some uncertain date in the future.
In those circumstances, the vendor could no longer maintain the position that any inability to comply with the purchaser's requirement existed. The correspondence between the parties' solicitors suggests, and it was not disputed in argument, that both vendor and purchaser regarded Mrs. Parkinson's suit as likely to fail and the vendor's counterclaim, seeking a declaration that the vendor had duly rescinded its contract with Mrs. Parkinson, as likely to succeed. Thus, once any specific date for settlement disappeared, there was no longer any inability to comply with the requisition; there was, of course, no known and certain ability to do so but that is irrelevant to the issue whether the vendor could invoke cl. 14.
For like reasons the vendor could not have invoked "unwillingness" as a ground for rescission; on the contrary, its actions showed it to be very willing to remove the caveat; that was precisely what it was engaged in doing by its defence of Mrs. Parkinson's suit and its counterclaim in those proceedings, and neither before nor after the threat of an early settlement date was withdrawn by the purchaser could any question of unwillingness be said to exist.
The facts of this case bear, in some respects, a similarity to those in Woolcott v. Peggie [1] , and on appeal [2] , but that decision is of significance rather because of the respects in which the present facts differ. In that case the purchasers called the vendor's attention to an entry on the register of deeds of a prior contract of sale of the relevant land to a third party; of this alleged contract the vendor had never previously heard and he promptly set about having the entry removed by resort to litigation which, through no fault of his own, involved delay. The purchasers insisted upon prompt removal of the entry in the register and immediate settlement unless the vendor gave an indemnity, which he refused to do; the vendor accordingly rescinded and his right to do so was upheld by the trial judge, by the Victorian Full Court and on appeal by the Privy Council.
1. (1888) 14 V.L.R. 444.
2. (1889) 15 App. Cas. 42.
It was the purchasers' refusal unconditionally to afford the vendor sufficient time to have the entry removed which was regarded as creating a situation of impossibility which entitled the vendor to rescind under a condition similar to cl. 14. The trial judge, Webb J., took this view and in the Full Court, Holroyd J. said that when such a condition provided [1] :
that the vendor shall be at liberty to rescind if he is unable to remove an objection to or comply with a requisition on title, it means if he is unable to do so at any time. If the purchaser were willing to give him 100 years to do it, I do not think the vendor could make any objection, nor could he take advantage of the condition and rescind; but the purchaser has a right to say: "I am not going to wait for ever. I insist on this objection being removed within a reasonable time." If the vendor then cannot remove it within a reasonable time he is at liberty to say: "You have a right to put a limitation of time on the condition but having done that I can no longer comply, and I will rescind".
1. (1888) 14 V.L.R., at p. 459.
In the present case the purchaser's notice to complete placed the vendor in much the position of Mr. Peggie (ignoring for present purposes the distinction that Mr. Peggie was quite unaware of the entry on the register when he contracted to sell to Woolcott) but the withdrawal of that notice, if not amounting to a statement that the vendor could take as long as was necessary to seek to remove the caveat, at least resulted in time being no longer a factor justifying the vendor in regarding it as impossible for him to comply with the purchaser's requirement.
Accordingly, there were here no circumstances such as would suffice to call into operation the terms of cl. 14.
So far, I have concerned myself with whether the vendor's situation was in fact one to which cl. 14 in its terms applied and have concluded that it was not. Viewing the matter somewhat more broadly there exists a second reason why the vendor should not be permitted to rely upon the power to rescind contained in cl. 14. It is allied to the first but arises from the fact that in interpreting clauses of this character the courts have consistently looked at the purposes for which the particular clause was designed and have refused to allow a vendor to "ride off upon a condition to rescind which was obviously not framed with reference to" the circumstances which in fact have arisen: per Rigby L.J. in In re Deighton and Harris's Contract [1] . In Gardiner v. Orchard [2] , Isaacs J. said of a clause similar to cl. 14:
In considering whether such a clause justifies a vendor in any given case in cancelling his contract, the Court must bear in mind three things: First, the purpose of every such condition, which is a matter of law, and is stated in the passage quoted from Greaves v. Wilson [3] ; next, the necessity for bona fides on the part of the vendor in using his power for that purpose: see also Woolcott v. Peggie [4] . This is a question of fact, and is admitted here. The third essential is that the cancellation must be reasonable. Reasonableness is a question of fact, dependent on the whole of the circumstances, though one of those circumstances consists always of the wording of the contract itself.
1. [1898] 1 Ch. 458, at p. 464.
2. (1910) 10 C.L.R., at pp. 739-740.
3. (1858) 25 Beav. 290 [53 E.R. 647].
4. (1889) 15 App. Cas. 42.
His Honour's reference to Greaves v. Wilson [3] is to a passage in which Sir John Romilly M.R. said [5] that such conditions were introduced to meet the case where a vendor finds that he is to be put to: " so much expense and trouble as to make it unreasonable that he should be called upon to do it." The learned Master of the Rolls emphasized that it was always "a question of the reasonableness of the thing required". As early as 1841 Lord Langdale M.R. had used reasonableness as a test of the validity of the vendor's rescission in his judgment in Page v. Adam [6] .
1. (1858) 25 Beav. 290 [53 E.R. 647].
2. (1858) 25 Beav., at p. 293 [53 E.R., at p. 649].
3. (1841) 4 Beav. 269, at p. 285 [49 E.R., 342, at p. 348].
Isaacs J. also relied upon what was said by Turner L.J. in Duddell v. Simpson [7] , where the learned Lord Justice instanced involvement in expenses far beyond what the vendor ever contemplated or in unforeseen litigation and expense as being the type of circumstance for the avoiding of which the vendor reserved to himself the power of annulling the contract.
1. (1866) 2 Ch. App. 102.
As was said by O'Connor J. in Gardiner v. Orchard [8] , the material time to be looked at is the time when the contract is rescinded, in the present case 7th April 1971. There was, at that time, nothing at all onerous or unreasonable involved in compliance with the requirement of the purchaser concerning the caveat of Mrs. Parkinson; as previously stated, the vendor was already involved in a suit in which he was, of his own volition and not as a result of any prompting by the purchaser, seeking, by way of counterclaim, a declaration that he had duly rescinded the contract with Mrs. Parkinson upon which the efficacy of her caveat depended. No doubt, in its own interests, and whether or not it had re-sold the land to the appellant purchaser, the vendor would have defended Mrs. Parkinson's suit and counterclaimed as it in fact did. In these circumstances the terms of the purchaser's requirement, once the time factor, later introduced by the notice to complete, is eliminated by the subsequent withdrawal of that notice, exposed the vendor to neither trouble nor expense and it was in my view quite unreasonable for it to have recourse to rescission under cl. 14. Accordingly, I consider that for this additional but associated reason rescission was not open to the vendor.
1. (1910) 10 C.L.R., at p. 736.
In Duddell v. Simpson [1] , Turner L.J., in a passage much cited in later cases, said, after referring to earlier authorities cited to the Court:
Those cases have settled, and, I think very wisely settled, that the word unwilling, in a condition of sale of this description, is not to be considered as giving an arbitrary power to the vendor to annul the contract he must shew some reasonable ground for unwillingness
1. (1866) 2 Ch. App. 102, at p. 107.
To hold otherwise, said his Lordship, would be to give to the vendor the power of saying that that which was intended as a sale, and was a sale, should in truth be no sale at all.
In In re Jackson and Haden's Contract [2] , Collins M.R. said of Duddell v. Simpson [3] , that it clearly brought out the exact line of difference between the cases in which the court would allow the vendor to avail himself of such condition as the present cl. 14 and that where it would not. I consider that the present case is clearly one in which rescission could not be availed of in the circumstances.
1. [1906] 1 Ch. 412, at p. 420.
2. (1886) 2 Ch. App. 102.
Once it be accepted, as I think it must be, that a vendor's powers under such a clause as cl. 14 are limited to the extent observed above a rather different objection to the vendor's purported exercise of a right of rescission in the present case becomes apparent. This being a sale of Torrens system land what the purchaser had bargained for was to become registered as proprietor of the land; as was said by Webb J. in Taylor v. Land Mortgage Bank of Victoria [4] :
The difference between the registration of a conveyance under the old law, and the registration of a transfer under the statute, is manifest. Under the old law the conveyance divested out of the vendor all his estate, and when he had executed that he had done everything necessary to divest the estate out of himself and vest it in the purchaser, and he had no further concern in the matter; the purchaser might register the conveyance, or not, as he pleased. But under the statute, s. 58, the registration, and not the execution of the transfer, divests the estate. Until then, the estate and interest of the proprietor remain in him; and until then the proprietor has not done all that is necessary to divest the estate out of himself and vest it in the transferee.
1. (1886) 12 V.L.R. 748, at pp. 754-755.
It was this contractual obligation to place the purchaser in a position to become registered as proprietor that the vendor sought to avoid by seeking to treat what was in effect no more than a statement by the purchaser of that obligation as an objection or requisition which it was unable to remove or comply with.
There has not been raised in these proceedings any suggestion of fraud or lack of good faith and it may be asked how was it that the vendor came to find this obligation to be one impossible to perform? As one might expect where a Torrens system title is in question, there had arisen no unexpected difficulty as to title of the kind which might arise in general law conveyancing. Was there then recklessness on the vendor's part in originally entering into its contract of sale with the purchaser at a time when a caveat was already on the title? If so, it is well established that such a reckless vendor cannot avail himself of the power of rescission contained in cl. 14: In re Jackson and Haden's Contract [1] ; Baines v. Tweddle [2] . But it seems that in this case the vendor may not have been reckless; both it and the purchaser, when it too learned of the caveat, apparently were confident that it could be removed; the purchaser was prepared initially to await that removal and the vendor was, as the learned trial judge found, diligent in pursuing its removal by its counterclaim.
1. [1906] 1 Ch. 412.
2. [1959] 1 Ch. 679.
The answer is, I think, provided by the fact that there was in this case in truth no existing defect in title or difficulty as to conveyance at all; I emphasize "existing"; there was of course what Webb J. in Taylor v. Land Mortgage Bank of Victoria [3] has described as a cloud thrown over the title but it was a cloud which both parties believed would pass. It cannot be, consistently with the authorities to which I have already referred, that a vendor may, in such circumstances, take advantage of what it believes to be only a passing cloud which the purshaser has pointed out must be, and which both parties believe will be, removed and, while proceeding in fact to have it removed, declare that it constitutes such an obstacle in fulfilling its contractual obligations as to entitle it to have recourse to cl. 14. To do so is to employ the clause for a purpose quite foreign to that which the courts have regarded as its true function.
1. (1886) 12 V.L.R., at p. 755.
As Romer J. said in In re Des Reaux and Setchfield's Contract [1] :
in all cases the vendor must do his best to comply with the obligations which by contract he has undertaken towards the purchaser. I can well understand that where, on a closer examination of the title it appears that there is some blot on it which was unknown and unsuspected by the vendor, even although that blot can be removed by the expenditure of a comparatively small sum of money, it may be quite reasonable for him to rescind the contract if the purchaser insists upon that expenditure being incurred. It is to meet such cases as that that conditions of this description are inserted.
1. [1926] 1 Ch. 178, at p. 190.
It is for the above reasons that I have concluded that this appeal should be allowed; I have, in the circumstances, found it unnecessary to advert to certain other grounds upon which this appeal was argued, including what appears to me to be the difficult question of the proper characterization of pars. 2 and 33 of the purchaser's requisitions, whether as going to title, to conveyance or neither and whether properly to be regarded as requisitions or objections or neither. I have had the opportunity of reading the judgment of my brother Walsh and it suffices to say that I agree with his observations concerning this aspect, which becomes material in view of the contention that there existed in the present case no "objection or requisition" within the meaning of cl. 14. I also respectfully adopt the views expressed by Walsh J. concerning the learned primary judge's reliance both on the vendor's consistent attitude that its rescission of the contract with Mrs. Parkinson was valid and on the fact that the existence of the caveat was there for all to see.
In my opinion, the appeal should be allowed.
Jongar Investments Pty. Ltd. v. Kanangra Park Pty. Ltd. In my opinion, all the questions in this case should be answered in the negative for the reasons given in my judgment in Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd. which has been handed down today. |
high_court_of_australia:/showbyHandle/1/11437 | decision | commonwealth | high_court_of_australia | text/html | null | R v Judges of Federal Court of Australia [1978] HCA 60 | https://eresources.hcourt.gov.au/showbyHandle/1/11437 | 2024-09-13T22:55:19.591383+10:00 | High Court of Australia
Gibbs, A.C.J. Stephen, Mason, Jacobs, Murphy and Aickin JJ.
R v Judges of Federal Court of Australia
[1978] HCA 60
ORDER
Order nisi discharged with costs.
The following written reasons for judgment were delivered:—
Gibbs, A.C.J., Stephen, Mason, Jacobs, Murphy and Aickin JJ.
The Court discharged the orders nisi with costs on 5th May 1980 and stated that reasons for judgment would be published later.
1978, Dec. 19
Gibbs A.C.J.
The Queen v. Federal Court of Australia and McDowell Pacific Ltd.; Ex parte Pilkington A.C.I. (Operations) Pty. Ltd.
In this case the Court discharged with costs the order nisi for prohibition, stating that the reasons for taking this course would be delivered later.
In my opinion it was clearly within the jurisdiction of the Federal Court to decide whether the applicant in that Court (one of the respondents before us) was entitled to the relief sought. This meant that it was within the jurisdiction of the Federal Court to decide whether the applicant was a person who had standing to institute proceedings for relief under s. 80 of the Trade Practices Act 1974 Cth, as amended. If the applicant was not such a person, the proper course for the Federal Court was to refuse the application; it would not mean that the Federal Court lacked jurisdiction. Accordingly the case is not one for prohibition. I am in general agreement with the reasons which Mason J. and Aickin J. have given for reaching this conclusion, and need not add to them. However, I think it preferable to refrain from expressing any opinion as to the construction of s. 80 until that question directly arises for our decision.
The Queen v. Federal Court of Australia and Richardson-Merrell Pty. Ltd.; Ex parte Soul Pattinson (Laboratories) Pty. Ltd.
This case was heard immediately after Reg. v. Federal Court of Australia and McDowell Pacific Ltd.; Ex parte Pilkington A.C.I. (Operations) Pty. Ltd. and, as in that case, the order nisi for prohibition has been discharged with costs.
For the reasons given in that case it was within the jurisdiction of the Federal Court to hear and decide the application. In the present case a further question arose as to the construction of s. 82 of the Trade Practices Act 1974 Cth as amended, but that question, like the construction of s. 80, need not be considered until it is necessary to decide it.
Stephen J.
Having had the opportunity of reading the expression by my brother Mason of his reasons for participating in discharge of the orders nisi in these cases, I am happy to adopt them as my own. Neither application disclosed a case for prohibition, and this regardless of one's view of the interpretation of s. 80 (1) (c). There is nothing on that aspect of the case which I wish to add to what Mason J. has already said.
However, since we have heard full argument upon the question of the interpretation of s. 80 (1) (c), I should, I think, say something as to that. In Hornsby Building Information Centre Pty. Ltd. v. Sydney Building Information Centre Ltd. [31] argument was not directly focussed upon this question. However in that case the judgments of my brothers Jacobs and Murphy and my own judgment clearly enough each accord to s. 80 (1) (c) just such a wide meaning as the prosecutors in the present applications would deny to it: likewise the judgments of the Chief Judge and of the other members of the Federal Court in World Series Cricket Pty. Ltd. v. Parish [32] .
1. (1978) 140 C.L.R. 216.
2. (1977) 16 A.L.R. 187.
Section 80 (1) (c) of the Trade Practices Act 1974 Cth, as amended, empowers the Federal Court to grant an injunction restraining contraventions of Pt V of the Act "on the application of any other person". The respondents to each of these applications have instituted proceedings before the Federal Court seeking relief under s. 80 (1) (c), based upon allegations of contraventions of Pt V. Those respondents are not consumers of the products against the suppliers of which they seek that relief: they are, on the contrary, trade competitors of those suppliers.
The substance of each of the present applications made to this Court by those suppliers, as prosecutors, is whether "any other person" in s. 80 (1) (c) has a wide and general meaning which extends to all persons, whether or not consumers; or whether, on the contrary, it is, as the prosecutors contend, confined to persons who are consumers. The prosecutors say that it is so confined and that they are accordingly entitled to prohibition, since the Federal Court is exceeding its jurisdiction in entertaining proceedings instituted by trade competitors who are not consumers.
They support this argument by pointing to the terms of Pt V of the Act which they say is concerned exclusively with the protection of consumers, who alone are capable of being misled or deceived, of being the victims of false or misleading representations or statements, of being unduly harassed or coerced or of otherwise being the target of the sort of conduct at which Part V is aimed.
The argument is that s. 80 of Pt VI of the Act, the Part headed "Enforcement and Remedies", is concerned with enforcing and giving remedies for contraventions of Pt V, itself headed "Consumer Protection": enforcement is the concern of sub-paragraphs (a) and (b) of s. 80 (1), which names respectively "the Minister" and "the Commission" as permitted applicants for injunctive relief. Then, so it is said, sub-paragraph (c), with its reference to "any other person", is concerned with the giving of a remedy to those requiring it, namely consumers; they alone are persons who can point to a breach of an obligation owed to them and created by Pt V of the Act.
Such a view involves reading down the wide term "any other person" and the prosecutors rely for this purpose upon Reg. v. Controller-General of Patents; Ex parte Tomlinson [33] . However that decision turned very much upon the statutory context, a context quite dissimilar from that occurring in the present case. In my view the decision casts no light upon the effect of s. 80 (1) (c).
1. [1899] 1 Q.B. 909.
The prosecutors must, then, rely upon indications to be gleaned from other provisions of the legislation if they are to achieve the reading down which they seek. However, obstacles lie in their way. Part V proves, upon examination, to extend the protection it confers beyond those who are consumers—e.g., ss. 59, 61; Pt IV, to any contraventions of which s. 80 equally applies, contains provisions which concern competitors and in respect of which competitors must be able to seek relief in reliance upon s. 80 (1) (c). Again, when s. 80 (1) (c) was amended in 1977 by inserting before "any other person" the words "subject to sub-section (A)" the result was to create one instance of an express restriction upon the width of sub-paragraph (c). Sub-section (1A) of s. 80 disentitles a person other than the Minister or the Commission from making application for an injunction where the contravention to be restrained is founded upon s. 50 of the Act. The very existence of this one express restriction may be thought to emphasize the otherwise wholly unrestricted scope of s. 80 (1) (c). However, perhaps the chief obstacle in the path of the prosecutors lies in the very width and generality of the words of s. 80 (1) (c); clear words or necessary implication from context would, in my view, be required to overcome the ordinary meaning of words such as these. Neither is, in my view, to be found in the Act.
Mason J.
The Queen v. Federal Court of Australia and McDowell Pacific Ltd.; Ex parte Pilkington A.C.I. (Operations) Pty. Ltd.
This was an application to make absolute an order nisi directed to the Judges of the Federal Court of Australia prohibiting them from proceeding with the hearing of an application by McDowell Pacific Ltd. ("McDowell") for an injunction under s. 80 of the Trade Practices Act 1974, as amended, ("the Act") restraining the prosecutor, Pilkington A.C.I. (Operations) Pty. Ltd., from engaging in certain conduct. The ground upon which prohibition was sought was that McDowell was at all material times a competitor of the prosecutor and that as such it did not have standing to institute proceedings for relief under s. 80 of the Act and that therefore the Federal Court lacked jurisdiction to entertain and deal with the application made to it. At the conclusion of the hearing this Court discharged the order nisi for prohibition with costs and announced that the reasons for its decision would be published later.
According to the evidence the prosecutor is the sole manufacturer in Australia of what is known as wired glass. It is in direct competition with McDowell which imports and sells wired glass in Australia. There is evidence that McDowell is neither a consumer nor a potential consumer of wired glass in Australia. On 1st March 1978 on the application of McDowell the Federal Court (Deane J.) made an order against the prosecutor calling on it to show cause why it should not be restrained from engaging in the following conduct:
Representing, contrary to the Act, (whether in advertisements, brochures or otherwise) in trade or commerce, that the wired glass manufactured by it and sold under the trade descriptions "Obscura" and "Scintilla" has uses which it does not have, namely, that it may legally be used to make a panel or door to screen a shower or bath where such glass is used within 1.8 metres of the floor or is "safety glass" within the meaning of the relevant building legislation and ordinances.
Although this order seems to suggest that McDowell was basing its case on s. 53 (c) of the Act, particulars subsequently furnished by McDowell indicate that it was relying as well on ss. 52 (1) and 53 (a). The three provisions to which I have referred are contained in Div. 1 of Pt V of the Act. Part V is headed " Consumer Protection " and Div. 1 is headed "Unfair Practices".
It is convenient to set out these provisions:
19.
(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
20. A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services—
(a) falsely represent that goods are of a particular standard, quality, grade, composition, style or model or have had a particular history or particular previous use;
(c) represent that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits they do not have.
Section 80 (1) and (1A) provide as follows:
80.
(1) The Court may, on the application of—
(a) the Minister;
(b) the Commission; or
(c) subject to sub-section (1A)—any other person,
grant an injunction restraining a person from engaging in conduct that constitutes or would constitute—
(d) a contravention of a provision of Part IV or V;
(e) attempting to contravene such a provision;
(f) aiding, abetting, counselling or procuring a person to contravene such a provision;
(g) inducing, or attempting to induce, a person, whether by threats, promises or otherwise, to contravene such a provision;
(h) being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or
(j) conspiring with others to contravene such a provision.
(1a) A person other than the Minister or the Commission is not entitled to make an application under sub-section (1) for an injunction by reason that a person has contravened or attempted to contravene or is proposing to contravene, or has been or is proposing to be involved in a contravention of, section 50.
The prosecutor's case was that Pt V of the Act is directed to the protection of members of the public in their capacity as consumers of goods or services and that it is not concerned with the protection of competitors in trade or commerce. The prosecutor then submitted that s. 80 (1) (c), properly construed, was not designed to afford relief in respect of contraventions of Pt V except to persons which it was the purpose of Pt V to protect, with the consequence that a competitor who is not a consumer or potential consumer has no sufficient interest to obtain an injunction against a person who is contravening the provisions of the Part.
There is at the outset the preliminary question whether the issue which the prosecutor seeks to raise is one which goes to the jurisdiction of the Federal Court and is appropriate to be raised by way of prohibition. The jurisdiction of this Court to grant prohibition to an officer of the Commonwealth is conferred by s. 75 (v.) of the Constitution and it cannot be removed by statute. This jurisdiction is recognized by s. 86 of the Act which, along with s. 80, appears in Pt VI—" Enforcement and Remedies ".
The section is curiously expressed. It is in these terms:
86. Jurisdiction is conferred on the Court to hear and determine actions, prosecutions and other proceedings under this Part and that jurisdiction is exclusive of the jurisdiction of any other court, other than the jurisdiction of the High Court under section 75 of the Constitution.
In so far as the section speaks of exclusive jurisdiction it evidently speaks of original jurisdiction. It would be astonishing if the decision of a single judge of the Federal Court were made final and conclusive, not subject to any appeal, and it would be even more astonishing to find such a result achieved indirectly by giving the Federal Court exclusive jurisdiction in all cases except s. 75 (v.) matters. As I read s. 86, it is aimed solely at the exercise of original jurisdiction by the Federal Court and does not derogate from the general provisions regulating appeals from decisions of the Federal Court to the Full Court of that Court and subsequently to the High Court that are contained in ss. 24 and 33 of the Federal Court of Australia Act 1976.
So understood, s. 86 confers jurisdiction on the Federal Court to hear and determine an application for an injunction under s. 80 to restrain a contravention of the provisions of Pt V. The Federal Court is a superior court of record (s. 5 (2) of the Federal Court of Australia Act), not an inferior tribunal, although it is a court of limited federal jurisdiction, not a court of general jurisdiction. It has the power, indeed the duty, to decide every issue of fact and law which arises for determination in those matters in which jurisdiction is conferred upon it by s. 86.
Whether an applicant falls within the statutory description or category of persons who are eligible to apply for an injunction under s. 80 is an issue which necessarily arises in proceedings for relief under that section. As such it is an issue which the Federal Court is required to consider and decide in the course of exercising its jurisdiction. In so doing the Court is required to determine the true construction of s. 80. But this affords no reason for thinking that it is not a matter within the province of the Federal Court. It would be bizarre indeed if the Federal Court were without jurisdiction to determine the construction of s. 80 when it is an issue which necessarily arises in proceedings under that section, the Court having exclusive jurisdiction to hear and determine those proceedings. And no less surprising that the Court in which original jurisdiction in proceedings under the Act is invested should be deprived of jurisdiction to decide a question of construction of a section of the Act which authorizes the Court to grant relief of a particular kind.
Whether a party to proceedings has locus standi is an issue which naturally falls for determination in the ordinary exercise of the jurisdiction committed to a court or tribunal. In R. v. Commissioner of Patents; Ex parte Weiss [1] this Court held that the question of the locus standi of a person claiming to oppose the grant of a patent was for the Commissioner of Patents to determine in the performance of his duty to "hear and decide the case" under s. 57 of the Patents Act 1903-1935. It was pointed out that his determination might be called in question on an appeal from the Commissioner's decision but that as it was within his jurisdiction to determine the matter, proceedings by way of prohibition were not an appropriate method of questioning the determination. Starke J. said [2] :
the case cannot be decided unless the commissioner determines whether the notice of opposition is good or bad, whether, in other words, it is given by a party entitled to give it, whether that party has sufficient interest to support the opposition, and whether it is given in due time. It is part of his jurisdiction to determine these questions, and it is not in excess of his jurisdiction if he determines them wrongly. If he decides wrongly, that is a matter for appeal if any appeal be provided, and if no appeal is provided then the decision is final and the courts cannot interfere by means of the prerogative writ of prohibition.
This was a case involving an inferior tribunal. The reasons for reaching a similar conclusion in relation to a superior court are so much the stronger.
1. (1939) 61 C.L.R. 240.
2. (1939) 61 C.L.R., at p. 257.
It is well settled that prohibition will not issue unless it appears that there is an absence, or an excess, of jurisdiction in a subordinate court or tribunal. Prohibition will not go to restrain a court or tribunal from deciding that which it has jurisdiction to hear or determine. Although a court of limited statutory jurisdiction, from whose decision there is no appeal, cannot give itself jurisdiction by an erroneous decision upon a preliminary question on the answer to which its jurisdiction depends, an erroneous decision upon a point which, however essential to the validity of its order, it is competent to try, is not a ground for prohibition (Amalgamated Society of Carpenters and Joiners Australian District v. Haberfield Pty. Ltd. [3] ). In that case Isaacs J. said [4] : " everything depends upon ascertaining in any particular case whether the matter in contention is collateral or preliminary, or is part of the subject matter, which, if true, is within the Court's jurisdiction".
1. (1907) 5 C.L.R. 33.
2. (1907) 5 C.L.R., at p. 53.
The legislature may make some fact or event a condition upon which the existence of which the jurisdiction of a tribunal or court shall depend. It is far more likely that the jurisdiction of a tribunal will be conditioned in this way than that of a court, more particularly a superior court. The adverse consequences of so conditioning the jurisdiction of a court, even an inferior court, expressed by Dixon J. in Parisienne Basket Shoes Pty. Ltd. v. Whyte [5] provide a powerful reason for rejecting the view that the legislature intended to bring about such consequences in the absence of the plainest words. There Dixon J. said [6] :
if the legislature does make the jurisdiction of a court contingent upon the actual existence of a state of facts, as distinguished from the court's opinion or determination that the facts do exist, then the validity of the proceedings and orders must always remain an outstanding question until some other court or tribunal, possessing power to determine that question, decides that the requisite state of facts in truth existed and the proceedings of the court were valid. Conceding the abstract possibility of the legislature adopting such a course, nevertheless it produces so inconvenient a result that no enactment dealing with proceedings in any of the ordinary courts of justice should receive such an interpretation unless the intention is clearly expressed. In the past a tendency may have appeared in the superior courts of common law to adopt constructions of statutes conferring powers on magistrates and others which would result in the withdrawal from their exclusive or conclusive determination matters which we should now think were intended for their decision. But, even then, it must not be forgotten that this tendency was manifested in proceedings by certiorari and not in prohibition. When prohibition is based upon want of jurisdiction it means that the proceedings are coram non judice, that a judgment or order, when given or made, would be void.
1. (1938) 59 C.L.R. 369.
2. (1938) 59 C.L.R., at pp. 391-392.
The language of ss. 86 and 80 lends no support to the interpretation which the prosecutor seeks to sustain. Nor has any persuasive reason been advanced for placing such an inconvenient and artificial construction on the provisions of the two sections leading to the adverse consequences mentioned in the previous paragraph, when a sensible reading of the statutory provisions leads to the natural result that the Federal Court has jurisdiction to interpret s. 80 and to decide questions that relate to, or are akin to, questions of locus standi.
In my view, therefore, the case is one in which the Federal Court is engaged in exercising the jurisdiction which is assigned to it. It is conceivable that in exercising this jurisdiction it may arrive at an erroneous decision which will be subject to an appeal under s. 23 of the Federal Court of Australia Act, but this circumstance, should it eventuate, constitutes no ground for saying that the Federal Court is exceeding its jurisdiction. The remarks of Dixon C.J., Webb, Fullagar and Kitto JJ. in Reg. v. Commonwealth Court of Conciliation and Arbitration; Ex parte Amalgamated Engineering Union, Australian Section [7] , made with reference to an application under s. 29 of the Conciliation and Arbitration Act 1904-1952 to the Court of Conciliation and Arbitration for an order enjoining a contravention of s. 96M, have equal application to this case. Their Honours said:
There was a proceeding regularly before it, an application for relief which it was authorized by the Act to entertain. In the course of entertaining that application, it had of necessity to consider the question of the construction and effect of s. 96M (6). The determination of that question was a matter within its jurisdiction, and, where the remedy sought is prohibition, it is not to the point to say that it determined that question wrongly.
1. (1953) 89 C.L.R. 636, at p. 648.
No doubt the desire to secure a final decision in this Court as the ultimate court of appeal on an important question of law and the fact that an appeal to this Court from the Full Court of the Federal Court may necessitate the grant of special leave explain why it is that the prosecutor seeks prohibition from this Court at an early stage in the proceedings before the Federal Court. But understandable though the prosecutor's motives may be, they provide no ground for departing from the firmly established rule that prohibition will not issue unless it appears that there is an absence, or an excess, of jurisdiction.
Indeed, there are the strongest reasons why this Court should insist upon a strict application of the rule in cases arising under the Act in the Federal Court. The Federal Court has been established by Parliament as the court which has exclusive original jurisdiction in matters arising under the Act and the Full Court of that Court has been established as the immediate court of appeal in relation to matters arising under the Act. This Court is the ultimate court of appeal, but Parliament has conditioned the appellate jurisdiction of this Court on the grant of special leave except in those cases where there is an appeal as of right. As the ultimate court of appeal this Court is entitled to the benefit of considering the Federal Court's views on the construction and application of the provisions of the Act. Moreover, this Court is entitled to the benefit of the Federal Court's findings of fact. Many cases arising under the Act are noted for their complexity both in relation to the facts and the law, and it is desirable that the Federal Court should be permitted to exercise its jurisdiction without interference by this Court by way of grant of prohibition except in those instances where the matter in question plainly gives rise to an absence or excess of jurisdiction.
There are, it must be acknowledged, some instances in which prohibition has been awarded at an early stage of proceedings in an inferior tribunal so as to prevent it from granting relief before it has decided the preliminary or collateral issue on which the power to grant relief depends. For the most part these are cases in which there was some reason for thinking that the tribunal would decide the issue erroneously or otherwise exceed the authority conferred upon it (Reg. v. Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co. Pty. Ltd. [8] ). Again, there are the somewhat anomalous instances of the grant of prohibition so as to prevent an inferior tribunal from entertaining a proceeding of a kind which it manifestly lacks jurisdiction to entertain in circumstances where there was nothing to indicate that the tribunal would have proceeded to the grant of relief. It is enough to say that the present case does not fall within either of these categories.
1. (1953) 88 C.L.R. 100, at pp. 117-118.
In the light of my conclusion that this is not a case for prohibition I have no need to deal with the prosecutor's arguments on the issue of substance which it sought to raise. However, as the point has been fully argued and as the Federal Court's view of the question is well known, it is as well that I should express my opinion upon it.
I do not think that s. 80 should be restricted in the manner suggested by the prosecutor. The Court is authorized by s. 80 (1) (c) to grant relief on the application of "any other person". The class is expressed as widely as it can be and it would require considerations of very great strength to warrant a reading down. Moreover, the existence of the express qualification or limitation in sub-s. (1A) serves to indicate that that is the only qualification or limitation to be placed upon s. 80 (1) (c).
There is, in my view, no incongruity in making the provisions of Pt V of the Act, notwithstanding they have been enacted for the protection of consumers, enforceable at the instance of a competitor who is not a consumer. The enforcement, at least by injunction, by such a person of the Pt V provisions enhances the protection which they give to consumers. Indeed, it constitutes the most effective sanction for that protection because the consumer who is misled or deceived in consequence of an unfair practice is unlikely to be a suitor for an injunction against the contravening corporation; he is more likely to seek damages.
I agree with the observations made by Bowen C.J. in World Series Cricket Pty. Ltd. v. Parish [9] :
Even where the application is brought by a rival competitor seeking redress of damage to his business caused by the allegedly unfair and illegal practices of the respondent, the application, though it vindicates or protects the private interests of the competitor, at the same time secures the public interest of consumer protection. Though, for example, the complaint under Pt V of the Act in some cases closely resembles an action for passing off or trade libel, it is nevertheless an action to protect the consuming public from being misled or misinformed. For competition between rival traders properly to be promoted, it is necessary that the relevant market is kept adequately informed about the goods or services available for purchase, and is not misled by deceptive trade practices.
See also the observations of Franki J. [10] and Brennan J. [11] .
1. (1977) 16 A.L.R. 181, at pp. 186-187.
2. (1977) 16 A.L.R., at p. 196.
3. (1977) 16 A.L.R., at p. 199.
It follows that in my opinion the effect of s. 80 (1) (c) was correctly expressed by Stephen J. (with whom Jacobs and Murphy JJ. agreed) in Hornsby Building Information Centre Pty. Ltd. v. Sydney Building Information Centre Ltd. [12] when his Honour said: " the Sydney Centre is not to be excluded from recourse to relief under s. 80 against contravention of s. 52 (1) because there are no private users of its services or because it has initiated these proceedings essentially for its own purposes in protection of its own interests and not those of consumers." I prefer this view of s. 80 to that enunciated by Barwick C.J. in the same case.
1. (1978) 140 C.L.R., at p. 226.
It is for these reasons that I participated in discharging the order nisi.
The Queen v. Federal Court of Australia and Richardson-Merrell Pty. Ltd.; Ex parte Soul Pattinson (Laboratories) Pty. Ltd.
This case raises issues similar to those which arose in Reg. v. Federal Court of Australia and McDowell Pacific Ltd.; Ex parte Pilkington A.C.I. (Operations) Pty. Ltd. The prosecutors, who are the respondents in proceedings in the Federal Court of Australia, seek an order absolute for prohibition against the Judges of the Federal Court and the applicant in that Court, Richardson-Merrell Pty. Ltd. ("Richardson-Merrell"). In its statement of claim in the Federal Court, Richardson-Merrell alleged that it manufactured and is manufacturing for sale and that it sold and is selling in Australia a skin care product known as "Oil of Ulan", that the product has become widely known and has acquired a valuable reputation. The statement of claim went on to allege that the first prosecutor has manufactured and the other prosecutors have sold a skin care product got up in cartons so as to be misleadingly and deceptively similar to the cartons in which Richardson-Merrell's product is sold. By reason thereof Richardson-Merrell claimed a declaration in the Federal Court that the prosecutors had engaged in conduct which is a contravention of ss. 52 and 53 of the Trade Practices Act 1974, as amended ("the Act"), injunctions restraining the prosecutors from manufacturing or selling a skin care product which is so got up to be in appearance substantially identical with, or deceptively similar to, the get-up of Richardson-Merrell's product and restraining the prosecutors from manufacturing or selling a skin care product in a carton substantially identical with or deceptively similar to the appearance or the get-up of Richardson-Merrell's skin care product or otherwise in such manner as to engage in conduct constituting a contravention of the provisions of s. 52 and s. 53 (a) and (d) of the Act. Richardson-Merrell also sought an order for delivery up of offending material, an inquiry as to loss and damage and an order in the form of an injunction to restrain passing off.
The prosecutors' first point is that Richardson-Merrell is not entitled to an injunction under s. 80 of the Act because it is a competitor and not a consumer or potential consumer and that prohibition will issue on this ground. For the reasons which I have given in Reg. v. Federal Court of Australia and McDowell Pacific Ltd.; Ex parte Pilkington A.C.I. (Operations) Pty. Ltd. this submission must be rejected. The prosecutors' second submission is that the proceedings are framed solely to protect Richardson-Merrell in its trade or business and are in the nature of passing off proceedings, that this gives Richardson-Merrell no foundation for an injunction to restrain a contravention of Pt V, in particular s. 52, with the consequence that the Federal Court lacks jurisdiction to entertain the proceedings. Again, what I have said in Ex parte Pilkington A.C.I. (Operations) Pty. Ltd. as to the availability of prohibition and as to the relationship which subsists between Pt V and s. 80 sufficiently answers this argument.
The prosecutors' third submission, as I understand it, is that the claim for damages is not authorized by s. 82 of the Act because that section confers a right to damages on a "person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV or V". The point is that only a person who falls within the category of persons for whose benefit Pt V has been enacted can suffer loss or damage by an act done in contravention of that Part. Without dealing with the substance of the submission it is enough for me to say that it is not a matter that goes to the jurisdiction of the Federal Court, it being an issue for the Federal Court to determine in the jurisdiction that is conferred upon it.
Quite apart from what I have already said, once it is decided, as it has been decided, that the Federal Court has jurisdiction to entertain the claim for an injunction under s. 80, that spells the end of the prosecutors' case for prohibition. There is no reason why this Court should in the circumstances that obtain here take the unusual step of exercising its discretion to grant prohibition in relation to part only of the claims made in the statement of claim, when the Federal Court has jurisdiction to entertain and deal with the residue of the case, involving as it does a claim for declarations and injunctions.
It is for these reasons that I participated in the making of the order discharging the order nisi for prohibition.
Jacobs J.
I agree with the reasons which have been expressed by Mason J.
Murphy J.
The Queen v. Federal Court of Australia and McDowell Pacific Ltd.; Ex parte Pilkington A.C.I. (Operations) Pty. Ltd.
On 4th May 1978, this Court discharged an order nisi for prohibition against the Judges of the Federal Court of Australia proceeding with the hearing of an application by McDowell Pacific Ltd. for an injunction under s. 80 of the Trade Practices Act 1974, as amended, restraining the prosecutor from a breach of s. 52 or s. 53 which are in Pt V of the Act.
The prosecutor contended that the words, "any other person", in s. 80 of the Act did not include McDowell which was a trade competitor in the importation and selling of wired glass in Australia, and that they should not be read in their ordinary meaning but confined to "a person aggrieved" or some other meaning restricted to a consumer which does not include a trade competitor.
There is no reason for reading the words, "any other person", down and strong reason for giving the words their natural breadth. A qualification such as suggested would lead to frequent investigations and arguments, resulting in waste of public time and resources (as has occurred elsewhere) in determining who was and who was not aggrieved. There is no hint of such qualification of the plain words. Also, experience shows that enforcement agencies in environmental and consumer protection (as well as those in occupational safety and health) often become unable or unwilling to enforce the law (because of indadequate resources or because they tend to become too close to those against whom they should be enforcing the law). Section 80 expresses the policy that such tendency to non-enforcement or limited enforcement should be overcome by providing that the Court may grant an injunction restraining a contravention of Pts IV or V on the application of the Minister, the Trade Practices Commission or (except in relation to s. 50) any other person.
In Hornsby Building Information Centre Pty. Ltd. v. Sydney Building Information Centre Ltd. [13] , a majority of this Court expressed the opinion that a person who is a trade competitor may claim an injunction under s. 80 (1). The fact that the proceedings resemble or are in substance a passing off suit does not exclude them from the scope of the Act. The Act is not to be read as if a "reserved powers" doctrine applied to it. Its remedies are available even if they overlap with those otherwise available under State statutory or decisional law; they are not to be read as applicable only in the interstices of remedies under State law (see World Series Cricket Pty. Ltd. v. Parish [14] ).
1. (1978) 140 C.L.R. 216.
2. (1977) 16 A.L.R. 181.
The Federal Court has jurisdiction to deal with the case. The order nisi should be discharged.
The Queen v. Federal Court of Australia and Richardson-Merrell Pty. Ltd.; Ex parte Soul Pattinson (Laboratories) Pty. Ltd.
The prosecutors unsuccessfully sought to have made absolute an order nisi for prohibition against the judges of the Federal Court of Australia and Richardson-Merrell Pty. Ltd. which is an applicant in that Court for an injunction under s. 80 of the Trade Practices Act 1974, as amended, to restrain a contravention of ss. 52 and 54 of the Act and consequential orders, including a claim for damages.
The prosecutors relied on three grounds. The first two grounds have been dealt with in Reg. v. Federal Court of Australia and McDowell Pacific Ltd.; Ex parte Pilkington A.C.I. (Operations) Pty. Ltd. These grounds are that Richardson-Merrell is a competitor and not a consumer or potential consumer and that the proceedings are in the nature of passing-off proceedings. Assuming these to be the facts, they do not deprive the Federal Court of jurisdiction.
The third ground is that part of the application, that is, the claim for damages, is not authorized by s. 82 of the Act, in that the applicant is not a person who falls within the category of persons for whose benefit Pt V of the Act (which includes s. 52) was enacted. In my opinion, the ground is not well founded. If it were it is questionable whether the ground raises a jurisdictional point. Even if it did, prohibition should not, as a matter of discretion, issue in respect of that part only of the application.
Aickin J.
At the conclusion of the hearing of the applications to make these orders nisi for prohibition absolute the Court discharged the orders nisi and indicated that its reasons would be given subsequently. It is convenient to deal with them together in these reasons for judgment.
The order nisi obtained on the application of Pilkington A.C.I. (Operations) Pty. Ltd. ("Pilkington") arose out of a proceeding instituted in the general division of the Federal Court of Australia by McDowell Pacific Ltd. ("McDowell") against Pilkington by McDowell obtaining an "order to show cause" issued by a judge of the Federal Court ordering Pilkington to show cause why it should not be restrained from engaging in the following conduct—"Representing, contrary to the Act, (whether in advertisements, brochures or otherwise) in trade or commerce, that the wired glass manufactured by it and sold under the trade descriptions "Obscura" and "Scintilla" has uses which it does not have, namely, that it may legally be used to make a panel or door to screen a shower or bath where such glass is used within 1.8 metres of the floor or is "safety glass" within the meaning of the relevant building legislation and ordinances." On 7th March 1978 Franki J. made an order giving directions with respect to the provision of particulars and the date of hearing which was fixed for 18th April 1978 in Sydney. It appears not to be contested that Pilkington is a manufacturer of glass described as "safety glass" which it sells in Australia and that McDowell is an importer and marketer of safety glass but not a user or consumer thereof, otherwise than for resale. The ground of the order nisi was that McDowell was a competitor of Pilkington and not a person having standing to institute proceedings for relief under s. 80 of the Trade Practices Act 1974 Cth, as amended, and that the Federal Court therefore had no jurisdiction to hear the application.
In the application by Soul Pattinson (Laboratories) Pty. Ltd. and others ("Soul Pattinson"), Soul Pattinson was the respondent in a proceeding commenced in the general division of the Federal Court of Australia by delivery of a statement of claim which alleged that the applicant Richardson-Merrell Pty. Ltd. ("Richardson-Merrell") had since 1970 manufactured for sale in Australia and sold in Australia a "skin care product under the name Oil of Ulan" got up in a particular manner. It was alleged that the product had become widely known to consumers and that Richardson-Merrell had acquired a substantial reputation in the product and that the get-up was distinctive of its product. It further alleged that Soul Pattinson (Laboratories) Pty. Limited had commenced to produce and other respondents to market, in Australia, a skin care product in cartons "got up so as to be misleadingly and deceptively similar" to Richardson-Merrell's product and that such conduct was "misleading or deceptive or likely to mislead or deceive". The relief sought in the proceedings was a declaration that Soul Pattinson had engaged in conduct constituting a contravention of ss. 52 and 53 of the Trade Practices Act, an injunction restraining Soul Pattinson from manufacturing, distributing etc. a skin care product, not manufactured under licence of Richardson-Merrell, which is so got up as to be substantially identical with or deceptively similar to the appearance of the get-up of Richardson-Merrell's skin care product, and from manufacturing, distributing etc. a product substantially identical with or deceptively similar to the appearance or the get-up of Richardson-Merrell's product in such a manner as to engage in conduct constituting a contravention of ss. 52 and 53, an order for delivery up by Soul Pattinson of all cartons, and advertising material etc. which is in the possession, power or control of Soul Pattinson and which is got up to be in appearance substantially identical with or deceptively similar to the appearance of the get-up of the skin care product manufactured and sold by Richardson-Merrell, an inquiry into loss and damage suffered by Richardson-Merrell by the conduct of Soul Pattinson in contravention of s. 52 or s. 53 and an order that Soul Pattinson pay Richardson-Merrell the amount of such loss and damage and finally an injunction restraining Soul Pattinson from manufacturing, distributing etc. or selling whether by use of the said cartons or otherwise any skin care product which is got up in such a way as to be calculated to lead to such product being believed to be or passed off or sold as being the skin care product of Richardson-Merrell. By notice of motion dated 7th April 1978 Richardson-Merrell sought an interlocutory injunction. The order nisi dated 17th April 1978 gave us grounds for the issue of a writ of prohibition that "the last named respondent [Richardson-Merrell] is a competitor of the first named prosecutor [Soul Pattinson] and not a person having standing to constitute proceedings for relief under s. 80 of the Trade Practices Act 1974 and that as a consequence the respondent Judges of the Federal Court of Australia and each and every one of them do not have jurisdiction to hear the said application". On a later date a further ground was added, namely, that the Trade Practices Act did not confer upon the Federal Court jurisdiction to hear a claim for damages in respect of an injury to reputation or otherwise to hear a claim for the order sought and a further ground that in so far as the proceedings claimed an injunction Richardson-Merrell had no standing to sue for such relief under the Trade Practices Act and that the proceedings were proceedings for passing off and that accordingly the Federal Court had no jurisdiction to hear the application.
Although the proceedings perhaps may be more properly described as having been heard consecutively, rather than together, the arguments overlapped to a substantial extent and the argument for Pilkington was adopted by counsel for Soul Pattinson although he did address an additional and separate argument. A number of different matters were canvassed in the course of the argument. I do not find it necessary to consider the merits of the arguments in respect of the proper construction of ss. 52 and 53 and ss. 80 and 83 because I have formed the view that the points relied upon do not go to the jurisdiction of the Federal Court, but concern matters which fall within its jurisdiction to decide and are such that if any error is made in the exercise of that jurisdiction it can be corrected on appeal to the Full Court of the Federal Court or by appeal, as of right or by leave as the case may be, to this Court.
The ground for prohibition is in effect the same in each case and it may be summarized by saying that the remedy given by s. 80, at least in so far as it relates to alleged breaches of ss. 52 and 53 is, upon the proper construction of s. 80, available only to the Minister, the Commission and to consumers. It is said in effect that para. (c) of s. 80 when it refers to "subject to sub-section 1 (A)—any other person" may apply, the words "any other person" refer to consumers only and in particular do not include competitors. It is likewise said that the provision in s. 82 (1) concerning damages refers to damage suffered by consumers or a consumer and in particular does not include loss or damage suffered by competitors by reason of passing off or otherwise. It was further said that the construction of those sections being so limited the Court had no jurisdiction to entertain proceedings under s. 80 or s. 83 in which an injunction or damages was claimed by a trade competitor in respect of competitive acts said to be misleading or deceptive or calculated to enable the defendant's goods to be passed off as those of the plaintiff. It was further said that on the face of each of these proceedings in the Federal Court they fell within those categories and that there was accordingly no jurisdiction in the Federal Court to entertain the proceedings.
The distinction between error made in the course of the exercise of jurisdiction and the erroneous assumption of jurisdiction where some matter of fact or of mixed fact and law is an essential prerequisite of jurisdiction has been well known since the 17th century, though it is not always easy to apply. The point has been dealt with and explained in this Court on a number of occasions. It will be sufficient to cite two only of those decisions. I refer first to the well-known passage from the judgment of Dixon J. in Parisienne Basket Shoes Pty. Ltd. v. Whyte [15] :
It cannot be denied that, if the legislature see fit to do it, any event or fact or circumstance whatever may be made a condition upon the occurrence or existence of which the jurisdiction of a court shall depend. But, if the legislature does make the jurisdiction of a court contingent upon the actual existence of a state of facts, as distinguished from the court's opinion or determination that the facts do exist, then the validity of the proceedings and orders must always remain an outstanding question until some other court or tribunal, possessing power to determine that question, decides that the requisite state of facts in truth existed and the proceedings of the court were valid. Conceding the abstract possibility of the legislature adopting such a course, nevertheless it produces so inconvenient a result that no enactment dealing with proceedings in any of the ordinary courts of justice should receive such an interpretation unless the intention is clearly expressed. In the past a tendency may have appeared in the superior courts of common law to adopt constructions of statutes conferring powers on magistrates and others which would result in the withdrawal from their exclusive or conclusive determination matters which we should now think were intended for their decision. But, even then, it must not be forgotten that this tendency was manifested in proceedings by certiorari and not in prohibition. When prohibition is based upon want of jurisdiction it means that the proceedings are coram non judice, that a judgment or order, when given or made, would be void. But certiorari is a proceeding for quashing orders that are voidable only. When nothing was intended in favour of orders of courts of inferior jurisdiction and magistrates and when convictions before them were bad unless they set out on their face the information, the process and the materials upon which they were founded, it was almost inevitable that whatever grounds existed for setting aside an order or conviction would be available upon certiorari. For a conviction was liable to quashing if upon its face a failure in the observance of law appeared. But it is one thing to quash a conviction or order for error on its face and another to hold that the court or magistrate usurped jurisdiction in making it. This explains the case referred to in the argument (R. v. Hammersmith Profiteering Committee [16] ), where upon certiorari a conviction was quashed in respect of an offence which according to the conviction itself was committed more than the statutory period before the prosecution.
We are concerned in the present case with prohibition, and I am clearly of opinion that the prerogative writ of prohibition does not lie to prohibit a Court of Petty Sessions from proceeding upon an information upon the ground that it was laid after the expiry of a time limited in the manner adopted by s. 229 (a) of the Factories and Shops Act 1928. The effect of such a limitation when considered with the provisions creating the offences to which it applies is to impose upon a person offending a penal liability during the prescribed period. Throughout the time limited he is under a liability to punishment, afterwards that liability is gone. Upon a prosecution the question for the decision of the court or tribunal is whether within that period he has committed the offence charged. Their jurisdiction necessarily includes the determination of that entire question.
The second reference is to the passage in the judgment of Dixon J. in R. v. Taylor; Ex parte Professional Officers' Association—Commonwealth Public Service [17] :
The Registrar had presented to him, as I have said, an application for the alteration of the conditions of eligibility. It was for the striking out of the provision which prevented members of the Public Service who are not engaged in an industry conducted by the Commonwealth from being members of the association. To strike it out merely removed a negative prohibition and left the general positive words of the condition of eligibility to speak for themselves and to operate as they might under the law. The Industrial Registrar, having considered this application, referred it under s. 30 to the court for decision. The court informed him by its reasons that he might proceed as asked but no formal order has been drawn up. It is not clear to me how the formal order of the court would have been drawn up and whether it would amount to a judicial decision. It has in this argument been treated as advisory only. In my opinion the Industrial Registrar in proceeding under regs. 118 and 119 was exercising the power reposed in him. He was considering an application for his approval and the registration of an alteration of the rules. This power enabled him to approve and required him before doing so to satisfy himself of the matters specified in s. 79 (3). He is engaged upon the very function assigned to him and none the less so because he may arrive at an erroneous conclusion. An officer may decide a matter before him wrongly without exceeding his power.
I think that the policy of the Act is that matters of this description should be dealt with by the Court of Conciliation and Arbitration and by its officers and that we should be very careful in maintaining the distinction between error in deciding a matter and excess of power so that we do not award a writ of prohibition in matters which are within the province of the court and of the Registrar to decide. We should be careful to exclude from our consideration matters which go to the correctness or incorrectness of the decisions of the Registrar or of the court when we are called upon to decide whether they have exceeded power. In the present case I do not think an erroneous determination of the Registrar would amount to an excess of power if he makes an erroneous determination, and on that ground I think that there is no room for a writ of prohibition.
1. (1938) 59 C.L.R. 369, at pp. 391-392.
2. (1920) 89 L. & K.B. 604: 122 L.T. 720.
3. (1951) 82 C.L.R. 177, at pp. 185-186.
By s. 4 (1) of the Trade Practices Act (as amended by the Federal Court of Australia (Consequential Provisions) Act 1976) the term "Court" is defined as the "Federal Court of Australia" and under Pt VI " Enforcement and Remedies " that Court is given power to deal with a number of contraventions of provisions of the Act and to make various orders. Part V which is headed " Consumer Protection " prohibits the doing in trade and commerce of a number of things and actions—see ss. 52 to 64. In Pt VI under s. 76 it is provided that if that Court is satisfied that a person has contravened a provision of Pt IV of the Court may order the person to pay to Australia a pecuniary penalty. By s. 80 it is provided that:
(1) The Court may, on the application of—
(a) the Minister;
(b) the Commission; or
(c) subject to sub-section 1 (A)—any other person,
grant an injunction restraining a person from engaging in conduct that constitutes or would constitute—
(d) a contravention of a provision of Part IV or V;
By s. 82 (1) it is provided that "A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV or Part V may recover the amount of the loss or damage by action against that other person." Sections 83, 86 and 87 make it clear the proceedings to recover such damages are to be instituted in the Federal Court. Reference should also be made to s. 163 which provides that prosecutions for offences under the Act are to be brought only in the Court, i.e. the Federal Court and jurisdiction is given to that Court to hear and determine prosecutions under the Act.
It appears from those sections that the Federal Court of Australia is the only court of first instance which is concerned with the enforcement of the Act and the punishment of offences against it. Both civil and criminal proceedings as well as quasicriminal proceedings for penalties must be instituted in that Court and that Court alone. Prima facie therefore it would seem that the proper construction of the Act is committed to the Federal Court and if errors of construction are made then they may be corrected on appeal to the Full Court of the Federal Court as constituted by the Federal Court of Australia Act 1976, ss. 24 and 25. From the Full Court of the Federal Court an appeal will lie to this Court either as of right or by leave in accordance with the provisions of s. 33 of that Act.
The questions which are raised by these orders nisi are all matters of construction. Thus, they include the proper construction of the expression "any other person" in s. 80 (1) (c) and the expression "a person who suffers loss or damage by an act of another person that was done in contravention of a provision of Part IV" in s. 82. The determination of such matters of construction is a task committed in the first instance to the Federal Court, just as the questions of fact involved in a contravention of a provision as construed by the Federal Court are themselves for the Federal Court to determine. Such factual conditions are not "jurisdictional facts" upon the actual existence of which, as determined by some superior court, the jurisdiction depends. It is the function of the Federal Court itself to determine whether or not those facts exist, subject of course to such rights of appeal as may be available. So also with regard to such questions of law as may be involved in the determination of whether there has been a contravention of Pt IV. The matters sought to be raised in these applications for prohibition are for those reasons matters which do not go to the constitutional or statutory limits of the jurisdiction of the Federal Court, but to the exercise of its jurisdiction. It is for that Court at first instance or on appeal, as the case may be, to decide those matters for itself, subject to such rights of appeal to this Court as are provided. |
high_court_of_australia:/showbyHandle/1/9575 | decision | commonwealth | high_court_of_australia | text/html | null | PMT Partners Pty Ltd (In Liq) v Australian National Parks & Wildlife Service [1995] HCA 36 | https://eresources.hcourt.gov.au/showbyHandle/1/9575 | 2024-09-13T22:55:24.489430+10:00 | High Court of Australia
Brennan CJ Toohey, Gaudron, McHugh and Gummow JJ
PMT Partners Pty Ltd (In Liq) v Australian National Parks & Wildlife Service
[1995] HCA 36
ORDER
1. Appeal allowed with costs.
2. Set aside the order of the Court of Appeal of the Northern Territory.
3. Remit the matter to the Court of Appeal of the Northern Territory for consideration of the remaining grounds of appeal before that Court.
Cur adv vult
The following written judgments were delivered:—
11 October 1995
Brennan CJ, Gaudron and McHugh JJ.
The parties to this appeal, PMT Partners Pty Ltd (now in liquidation) and the Australian National Parks and Wildlife Service, entered into a standard form contract in common use in the construction industry throughout Australia [1] . The contract was for the construction of roads and a car park in the Uluru National Park. It is convenient to refer to the parties, respectively, as "the Contractor" and "the Principal", those being the terms by which they described themselves in their contract. A dispute arose under the contract and a question now arises as to the procedures available for its resolution.
1. NPWC Edition 3 (1981).
Specific provision was made in the contract, in a clause which has been the subject of much litigation [2] , namely, cl 45, with respect to procedures for the settlement of disputes. It will later be necessary to refer to that clause in some detail. For the moment, it is sufficient to note that, by cl 45(a), the Contractor is required, as a first step, to give written notice to the Director of Operations, Department of Transport and Works (referred to in the contract and hereafter as "the Superintendent") within fourteen days of any dispute arising, and that subsequent steps may be taken with the effect that the dispute is referred to arbitration. The dispute which gives rise to this appeal arose sometime in 1991 [3] , but the written notice required by cl 45(a) was not received until 19 June 1992.
1. See, eg, Eden Constructions Pty Ltd v Eurobodalla Shire Council (1985) 1 BCL 375 Reed Constructions Pty Ltd v State Rail Authority (NSW) (1987) 3 BCL 384 Rheem Australia Ltd v Federal Airports Corporation (1989) 6 BCL 130 Transaustralian Constructions Pty Ltd v Northern Territory (1991) 104 FLR 358See also Minister for Main Roads (Tas) v Leighton Contractors Pty Ltd (1985) 1 BCL 381and The Commonwealth v Jennings Construction Ltd [1985] VR 586, both involving a clause in substantially identical terms.
2. The trial judge found that the dispute which gives rise to this appeal arose in August 1991. Counsel for the Principal submitted to the Court of Appeal that the dispute arose earlier than was found by the trial judge, but the Court of Appeal did not find it necessary to determine the question.
In February 1994, on the application of the Contractor, an order was made by Thomas J of the Supreme Court of the Northern Territory under s 48 of the Commercial Arbitration Act 1985 NT (the Act) extending time for the giving of notice under cl 45(a) of the contract until 19 June 1992. The Principal appealed successfully to the Court of Appeal and the order was set aside, it being held, in effect, that in the circumstances there was no power to make the order sought. It was, thus, unnecessary for the Court of Appeal to deal with other grounds of appeal going to the question whether, as a matter of discretion, the order should have been made. The Contractor now appeals to this Court.
Clause 45 of the contract
Clause 45, which is headed "Settlement of Disputes", first provides that the Contractor shall at all times continue with the work, if it has not been completed, and comply with all directions given in accordance with the contract by the Principal or by the Superintendent. There then follow the terms with which this appeal is concerned:
All disputes or differences arising out of the Contract or concerning the performance or the non-performance by either party of his obligations under the Contract whether raised before or after the execution of the work under the Contract shall be decided as follows —
(a) The Contractor shall, not later than fourteen days after the dispute or difference arises, submit the matter at issue in writing, specifying with detailed particulars the matter at issue, to the Superintendent for decision and the Superintendent shall, as soon as practicable thereafter, give his decision to the Contractor.
(b) If the Contractor is dissatisfied with the decision given by the Superintendent, he may, not later than fourteen days after the decision of the Superintendent is given to him, submit the matter at issue in writing, specifying with detailed particulars the matter at issue, to the Principal for decision and the Principal shall, as soon as practicable thereafter, give his decision to the Contractor in writing.
If the Contractor is dissatisfied with the decision given by the Principal pursuant to the last preceding paragraph, he may, not later than twenty-eight days after the decision of the Principal is given to him, give notice in writing to the Principal requiring that the matter at issue be referred to arbitration and specifying with detailed particulars the matter at issue, and thereupon the matter at issue shall be determined by arbitration. If, however, the Contractor does not, within the said period of twenty-eight days, give such a notice to the Principal requiring that the matter at issue be referred to arbitration, the decision given by the Principal pursuant to the last preceding paragraph shall not be subject to arbitration.
Where a notice is given by the Contractor to the Principal pursuant to the last preceding paragraph requiring that the matter at issue be referred to arbitration no proceedings in respect of that matter at issue shall be instituted by either the Principal or the Contractor in any court unless and until the arbitrator has made his award in respect of that matter at issue.
Clause 45 next provides as to how and where arbitration is to be effected and then specifies that "[a] reference to arbitration shall be deemed to be a reference to arbitration within the meaning of the laws relating to arbitration in force in the [Northern Territory]". It also provides, in the final paragraph, as to the payment of moneys to the Contractor in the event of arbitration in the following terms:
Moneys that are or become due and payable by the Principal in respect of work carried out under the Contract shall not be withheld because of arbitration proceedings but the Principal may, at his discretion, and pending the award of the arbitrator withhold payment of moneys in respect of any matter that is the subject of arbitration proceedings.
Section 48 of the Act and other relevant legislative provisions
The Act makes comprehensive provision with respect to the appointment of arbitrators and umpires and the conduct of arbitration proceedings. It also confers various powers on the Supreme Court with respect to arbitration agreements and proceedings, including, by s 48, a power to extend time "for doing an act or taking a proceeding in or in relation to an arbitration" and, by s 53, a power to stay court proceedings in respect of matters "agreed to be referred to arbitration".
Section 48 provides:
(1) Subject to subsection (3), the Court [4] shall have power, on the application of a party to an arbitration agreement or an arbitrator or umpire, to extend the time appointed by or under this Act or fixed by the agreement or by an order under this section for doing an act or taking a proceeding in or in relation to an arbitration.
(2) The Court may make an order under this section although an application for the making of the order was not made until after the expiration of the time appointed or fixed for doing the act or taking the proceeding.
(3) An order shall not be made under this section extending the time within which arbitration proceedings may be commenced unless—
(a) the Court is satisfied that undue hardship would otherwise be caused; and
(b) the making of the order would not contravene the provision of an Act limiting the time for the commencement of arbitration proceedings.
1. By s 4 of the Act, "Court" means the Supreme Court.
Subject to a limitation and to conditions which are not presently relevant, s 53(1) enables proceedings to be stayed "[i]f a party to an arbitration agreement commences proceedings in a court against another party to the arbitration agreement in respect of a matter agreed to be referred to arbitration by the agreement".
"Arbitration agreement" is defined in s 4 of the Act to mean, unless the contrary intention appears, "an agreement in writing to refer present or future disputes to arbitration".
The decision of the Court of Appeal
The Court of Appeal (Martin CJ, Mildren J and Gray AJ) approached cl 45, as did Thomas J at first instance, on the basis that it lays down a first step to be taken before a claim can be pursued, namely, the giving of fourteen days' notice to the Superintendent, but leaves it open to the Contractor to elect to pursue the claim in the courts or by arbitration unless and until notice is given requiring arbitration. In that context, it was held by Mildren J and Gray AJ that "it is only when, and if, the [C]ontractor chooses to give notice to the [P]rincipal requiring the dispute to be referred to arbitration that the [C]ontractor has taken a step "in or in relation to an arbitration" " within the meaning of s 48(1) of the Act. Martin CJ, who agreed with the judgment of Mildren J and Gray AJ, also expressed the view that, as the dispute might be resolved at any stage of the processes set out in sub-cll 45(a) and 45(b) [5] and as the option of proceeding to arbitration only arose once those processes were exhausted, "[t]he time limits set under [those sub-clauses] are not "in relation to an arbitration" but in relation to the other procedures by which disputes or differences might be decided".
1. There are two paragraphs lettered "(a)" and two lettered "(b)" in cl 45. The Court of Appeal referred to the first pair of these — which appears in the excerpt from cl 45 quoted above — as sub-cll (a) and (b) of cl 45. It is convenient to continue with that course.
The Court of Appeal also held that "the provisions of subparagraphs (a) and (b) [of cl 45] do not constitute an arbitration agreement within the definition thereof in s 4 of the Act". Moreover, the Court of Appeal expressed the view that there is a "very real question whether the second part of clause 45 amounts to an arbitration agreement as defined in s 4 of the Act".
An arbitration agreement
The Court of Appeal's doubts as to whether the second part of cl 45 constitutes an arbitration agreement seem to proceed from the view that the definition of arbitration agreement in s 4 of the Act requires that both parties be bound, then and there, to refer their disputes to arbitration. In this regard it was said that "[a]n agreement which gives one of the parties an option to submit a dispute to arbitration does not readily answer the description of an arbitration agreement as defined". As well, reference was made to an observation by Underwood J of the Tasmanian Supreme Court in Minister for Main Roads (Tas) v Leighton Contractors Pty Ltd [6] suggesting that a provision in identical terms to cl 45 might not amount to a submission to arbitration as defined in s 3 of the Arbitration Act 1892 Tas because arbitration "will only occur if the contractor gives notice in the prescribed manner".
1. (1985) 1 BCL 381 at 384-385.
The notion that the definition of arbitration agreement in s 4 is not satisfied unless both parties are bound, then and there, to refer their disputes to arbitration has two distinct aspects. The first is that the parties must have agreed upon arbitration to the exclusion of all other methods of dispute resolution. The second is a requirement of mutuality, in the sense that both parties must have the right to refer disputes to arbitration.
The notion that, for there to be an arbitration agreement, the parties must have agreed upon arbitration to the exclusion of other methods of dispute resolution can be traced to the decision of Menhennitt J in Hammond v Wolt [7] . That case concerned an arbitration clause allowing that "either party may give to the other notice of dispute" and providing that, if notice was given and other steps were taken as required by the contract, an arbitrator would then be appointed and his or her "Award or Assessment" would be final and binding [8] . No notice had been given before proceedings commenced and, consistent with the decisions of this Court in John Grant & Sons Ltd v Trocadero Building & Investment Co Ltd [9] and Plucis v Fryer [10] , his Honour construed the clause as not precluding pursuit of the claim in question in the courts. His Honour went on to hold that an agreement allowing for arbitration or assessment at the election of the person appointed as "arbitrator" was not a submission [11] to arbitration within the meaning of s 5 of the Arbitration Act 1958 Vict because he or she need not arbitrate the dispute or any part of it. As well, his Honour held that it was not an "agreement to submit [to arbitration]" because "the word "to" [in that expression] requires that the parties have agreed that the differences are to be submitted, not that, at the option of one or other of them, they may be" [12] .
1. [1975] VR 108.
2. Hammond [1975] VR 108 at 110-111
3. (1938) 60 CLR 1.
4. (1967) 126 CLR 17.
5. Section 3 of the Arbitration Act 1958 Vict defined "submission" as meaning, unless inconsistent with the context or subject matter, "a written agreement to submit present or future differences to arbitration whether an arbitrator is named therein or not". This definition is very similar to the definition of arbitration agreement in s 4 of the Act.
6. Hammond [1975] VR 108 at 117
The view in Hammond v Wolt that, for there to be an arbitration agreement, the parties must have agreed that their disputes are to be referred to arbitration, not merely that they may be so referred, has since been adopted, although not uniformly, with respect to the definition of arbitration agreement in s 4 of the Act and its counterparts in other jurisdictions [13] . Recently, however, there has been a tendency to describe a clause of the kind considered in Hammond v Wolt as conferring a "right of election" rather than "an option" [14] . The Hammond v Wolt view leads to the conclusion reached by the Court of Appeal in this case, namely, that where there is a clause which confers a right of election, no arbitration agreement comes into existence until an election is made to have the matter arbitrated.
1. See, eg, Minister for Main Roads (Tas) v Leighton Contractors Pty Ltd (1985) 1 BCL 381 Hyslop v Liverpool Hospital (1987) 22 IR 52 Woolworths Ltd v Herschell Constructions Pty Ltd (In liq) (unreported; Supreme Court of Vict; 19 June 1991).
2. See Brunswick NL v Sam Graham Nominees Pty Ltd (1990) 2 WAR 207 at 210-213, per Ipp J.
As earlier indicated, the approach taken in Hammond v Wolt has not always been followed [15] . It has been the subject of criticism, most recently by the Court of Appeal of the New South Wales Supreme Court in ABB Power Plants Ltd v Electricity Commission (NSW) [16] . Criticism of the approach taken in Hammond v Wolt has tended to focus on the textual consideration that "arbitration agreement" is defined as an "agreement to refer present or future disputes to arbitration", not as "an agreement referring disputes to arbitration" (our emphasis) [17] . As well, it has been noted [18] that the power to stay proceedings under s 53 of the Act is, as one might expect, exercisable only with respect to "a matter agreed to be referred to arbitration", an expression which is apt to describe the situation that occurs when a right of election has been exercised or other preconditions satisfied and which is syntactically and conceptually quite different from that found in the definition of "arbitration agreement" which merely requires that the parties have agreed "to refer present or future disputes to arbitration". Additionally, attention has been directed to the United Kingdom decision of Pittalis v Sherefettin , in particular to a statement by Fox LJ that "an agreement to arbitrate in future if a party so elects can correctly be described as an agreement to refer a future dispute to arbitration" [19] . However, it should be noted that the clause considered in that case was one that required arbitration if the matter in issue was to be contested, not one conferring a right to elect between arbitration and litigation.
1. See, eg, Barrier Reef Holdings v Bethlehem Singapore (unreported; Supreme Court of NSW; 24 June 1987); Brunswick NL v Sam Graham Nominees Pty Ltd (1990) 2 WAR 207 Transaustralian Constructions Pty Ltd v Northern Territory (1991) 104 FLR 358
2. (1995) 35 NSWLR 596 at 602-604, per Sheller JA; at 618-622, per Cole JA.
3. See Turner Corporation Ltd v Austotel Pty Ltd (1992) 27 NSWLR 592 at 598-599, per Giles J.
4. See ABB Power Plants Ltd v Electricity Commission (NSW) (1995) 35 NSWLR 596 at 625, per Cole JA.
5. Pittalis [1986] QB 868 at 874
The requirement for mutuality has been suggested in a number of Australian cases [20] , often by reference to the statement of Menhennitt J in Hammond v Wolt set out above [21] . However, a fair reading of the decision in that case indicates that his Honour was concerned to emphasise that the parties should be bound to have their dispute arbitrated, rather than that there should be mutuality in the sense of both parties having the right to require arbitration.
1. See, eg, Minister for Main Roads (Tas) v Leighton Contractors Pty Ltd (1985) 1 BCL 381 at 385 Barrob Pty Ltd v OV Peters Pty Ltd (unreported; Supreme Court of WA; 19 January 1993). See also Halsbury's Laws of Australia, vol 1, par 25-80.
2. See fn 26.
Apparently, the need for mutuality was accepted for a time in the United Kingdom [22] , but was later rejected in Pittalis v Sherefettin [23] . Whatever the position in the United Kingdom, there is no decision in this country to the effect that, as a matter of general law, there can only be an arbitration agreement if there are mutual or bilateral rights of reference. And even if there were such a decision, it is another question entirely whether the requirement finds expression in the definition of arbitration agreement in s 4 of the Act.
1. See Baron v Sunderland Corporation [1966] 2 QB 56 at 64, per Davies LJ.
2. [1986] QB 868 at 875-876, per Fox LJ; at 885-886, per Dillon LJ; at 890, per Neill LJ.
It is of fundamental importance that statutory definitions are construed according to their natural and ordinary meaning unless some other course is clearly required. It is also of fundamental importance that limitations and qualifications are not read into a statutory definition unless clearly required by its terms or its context [24] , as for example if it is necessary to give effect to the evident purpose of the Act [25] . The words "agreement to refer present or future disputes to arbitration" in s 4 of the Act are, in their natural and ordinary meaning, quite wide enough to encompass agreements by which the parties are bound to have their dispute arbitrated if an election is made or some event occurs or some condition is satisfied, even if only one party has the right to elect or is in a position to control the event or satisfy the condition. To some extent, that meaning is confirmed by s 53(1) which, as already indicated, confers a power exercisable on the application of a party to an arbitration agreement with respect to "a matter agreed to be referred to arbitration". However and more important, there is nothing in the Act which requires that the natural and ordinary meaning of the words used in the definition be qualified in any way. And when it is given its natural and ordinary meaning, the definition is clearly satisfied by cl 45, even if, as was held by the Court of Appeal, cl 45 does not preclude the Contractor from pursuing its claim in the courts.
1. Owners of Shin Kobe Maru v Empire Shipping Co Inc (1994) 181 CLR 404 at 420 Police v Thompson [1966] NZLR 813 at 818
2. See Australian Softwood Forests Pty Ltd v Attorney-General (NSW); Ex rel Corporate Affairs Commission (1981) 148 CLR 121 at 130, per Mason J. See also Slonim v Fellows (1984) 154 CLR 505 at 513, per Wilson J.
Party to an arbitration agreement
Once it is accepted that cl 45 is or contains an arbitration agreement, it follows that the Contractor is a party to an arbitration agreement and, thus, entitled to apply for an extension of time under s 48 of the Act. It matters not for the purposes of that entitlement whether sub-cll (a) and (b) are, themselves, an arbitration agreement or, even, part of an arbitration agreement. All that matters is whether the step required by cl 45(a) is, in terms of s 48, "an act or a proceeding in or in relation to an arbitration".
The nature of the arbitration agreement effected by cl 45
It is convenient, before turning to the question whether the step required by cl 45(a) is "an act in or in relation to an arbitration", to consider whether, as was held by the Court of Appeal, cl 45 confers a right on the Contractor to elect to have its claims determined either in the courts or by arbitration. That construction was not challenged in this Court. However, the proper construction of cl 45 is a matter on which courts have differed [26] and, also, one which was squarely raised in argument. Moreover it is directly relevant to the question whether the notice required by cl 45(a) is "an act in or in relation to an arbitration".
1. See, eg, The Commonwealth v Jennings Construction Ltd [1985] VR 586, involving a clause which was substantially identical to cl 45; Rheem Australia Ltd v Federal Airports Corporation (1989) 6 BCL 130
It may be accepted that contracts will only be construed as limiting the rights of the parties to pursue their remedies in the courts if it clearly appears that that is what was agreed. However, when it is provided, as it is in cl 45, that "[a]ll disputes or differences shall be decided" in accordance with specified procedures, the starting point must be that the parties are to be taken to have provided exclusively and exhaustively as to the procedures to be followed, unless something makes it plain that that is not the case. That is not simply because, in a context dealing with rights and obligations, the word "shall" ordinarily involves a mandatory aspect. There is also the important consideration that cl 45 is concerned with dispute resolution. Disputes are not readily resolved if there are parallel proceedings permitting of different outcomes. Nor are they readily resolved by procedures which can be set at nought if one party elects to pursue some other course of action. As with statutes, there are difficulties in construing contracts by application of the principle expressed in the maxim expressio unius est exclusio alterius [27] . However, the subject matter with which cl 45 is concerned compels an approach which treats that clause as requiring the parties to have their disputes decided in accordance with the procedures specified — and only in accordance with those procedures, unless there is something which clearly indicates to the contrary.
1. See, as to statutes, Houssein v Under Secretary of Industrial Relations and Technology (NSW) (1982) 148 CLR 88 at 94 Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 575
The argument in favour of construing cl 45 as permitting the Contractor to choose between having its claims determined in the courts or by arbitration is based, substantially, on the difference between the language in sub-cl (a), which directs that "[t]he Contractor shall submit the matter at issue to the Superintendent" and that found in sub-clause (b) and the following paragraph allowing, respectively, that "he may submit the matter to the Principal for decision" and that "he may give notice requiring that the matter be referred to arbitration". As well, the argument draws attention to the absence of any prohibition on the bringing of proceedings in the courts, other than that which is expressed to operate "[w]here a notice is given by the Contractor to the Principal requiring that the matter at issue be referred to arbitration".
The change in language from "shall" in cl 45(a) to "may" in cl 45(b) and the paragraph following provides no reason for thinking that cl 45 does not provide an exclusive regime for the resolution of disputes. Rather, the provisions, if read in their entirety, confirm the view that disputes are to be determined in accordance with and only in accordance with the procedures: if the Contractor wishes to raise a dispute he must — "shall" — give notice to the Superintendent who has power to decide the matter; however, once the Superintendent has decided the matter, the Contractor may accept the decision or, if dissatisfied, "may submit the matter at issue to the Principal for decision"; so, too, the Contractor may accept the decision of the Principal or, if dissatisfied, "may give notice requiring that the matter at issue be referred to arbitration".
Similarly, the absence of a prohibition on the bringing of proceedings in the courts except "[w]here a notice is given requiring that the matter at issue be referred to arbitration" provides no reason for treating the clause as conferring on the Contractor the right to elect between pursuing its claim in the courts or by arbitration. To the extent to which a decision by the Superintendent or the Principal is in favour of the Contractor, the Contractor, if it accepts the decision, may sue to secure the benefit of it. The provision limiting access to the courts "[w]here a notice is given requiring that the matter at issue be referred to arbitration", prevents the Contractor from proceeding in the courts to secure the benefit of so much of the Principal's decision, if any, as is in its favour and, also, proceeding by way of arbitration to contest that part with which it is dissatisfied. It also prevents the Principal from pursuing any claim it might have in parallel court proceedings. The express limitation on access to the courts ensures that the dispute is dealt with in its entirety by arbitration, and also ensures that the final paragraph of cl 45 has full effect, with it being at the discretion of the Principal whether or not to "withhold payment of moneys in respect of any matter that is the subject of arbitration proceedings".
The Court of Appeal erred in construing cl 45 as permitting the Contractor to elect between proceeding in the courts and by way of arbitration prior to the giving of notice requiring arbitration. Rather, it should have held that cl 45 provides exclusively as to the procedures to be followed in the event of a dispute to which it applies.
The meaning of " in or in relation to " in s 48 of the Act
Inevitably, the closeness of the relationship required by the expression "in or in relation to" in s 48 of the Act — indeed, in any instrument — must be ascertained by reference to the nature and purpose of the provision in question and the context in which it appears. The nature and purpose of s 48 is clear. It is a provision conferring power on a court to relieve against agreed time limits which might otherwise prevent or interfere with the fair and proper processes of arbitration. Its remedial nature and the consideration that a provision conferring a power to be exercised judicially should be construed as liberally as its terms and context permit [28] tend in favour of treating the expression "in or in relation to" in s 48 as being wide enough to encompass the taking of a step, such as that directed by cl 45(a), which is a condition precedent to arbitration, even if arbitration is not the inevitable consequence of that step. And that is so, in our view, even if the agreement is one that allows a party to elect between proceeding in the courts and proceeding to arbitration.
1. See FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268 at 290 Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 205
The Court of Appeal considered that s 48(3), which conditions the court's power to extend "the time within which arbitration proceedings may be commenced", indicates that "a step initiating arbitration proceedings is the outer limit of what is encompassed by the expression "relating to an arbitration" in s 48(1)". There is force in this view if, as was suggested in argument, a contrary interpretation would permit of an order extending time for some preliminary step even though, in the circumstances, an order could not be made extending the time within which arbitration proceedings might be commenced.
As already indicated, the power conferred by s 48 is one that must be exercised judicially. That means, among other things, that it must not be exercised arbitrarily, capriciously or to frustrate the legislative intent. Rather, it must be exercised in the interests of justice and within the confines of "the purposes for which it was entrusted" [29] . Accordingly, if the power is such as to permit of an order extending time for a step which is preliminary to the commencement of arbitration, it would not properly be exercised to extend time for that step if, in the circumstances, an order could not be made extending the time within which arbitration proceedings might be commenced. That being so, sub-s (3) does not, in our view, provide any basis for reading "in or in relation to" as requiring a more direct or immediate connection than that which would ordinarily be suggested by the nature and purpose of s 48(1) of the Act. Nor is there any other matter which detracts from that approach. Thus, s 48(1) extends to a step which is a condition precedent to arbitration even where there is a right to elect between proceeding in the courts and proceeding by way of arbitration. Certainly, it extends to the step required by cl 45(a).
1. Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 504See also O'Sullivan v Farrer (1989) 168 CLR 210 at 216
Conclusion
The appeal should be allowed, the order of the Court of Appeal set aside and the matter remitted to that Court for its consideration of the remaining grounds of appeal.
Toohey and Gummow JJ.
Introduction
PMT Partners Pty Ltd (PMT), the appellant, contracted with the Australian National Parks and Wildlife Service (the Service), the respondent, to carry out road and carpark construction work in Uluru National Park on 15 August 1990. In late 1991, certain work was rejected by the respondent as defective and there was a direction to the appellant that it be reconstructed. Differences arose between the parties as to the justification for this rejection, and the cost of consequential delays and the extra work involved. It is the nature of the mechanism for the resolution of these differences, provided by the contract between the parties, which is the subject of the present appeal. We turn now to the terms of this contract.
The contract governing the construction work was the standard form contract NPWC Edition 3 (1981) (the contract). The Court was informed that this is a common contract, widely used for construction projects throughout Australia. The relevant provision of the contract is cl 45. This is headed "Settlement of Disputes". Clause 2 states that clause headings shall not be used in the interpretation or construction of the contract.
So far as is presently relevant, cl 45 provides:
All disputes or differences arising out of the Contract or concerning the performance or the non-performance by either party of his obligations under the Contract whether raised before or after the execution of the work under the Contract shall be decided as follows —
(a) The Contractor shall, not later than fourteen days after the dispute or difference arises, submit the matter at issue in writing, specifying with detailed particulars the matter at issue, to the Superintendent for decision and the Superintendent shall, as soon as practicable thereafter, give his decision to the Contractor.
(b) (b) If the Contractor is dissatisfied with the decision given by the Superintendent, he may, not later than fourteen days after the decision of the Superintendent is given to him, submit the matter at issue in writing, specifying with detailed particulars the matter at issue, to the Principal for decision and the Principal shall, as soon as practicable thereafter, give his decision to the Contractor in writing.
If the Contractor is dissatisfied with the decision given by the Principal pursuant to the last preceding paragraph, he may, not later than twenty-eight days after the decision of the Principal is given to him, give notice in writing to the Principal requiring that the matter at issue be referred to arbitration and specifying with detailed particulars the matter at issue, and thereupon the matter at issue shall be determined by arbitration. If, however, the Contractor does not, within the said period of twenty-eight days, give such a notice to the Principal requiring that the matter at issue be referred to arbitration, the decision given by the Principal pursuant to the last preceding paragraph shall not be subject to arbitration.
Where a notice is given by the Contractor to the Principal pursuant to the last preceding paragraph requiring that the matter at issue be referred to arbitration no proceedings in respect of that matter at issue shall be instituted by either the Principal or the Contractor in any court unless and until the arbitrator has made his award in respect of that matter at issue.
A reference to arbitration under this clause shall be deemed to be a reference to arbitration within the meaning of the laws relating to arbitration in force in the State or Territory named in the Annexure hereto and the arbitration proceedings shall be conducted in that State or Territory. The arbitrator shall have all the powers conferred by those laws and it shall be competent for him to enter upon the reference without any further or more formal submission than is contained in this clause.
The term "the Contractor" is defined in cl 2 as meaning the person who as a party to the contract is bound to execute the work under the contract in accordance with the contract. The term "the Superintendent" is defined in the same clause as meaning the person named in the Annexure to the contract as the Superintendent or other person from time to time appointed in writing by the Principal to be the Superintendent for the purposes of the contract, and notified as such in writing to the Contractor by the Principal. In the present case, the appellant, PMT, is the Contractor and the Director of the Service, the respondent, is the Principal.
In this case, the appellant made a submission under par (a) which the Superintendent rejected as having been made outside the time stipulated. The appellant then applied to the Supreme Court of the Northern Territory on 3 December 1993 pursuant to s 48 of the Commercial Arbitration Act 1985 NT (the Act). The appellant sought an extension of the time provided by cl 45(a) for the submission of the dispute to the Superintendent.
Section 48 of the Act is in the following terms:
Extension of Time
(1) Subject to subsection (3), the Court shall have power, on the application of a party to an arbitration agreement or an arbitrator or umpire, to extend the time appointed by or under this Act or fixed by the agreement or by an order under this section for doing an act or taking a proceeding in or in relation to an arbitration.
(2) The Court may make an order under this section although an application for the making of the order was not made until after the expiration of the time appointed or fixed for doing the act or taking the proceeding.
(3) An order shall not be made under this section extending the time within which arbitration proceedings may be commenced unless —
(a) the Court is satisfied that undue hardship would otherwise be caused; and
(b) the making of the order would not contravene the provision of an Act limiting the time for the commencement of arbitration proceedings.
The section is a provision which performs a double function of qualifying or modifying the contractual rights of the parties to an arbitration agreement and conferring power upon the Court to achieve the result by order made upon application to it by a party to the agreement [30] . Further, it is inappropriate to read a provision conferring jurisdiction or granting powers to a court by making implications or imposing limitations not found in the words used [31] . This may be so even if what is involved is the displacement of a general precept of the common law where this result accords with the evident purpose of the statute [32] .
1. R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141 at 165-166
2. Owners of Shin Kobe Maru v Empire Shipping Co Inc (1994) 181 CLR 404 at 421
3. FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268 at 290
The power of the Court conferred by s 48 is to be exercised on the application of a "party" to an "arbitration agreement". These terms are defined in s 4. A "party" includes a person claiming through or under a party to the arbitration agreement. The term "arbitration agreement" is defined as meaning "an agreement in writing to refer present or future disputes to arbitration".
On 4 February 1994, the trial judge, Thomas J, granted the relief sought. An appeal to the Northern Territory Court of Appeal was successful. The success of the appeal was based on the narrow ground that Thomas J had erred in law in finding that s 48 of the Act applied to cl 45(a) and (b) of the contract. There are other grounds of appeal with which the Court of Appeal has not yet dealt. Accordingly, if the present appeal is successful, the matter will have to be returned to the Court of Appeal for consideration of those outstanding issues.
The issues
The present appeal is concerned with the Court's power under s 48 of the Act to grant an extension of time. That power is shaped, in sub-s (1), by alternative requirements. First, there must be an "application of a party to an arbitration agreement or an arbitrator or umpire". Secondly, where, as is the case here, no arbitrator or umpire has yet been appointed, the Court's power can only be enlivened by the application of a party to an "arbitration agreement". That term, as we have indicated, means "an agreement in writing to refer present or future disputes to arbitration". Whether by reason of the presence in the contract of cl 45 it may properly be characterised, either in whole or in part, as an arbitration agreement is the first issue which falls to be determined. The second issue concerns the scope of the Court's power under s 48(1) to extend time "for doing an act or taking a proceeding in or in relation to an arbitration". It must be determined whether the procedures laid down in cl 45(a) and (b) of the contract are proceedings in or in relation to an arbitration.
In the Court of Appeal, Martin CJ agreed with the joint judgment of Mildren J and Gray AJ. In their judgment, Mildren J and Gray AJ held that cl 45 did not take away any rights or bar conduct for a failure to comply with either cl 45(a) or (b) and that the only party which could refer the dispute in the first place was the Contractor. Their conclusions are reflected in the following passage:
In our opinion, it is only when, and if, the contractor chooses to give notice to the principal requiring the dispute to be referred to arbitration that "the matter at issue shall be determined by arbitration" and that the contractor has taken a step "in or in relation to an arbitration".
For the same reasons it is in our view clear that the provisions of subparagraphs (a) and (b) do not constitute an arbitration agreement within the definition thereof in s 4 of the Act.
These conclusions, which the respondent supports, correctly condition the power under s 48 of the Act to extend time on the existence of an "arbitration agreement" and acts or proceedings "in or in relation to an arbitration". However, in our view, the Court of Appeal has unduly restricted the class of contract which satisfies those conditions. The Court of Appeal imported requirements of "exclusivity" and "obligation" into the definition of arbitration agreement. "Exclusivity" is imported in the sense that the contract must identify arbitration as the sole and exclusive method of dispute resolution. "Obligation" is imported in the sense that the contract must oblige reference of disputes to arbitration rather than allowing an election for arbitration. What one might, somewhat loosely, call the optional nature of some arbitration clauses was held also to mean that acts or proceedings prior to the exercise of an option to arbitrate were not "in or in relation to" an arbitration.
The position reached by the Court of Appeal may briefly be compared with that which obtains in the United Kingdom. Section 27 of the Arbitration Act 1889 UK defined "submission" as "a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not". Section 32 of the Arbitration Act 1950 UK (the 1950 Act) defines "arbitration agreement" in similar terms. In the second edition of their work The Law and Practice of Commercial Arbitration in England, Lord Mustill and Mr Boyd state [33] :
Commercial contracts occasionally give a unilateral right of arbitration. Sometimes they provide that claims by one party are to be the subject of arbitration, whereas claims by the other are not. In other cases, one party has an option to call for arbitration, whilst the other party does not. Such clauses are recognised by the Court as binding.
As authority for the proposition in the last sentence, reference is made to the decision of the Court of Appeal in Pittalis v Sherefettin [34] . It will be necessary to refer further to this decision later in these reasons. Pittalis also is relied upon as authority for the statement in Halsbury [35] that "[t]he agreement may confer the right to require arbitration on only one party."
1. (1989), p 121.
2. [1986] QB 868.
3. Halsbury's Laws of England, 4th ed Reissue, 1991, vol 2, p 335.
In our view, to condition the power of the Court to extend time as was done by the Court of Appeal is not justified by the terms of the Act. To do so would unduly restrict the class of contracts over which the power to extend time existed, and would impede rather than advance the scope and purpose of the legislation.
The Act
The Act is one of a number of statutes which follow broadly an agreed common form in the States and Territories [36] .
1. Commercial Arbitration Act 1984 NSW; Commercial Arbitration Act 1984 Vict; Commercial Arbitration Act 1985 WA; Commercial Arbitration Act 1986 SA; Commercial Arbitration Act 1986 Tas; Commercial Arbitration Act 1986 ACT; Commercial Arbitration Act 1990 Q. Arbitrations with an international element may be subject to the International Arbitration Act 1974 Cth. In s 3(1) of the federal statute, "arbitration agreement" is defined as "an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration".
The legislation is to be considered in the light of the pre-existing common law. In Dobbs v National Bank of Australasia Ltd [37] , Rich, Dixon, Evatt and McTiernan JJ said:
A clear distinction has always been maintained between negative restrictions upon the right to invoke the jurisdiction of the Courts and positive provisions giving efficacy to the award of an arbitrator when made or to some analogous definition or ascertainment of private rights upon which otherwise the Courts might have been required to adjudicate. It has never been the policy of the law to discourage the latter. The former have always been invalid.
1. (1935) 53 CLR 643 at 652.
One evident object of the Act is to encourage resolution by arbitration of disputes. But the legislation has a system of checks and balances. Thus, it provides for review of awards by the Court in respect of questions of law (s 38) and the determination of preliminary points of law by the Court (s 39); in certain circumstances, the rights to approach the Court under ss 38 and 39 may be excluded (ss 40, 41). The Court may stay proceedings brought in respect of a matter agreed to be referred to arbitration (s 53). On the other hand, a " Scott v Avery [38] clause" does not, in the circumstances described in s 55, operate to prevent the institution of legal proceedings on the matter in dispute and is to be construed as an agreement to refer the matter to arbitration.
1. Scott v Avery (1856) 5 HLC 811[10 ER 1121].
Further, s 53, while providing for an application to the Court to stay proceedings which have been instituted in the Court in respect of a matter agreed to be referred to arbitration, provides that, notwithstanding any rule of law to the contrary, a party to an arbitration agreement shall not be entitled to recover damages from another party to the agreement by reason that the other party has taken proceedings in a court in respect of a matter agreed to be referred to arbitration by the parties' arbitration agreement.
Exclusivity of arbitration
The respondent's primary submission is that the Court of Appeal was correct in holding that cl 45 of the contract was not an "arbitration agreement" as defined by the Act. Under the terms of s 48, there must be an application by "a party to an arbitration agreement" in order to enliven the jurisdiction of the Court to grant an extension of time.
In support of this primary submission, the respondent first contends that cl 45 is not, as the respondent submits it must be to answer the definition of arbitration agreement in s 4, a "code" for settlement of disputes by arbitration. Clause 45 is said not to be an arbitration agreement because it does not exclude the ability of the parties to litigate in the courts.
The submission is based on a two-stage process of reasoning. The first, relying on expressions employed in the contract and a stream of authority, is to show that cl 45 preserves the existing right to sue at law. The second stage is to say that this preservation of a right to sue at law takes the contract outside the definition of arbitration agreement in the Act.
We turn to the first stage.
The respondent seeks to derive textual support for its proposition that the right to litigate is preserved by the terms of cl 45 from the use of the word "shall" in cl 45(a), as distinct from the word "may" in cl 45(b) and what follows. It is submitted that the use of the word "may" in par (b) indicates a choice from three options for the Contractor upon a decision by the Superintendent under par (a). The Contractor may (1) submit the dispute to the Principal; or (2) accept the Superintendent's decision; or (3) have resort to the ordinary processes of the Court under the contract. If that first choice is made and an issue is referred to the Principal but the Contractor remains dissatisfied, the Contractor then "may" require a reference to arbitration. The respondent argues that at this stage the Contractor may also elect to do nothing, or to commence proceedings in the Court. This reading is said to be supported by the express exclusion of litigation once notice is given requiring that the dispute be submitted to arbitration. By some application of the maxim expressio unius est exclusio alterius, this latter exclusion is said to indicate the possibility of recourse to the courts at the earlier stages of pars (a) and (b). However, the maxim must always be applied with care, for it is not of universal application and applies only where the intention it expresses is discoverable upon the face of the instrument [39] .
1. Houssein v Under Secretary of Industrial Relations and Technology (NSW) (1982) 148 CLR 88 at 94 O'Sullivan v Farrer (1989) 168 CLR 210 at 215
The respondent also seeks comfort in a line of authority which it submits holds that provisions such as pars (a) and (b) do not exclude the ability of the parties to litigate disputes in the courts [40] .
1. Hammond v Wolt [1975] VR 108 The Commonwealth v Jennings Construction Ltd [1985] VR 586 at 595 Brunswick NL v Sam Graham Nominees Pty Ltd (1990) 2 WAR 207 at 210-211 Reed Constructions v State Rail Authority (NSW) (1987) 3 BCL 384 at 385 Rheem Australia Ltd v Federal Airports Corporation (1989) 6 BCL 130 at 136
In substance, the respondent founds its submission upon the principle that access to the courts should not be precluded by contract unless there are clear words to that effect, coupled with the proposition that a clause limiting such access will be strictly construed. We have expressed our view as to the relevant scope and purpose of the Act as it applies to the contract. The statute advances the object of non-curial resolution of disputes. Subject to any special considerations attending the exercise of the judicial power of the Commonwealth (which do not arise here), the nub of the matter was expressed by Windeyer J in Felton v Mulligan . His Honour said [41] :
But the grandiloquent phrases of the eighteenth century condemning ousting of the jurisdiction of courts cannot be accepted in this second half of the twentieth century as pronouncement of a universal rule.
1. Felton (1971) 124 CLR 367 at 385
Neither the textual arguments, nor the authorities, should be accepted as resolving the issue. The authorities are of limited assistance for a number of reasons. Some cases concern clauses which were differently expressed [42] . Some cases are concerned not with the court's power to extend time, but rather with the court's power to stay proceedings [43] . There is also a line of contrary authority [44] .
1. Hammond v Wolt [1975] VR 108 at 110 Brunswick NL v Sam Graham Nominees Pty Ltd (1990) 2 WAR 207 at 209
2. Hammond v Wolt [1975] VR 108 at 110 Brunswick NL v Sam Graham Nominees Pty Ltd (1990) 2 WAR 207 at 210
3. Transaustralian Constructions Pty Ltd v Northern Territory (1991) 104 FLR 358 at 363 Allied Constructions Pty Ltd v Novacoal Australia Pty Ltd (1991) 25 NSWLR 54 at 65 ABB Power Plants Ltd v Electricity Commission (NSW) (1995) 35 NSWLR 596
The respondent's submission faces significant textual hurdles within the clause itself. Support for the view that cl 45 makes exhaustive provision for the means of settlement of disputes is provided in the passage in cl 45 immediately preceding par (a):
All disputes or differences arising out of the Contract or concerning the performance or the non-performance by either party of his obligations under the Contract whether raised before or after the execution of the work under the Contract shall be decided as follows (emphasis added),
and by the contrasting phrase immediately following par (b):
If the Contractor is dissatisfied with the decision given by the Principal he may give notice in writing.
The natural meaning of the words "shall be decided" is that the means appearing thereafter are the only means as to which the parties are agreed. In this regard, we respectfully agree with the remarks of Handley and Sheller JJA in ABB Power Plants Ltd v Electricity Commission (NSW) [45] .
1. (1995) 35 NSWLR 596 at 599, 601.
In that case, the issue before the New South Wales Court of Appeal was whether cl 46 of the General Conditions of Contract AS2124-1986 contained an arbitration agreement within the definition in s 4(1) of the New South Wales legislation, the Commercial Arbitration Act 1984. This is in the same terms as the definition in the Northern Territory statute. Clause 46 dealt with settlement of disputes between the contractor and the principal. Although differently expressed to cl 45 of the contract with which this litigation is concerned, cl 46 presented a similar juxtaposition of the words "shall" and "may". Handley JA said [46] :
It has long been established that contractual or statutory provisions prescribing in positive terms a procedure to be followed necessarily imply that the same matter will not be dealt with under a different procedure. In R v Wallis [47] Dixon J said: "This accords with the general principles of interpretation embodied in the maxim expressum facit cessare tacitum and in the proposition that an enactment in affirmative words appointing a course to be followed usually may be understood as importing a negative, namely, that the same matter is not to be done according to some other course."
In that passage in Wallis [48] , Dixon J continued:
This applies especially when the power or duty affirmatively conferred or imposed is qualified by some condition, limitation or direction.
In ABB Power Plants, Sheller JA said [49] :
If the words "all disputes or differences arising out of the contract shall be determined" in accordance with the steps then formulated are to be given effect, in accordance with their language, the parties had agreed to refer such disputes to arbitration.
1. ABB Power Plants (1995) 35 NSWLR 596 at 599.
2. (1949) 78 CLR 529 at 550.
3. See also Anthony Hordern & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia (1932) 47 CLR 1 at 7, 20-21; Saraswati v The Queen (1991) 172 CLR 1 at 23-25 Downey v Trans Waste Pty Ltd (1991) 172 CLR 167 at 171-172, 180-182.
4. ABB Power Plants (1995) 35 NSWLR 596 at 601.
The use of the word "decision" no fewer than six times in pars (a) and (b), combined with the failure to make any express reference to the continuing availability of curial process, lends support to the construction that steps specified in cl 45 are the only steps to be taken to decide any dispute or difference identified by the opening words of the clause.
The better view is that, once cl 45 is engaged by the Contractor submitting the matter at issue in writing to the Superintendent under sub-cl (a), the resolution of that issue by curial means is precluded by the contract.
The answer to the first proposition of the respondent forecloses the second proposition which assumes that, upon the true construction of cl 45, a right to sue at law is preserved by contract.
Obligation to arbitrate
The respondent advanced a separate but related contention in support of its primary submission. It is that, if the effect of the contract is to confer an election to proceed to arbitration, then, until that election has been made, there is no agreement to refer the dispute to arbitration within the meaning of the definition of "arbitration agreement". It is said that an agreement which provides a right of election to proceed by way of arbitration or litigation does not constitute an arbitration agreement. The submission treats the definition of arbitration agreement as if it read "an agreement in writing that the parties must refer present or future disputes to arbitration".
The present proposition is related to the respondent's second proposition mentioned above but is distinct from it because it is independent of the availability of litigation as an option. The present proposition depends merely on there being no obligation to arbitrate until exercise of an election to do so.
This case is concerned with a clause which confers a right of election upon one party, the Contractor. However, the submission would embrace provisions which conferred such a right upon either or both parties.
Without finally dealing with the point, the Court of Appeal in the present case held:
An agreement which gives one of the parties an option to submit a dispute to arbitration does not readily answer the description of an arbitration agreement as defined.
However, in our view, the terms of the definition of arbitration agreement in s 4 of the Act extend to an agreement whereby the parties are obliged if an election is made, particular event occurs, step is taken or condition is satisfied (whether by either or both parties) to have their dispute referred to arbitration. This result is within the ordinary and natural meaning of the terms of the definition and there is no sufficient reason to cut down that meaning.
Once again, case law provides limited assistance. No authority deals directly with the interrelationship of s 48 of the Act and cl 45 of the contract. There are numerous authorities in which various clauses of this nature have been held to constitute an arbitration agreement [50] . On the other side there are those cases which have denied the existence of an arbitration agreement [51] . Detailed analysis of the authorities would be unproductive.
1. Elders CED Ltd v Dravo Corporation (1984) 59 ALR 206 at 209 Bond Corporation Pty Ltd v Theiss Contractors Pty Ltd (1987) 14 FCR 193 at 204 Allied Constructions Pty Ltd v Novacoal Australia Pty Ltd (1991) 25 NSWLR 54 at 65 Transaustralian Constructions Pty Ltd v Northern Territory (1991) 104 FLR 358 at 364
2. Hammond v Wolt [1975] VR 108 at 116 Minister for Main Roads (Tas) v Leighton Contractors Pty Ltd (1985) 1 BCL 381 at 385 Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (1992) 11 WAR 40 at 46
The conflicting views are represented in the judgments of the New South Wales Court of Appeal in ABB Power Plants. As we have said, the question in that case was whether cl 46 of the General Conditions of Contract AS2124-1986 contained an arbitration agreement as defined by s 4(1) of the Commercial Arbitration Act 1984 NSW, which is in identical terms to the Northern Territory statute. The appellant contractor instituted an action in the Supreme Court claiming large sums for debt and damages under a contract with the respondent to construct works at the Liddell Power Station. The respondent had successfully applied to Giles J for a stay of proceedings under s 53(1) of the New South Wales Act. The appeal from that order was dismissed by all three members of the Court of Appeal.
The respondent relied upon various statements made in the judgments of Handley and Sheller JJA. For example, Sheller JA said [52] :
In a clause such as that under consideration in Hammond v Wolt [53] the parties agreed that, in the event of dispute as to any matter arising under the agreement, one might, if it so wished, refer the dispute to arbitration. Importantly the contract did not oblige either party to do so. In one sense, as Giles J has pointed out, if in fact one of the parties referred the dispute to arbitration the other party was bound to this procedure by force of the contract. Even so to say that the parties have agreed to refer the dispute to arbitration at the time the agreement is made is not, in my opinion, accurate. What the parties have agreed, in the example given, is that either one may if it so decides and by taking the appropriate steps refer the dispute to arbitration.
1. ABB Power Plants (1995) 35 NSWLR 596 at 609.
2. [1975] VR 108.
Representative of the opposite position is the judgment of Cole JA. His Honour said [54] :
I am unable to agree that the fact that one party is given the contractual right to elect to have an unsatisfied claim resolved by arbitration does mean there is no arbitration agreement within the meaning of s 4. The clause conferring that right is "an agreement in writing to refer present or future disputes to arbitration". Such a clause is part of an agreement binding upon the parties, the provisions and operations of which are enlivened by an election.
In so far as Australian National Parks & Wildlife Service [55] holds that cl 45 NPW3 does not, prior to an election to refer a dispute for resolution by arbitration, constitute an arbitration agreement within the meaning of s 4, I respectfully disagree.
1. Australian National Parks & Wildlife Service v PMT Partners Pty Ltd (In liq) (unreported; Supreme Court of NT; Full Court; 7 July 1994).
1. ABB Power Plants (1995) 35 NSWLR 596 at 625-626.
2. Australian National Parks & Wildlife Service v PMT Partners Pty Ltd (In liq) (unreported; Supreme Court of NT; Full Court; 7 July 1994).
In our view, the reasoning of Cole JA is to be preferred. This was described by the respondent as "simplistic", as if that were necessarily pejorative. Simplistic it may be, but it accords with the scheme of the legislation and the weight of logic. His Honour said [56] :
If the parties have agreed by a clause such as cl 22.1 that, upon one party electing, the dispute in consequence will be arbitrated, they have agreed to refer such a dispute to arbitration. That falls within the definition of s 4. The expression "agreement in writing to refer present and future disputes to arbitration" is not limited to existing or mutually accepted references: it includes references which flow in the future in consequence of an election, conferred by the contract on a party, by that party.
1. ABB Power Plants (1995) 35 NSWLR 596 at 620.
Support was drawn for this proposition from the decision of the English Court of Appeal in Pittalis v Sherefettin [57] . In that case a lease provided that, after a particular date and for the remainder of the term, the rent should be whichever was the higher of a stipulated amount and the open market rental value of the property. The open market rental value was either a sum to be notified by the lessors, or agreed between the lessors and lessee in writing, or " at the election of the lessee by notice in writing to the lessor not later than three months after the lessors' notification in writing it shall be determined by an independent surveyor" (emphasis added). The lessee refused to pay the notified increased rent or make an election within time. However, he served an application for an extension of time under s 27 of the 1950 Act. That section provided relevantly that:
[w]here the terms of an agreement to refer future disputes to arbitration provide that any claims to which the agreement applies shall be barred unless notice to appoint an arbitrator is given or an arbitrator is appointed or some other step to commence arbitration proceedings is taken within a time fixed by the agreement, and a dispute arises to which the agreement applies, the High Court may extend the time for such period as it thinks proper.
1. [1986] QB 868.
The expression in the lease in Pittalis "at the election of the lessee" fulfils an analogous function to the word "may" when used in the relevant passage in cl 45 of the contract with which this litigation is concerned, namely:
If the Contractor is dissatisfied with the decision given by the Principal pursuant to the last preceding paragraph, he may, not later than twenty-eight days after the decision of the Principal is given to him, give notice in writing to the Principal requiring that the matter at issue be referred to arbitration. (Emphasis added.)
In Pittalis , Fox LJ said [58] :
But an agreement to arbitrate in future if a party so elects can, in my opinion, correctly be described as an agreement to refer a future dispute to arbitration; if there is an election, both parties are bound. Looking at the matter at the point of time when the lease was made, there was an agreement to refer a future dispute to arbitration, and not the less so because the reference was upon a contingency (ie election).
1. Pittalis [1986] QB 868 at 874
We have referred earlier in these reasons to the acceptance of Pittalis in authoritative United Kingdom texts. Additional support is provided in Russell on the Law of Arbitration [59] . In discussing the definition of arbitration agreement in the 1950 Act, the learned authors comment [60] :
This statutory definition, at least as regards future disputes, can surely mean no more than that there is provision for compulsory arbitration; it cannot mean that it is guaranteed that there will be arbitration, for under the most ordinary clause there will only be an arbitration of such disputes if several contingencies are satisfied; certain facts must arise; the aggrieved party must elect to choose them as constituting a dispute, and even then he may sue and the other party may fail to obtain a stay. The need for a yet further contingency to be satisfied, namely, that A opts to treat a certain dispute as arbitrable would not seem to affect the question of whether the agreement falls within the definition. If that is right the mere fact that an agreement to submit future disputes is dependent on A's unilateral choice would not appear to deny the agreement the necessary character of an arbitration agreement.
1. 20th ed (1982), pp 38-43.
2. Russell , 20th ed (1982), p 41.
In this case, PMT and the Service agreed in cl 45 that their disputes "shall be decided" by arbitration but, before a dispute could be referred to arbitration, there were some other steps which had to be taken, as provided in pars (a) and (b). That does not mean that there is no arbitration agreement within the meaning of the definition in s 4 of the Act.
" In or in relation to "
The circumstance that cl 45 created what it described as "an option" in the appellant, as Contractor, to go to arbitration was said by the respondent to go, not only to the existence of an arbitration agreement in the statutory sense, but also to the issue of whether acts or proceedings prior to the exercise of that "option" could be "in or in relation to" an arbitration.
The submission is that a line must be drawn between, on the one hand, times fixed for doing acts which do relate to the commencement of an arbitration and, on the other hand, times fixed for doing other acts which, although they necessarily precede any arbitration which takes place, do not necessarily lead to its commencement. In cl 45, it is argued, this line is drawn at the stage of the Contractor electing to give notice requiring that "the matter at issue shall be determined by arbitration". The respondent submits that this is the first point in the process which can properly be described as a step "in or in relation to" an arbitration.
The Court of Appeal accepted this submission:
It is apparent that the dispute may be settled or taken to Court at any stage prior to the contractor giving notice requiring an arbitration. Thus it is, in our view, impossible to say that steps taken in relation to subparagraphs (a) and (b) are "in or in relation to an arbitration", merely because such steps need to be taken before an arbitration can be required by the contractor.
The Court noted that "[t]he English equivalent of s 48 is s 27 of the Arbitration Act 1950 UK ". That section has already been reproduced. The relevant general words in that section which condition the power of the court to extend time are "some other step to commence arbitration proceedings". The Court of Appeal then referred to various English decisions construing that section [61] . The Court of Appeal acknowledged that s 48 is undoubtedly wider "in some respects" [62] than s 27 and said:
In a comparison between the two sections in the present context, the question is whether taking "a step to commence arbitration proceedings" is distinguishable from "doing an act in or in relation to an arbitration".
It is clear that the former expression does not embrace a step to be taken within an arbitration But otherwise, we can detect no ground of distinction. In our opinion, to be an act in relation to an arbitration, the act must be shown to be more than an act which may or may not turn out to be a step towards an arbitration. The expression "in relation to" is doubtless very wide but the essential component is that there must be two subject matters which are to some extent connected. [63]
1. Trustees Executors & Agency Co Ltd v Reilly [1941] VLR 110 at 111
1. Babanaft International Co SA v Avant Petroleum Inc [1982] 1 WLR 871[1982] 3 All ER 244 Nestlé Co Ltd v E Biggins & Co Ltd [1958] 1 Lloyd's Rep 398.
2. Australian Shipping Commission v Kooragang Cement Pty Ltd [1988] VR 29 at 36
3. Trustees Executors & Agency Co Ltd v Reilly [1941] VLR 110 at 111
This reasoning led the Court of Appeal to the conclusion that: "it cannot be said that the act required by cl 45(a) or (b) is an act in relation to an arbitration."
In so far as this conclusion is based on English cases, it must be recognised that the wording of s 27 is very different. This significantly reduces the authoritative value of the English cases. Reference to the parliamentary materials in various jurisdictions which adopted this model legislation provides little assistance in determining precisely why these different words were used [64] .
1. Victoria, Parliamentary Debates (Hansard), 13 September 1984, pp 432-434; 2 November 1984, pp 1857-1867; New South Wales, Parliamentary Debates (Hansard), 18 October 1984, p 2160; 30 October 1984, pp 2797-2798. See also Kooragang Cement [1988] VR 29 at 33.
The Northern Territory Court of Appeal identified the "essential component" of the expression "in relation to" as being that there must be two subject matters which are to some extent connected. With respect, it is hard to see how a reference to the Superintendent under par (a) and a reference to the Principal under par (b) are not "to some extent connected" with any arbitration which may ensue. The mere non-existence of the last event at the time of the first event does not prevent the first event from being "in relation to" the later event. The case of Newbury v Smith [65] provides some authority for this proposition. In that case, Gray J said:
The premise that an event which occurs before an election begins cannot be "in relation to" that election is wrong. It is obviously possible to do an act "in relation to" an event, before that event takes place. Acts preparatory to an event will usually be regarded as being performed "in relation to" that event. Even such a thing as the purchase of a ticket for a football match could be regarded as an act performed "in relation to" that football match, although the match has not yet begun. It was contended on behalf of the defendant that a proposed event may never take place; it may be postponed or cancelled, for whatever reason. This is true, but it does not mean that the event must have begun before any act can be said to be "in relation to" the event. The postponement of a football match does not make the prior purchase of a ticket for it any less "in relation to" the football match than it would have been if the football match had proceeded.
1. (1991) 29 FCR 246 at 252-253.
The contrary proposition, which must have been adopted by the Court of Appeal, is based on the notion that the steps in pars (a) and (b) do not necessarily lead to arbitration, unless they are followed by an election by the Contractor to arbitrate. Since there may be no arbitration, the argument runs, there can, at the stage of steps (a) and (b), be nothing "in or in relation to" an arbitration. This argument should be rejected. What one might call the potential non-existence of arbitration is the very thing with which s 48 is designed to deal. If, for example, the time limit were exceeded for the Contractor to give notice requiring arbitration, then, if that time limit were a bar, there would be no arbitration. Yet, it can hardly be doubted that s 48 would catch an application to extend this time as "in relation to" an arbitration.
The Court of Appeal was also persuaded by the operation of s 48(3) of the Act as an aid to the interpretation of s 48(1). It will be remembered that s 48(1) is expressed to be "[s]ubject to subsection (3)". Sub-section (3) provides as follows:
An order shall not be made under this section extending the time within which arbitration proceedings may be commenced unless —
(a) the Court is satisfied that undue hardship would otherwise be caused; and
(b) the making of the order would not contravene the provision of an Act limiting the time for the commencement of arbitration proceedings.
The Court of Appeal held that:
The fact that its operation is confined to an order "extending the time within which arbitration proceedings may be commenced" suggests that a step initiating arbitration proceedings is the outer limit of what is encompassed by the expression "relating to an arbitration" in s 48(1).
The better construction is that sub-s (3) prescribes restrictions in relation to a particular matter, namely, extending the time within which arbitration proceedings may be commenced, but does not otherwise prescribe criteria. This suggests that the power in sub-s (1) goes to matters other than merely the time for commencement of arbitration.
Sub-section (3) is cast in such a fashion as to distinguish it from sub-s (1) and indicates that it was designed to impose extra restrictions on the power of a court to extend time only in some of the circumstances in which sub-s (1) gives the court that power. It may be asked why sub-s (3) would single out an order of a particular description if sub-s (1) did not contemplate that there may be other orders made under the section. The point is that the doing of an act or the taking of a proceeding, in the terms of sub-s (1), covers a wider range of matters than the time for commencement of proceedings dealt with in the language of sub-s (3). The restrictions of sub-s (3) do not apply when a court comes to exercise its power under sub-s (1) to extend time for compliance with pars (a) and (b) of cl 45 of the contract.
There is another reason why this view is to be preferred. The apparent object of the section is to mitigate the severity of harsh time limits. It confers on the court a remedial power. This may have a particular importance in contracts where the agreement is in a preprinted form accepted by the Contractor with no practical opportunity to negotiate the detail.
As it has been put, the issue on the appeal is whether acts or proceedings under pars (a) and (b) of cl 45 are "acts or proceedings in or in relation to an arbitration". It is perhaps revealing to ask the question in reverse. Can it be said with any conviction that these matters are not, at least, "in relation to" an arbitration? The section is a logical universe of only two possibilities — it either is or is not in relation to an arbitration.
It is apparent that the words "in or in relation to" are particularly wide. We have already referred to the idea that, as a facultative provision, there is no apparent call to read down the words used, or to give them any constricted operation. Cases concerning the interpretation of this phrase in other statutory contexts are of limited assistance. However, the cases do show that the words are prima facie broad and designed to catch things which have sufficient nexus to the subject. The question of sufficiency of nexus is, of course, dependent on the statutory context. Some examples will bear this out.
In Perlman v Perlman [66] , Gibbs CJ considered the meaning of the words "in relation to" in the Family Law Act 1975 Cth:
The words "in relation to" import the existence of a connection or association between the two proceedings, or in other words that the proceedings in question must bear an appropriate relationship to completed proceedings of the requisite kind.
1. (1984) 155 CLR 474 at 484.
Another recent example is O'Grady v Northern Queensland Co Ltd [67] . In that case, the question for this Court was whether the Supreme Court of Queensland was deprived of the jurisdiction to grant the relief on the counter-claim by s 80(4) of the Mining Act 1968 Q. Section 80 provided:
(1) a Wardens Court shall have jurisdiction to hear and determine all actions, suits and proceedings arising in relation to mining or to any mining tenement.
Without limiting the generality of the foregoing jurisdiction of a Wardens Court such a court shall have jurisdiction to hear and determine actions, suits and proceedings with respect to the following matters:
(g) any matter arising between miners in relation to mining
By a majority, the Court held that the counterclaim was not an action, suit or proceeding arising in relation to mining or a mining tenement. All members of the Court recognised the breadth of the term "in relation to". A difference of opinion occurred concerning the qualifying effect of the word "arising". Toohey and Gaudron JJ said [68] :
Although "in relation to" is an expression of broad import, in context with "arising" it presupposes a direct connection between a presently existing action, suit or proceeding and mining or a mining tenement, not merely an incidental connection.
Dawson J, who agreed with Toohey and Gaudron JJ, said [69] :
The words "in relation to", read out of context, are wide enough to cover every conceivable connection. But those words should not be read out of context, which in this case is provided by the Mining Act 1968 Q. What is required is a relevant relationship, having regard to the scope of the Act. Where jurisdiction is dependent upon a relation with some matter or thing, something more than a coincidental or mere connection — something in the nature of a relevant relationship — is necessary.
In his dissenting judgment, McHugh J recognised that [70] :
[t]he prepositional phrase "in relation to" is indefinite. But, subject to any contrary indication derived from its context or drafting history, it requires no more than a relationship, whether direct or indirect, between two subject matters.
1. (1990) 169 CLR 356.
2. O'Grady (1990) 169 CLR 356 at 374
3. O'Grady (1990) 169 CLR 356 at 367
4. O'Grady (1990) 169 CLR 356 at 376see also at 365, per Brennan J.
The connection which is required by the phrase "in relation to" is a question of degree. There must be some "association" which is "relevant" or "appropriate". The question of the relevance or appropriateness of the connection is a question which cannot be divorced from the particular statutory context.
It was conceded by the respondent, consistently with authority [71] , and as recognised in the Court of Appeal, that the earlier stages outlined in cl 45 of the contract of reference to the Superintendent under par (a), and reference to the Principal under par (b), are conditions precedent to a reference to arbitration taking place. They are necessary stops on the route to an arbitration. There is no justification to read down the phrase "in relation to" so as to exclude acts or proceedings which are preliminary to, but necessary for, reference to arbitration.
1. Rheem Australia Ltd v Federal Airports Corporation (1989) 6 BCL 130 at 133-134 Transaustralian Constructions Pty Ltd v Northern Territory (1991) 104 FLR 358 at 364
Conclusion
The appeal should be allowed, with costs. However, because the Court of Appeal only considered ground 3 in the notice of appeal to it dated 2 March 1994, it is appropriate to remit the matter to that Court for the consideration of the remaining grounds of that notice of appeal. |
high_court_of_australia:/showbyHandle/1/11063 | decision | commonwealth | high_court_of_australia | text/html | null | Kaiser Aluminum & Chemical Corp v Reynolds Metal Co [1969] HCA 7 | https://eresources.hcourt.gov.au/showbyHandle/1/11063 | 2024-09-13T22:55:25.412901+10:00 | High Court of Australia
Kitto J.
Kaiser Aluminum & Chemical Corp v Reynolds Metal Co
[1969] HCA 7
ORDER
Appeal dismissed. Order that Deputy Commissioner's dismissal of opposition and direction that application proceed to grant be set aside; that opposition be remitted to Commissioner; that appellant pay respondent's costs of appeal. Deputy Commissioner's award of costs against opponent to stand.
Cur. adv. vult.
March 14
Kitto J. delivered the following written judgment:—
This is an appeal under s. 60 (5) of the Patents Act 1952-1966 Cth against a decision of a Deputy Commissioner of Patents dismissing an opposition to an application for a patent and directing that the application proceed to grant. The patent applied for was for an invention relating to refractory linings for electrolytic cells used for the reduction of alumina in the production of aluminum.
The opposition was initiated by a notice dated 2nd November 1966 containing seven grounds of opposition followed by a statement in these terms:—
Our interest is based upon the following facts:
We are manufacturers of refractories and we believe that the grant of letters patent in respect of the instant application will be detrimental to our future interests in the Commonwealth of Australia.
No other facts were stated from which it might be concluded that the opponent had an interest entitling it to oppose the application. Each party lodged declarations in support of its case. The opponent notified the Deputy Commissioner that it was not desirous of being heard and the Deputy Commissioner heard the matter of the opposition in the presence only of a representative of the applicant. The material relevant to the question of locus standi consisted only of the statement in the notice of opposition, for the declarations dealt only with the substance of the opponent's case. The applicant's representative took the point that the opponent had not shown a locus standi, there being nothing to show that the opponent was manufacturing refractories in Australia or had exported any of its goods to Australia or had any definite intention of manufacturing or selling them in Australia.
The Deputy Commissioner upheld the point, and he was plainly right. He quoted the well-known statement of Lord Buckmaster as Solicitor-General, in New Things Ltd.'s Application [1] , that an interest to oppose a patent application "must be a real, definite, and substantial interest, and must not arise from something that the opponent proposes to do". The second half of this passage is only one particular way of stating the converse of the rule expressed in the first half: Clavel's Application [2] . As the Comptroller-General in England had laid down earlier, there must be reasonable grounds for apprehending that the grant of patent rights to the applicant would be "immediately or directly prejudicial to the interests of the opponent" at the time when the opposition is heard: Notes of Rulings, 1912 (B) and (C) [3] . See Lufft v. Weiss [4] . On the material before the Deputy Commissioner in the present case it could not properly have been held that the opponent had any interest in this sense.
1. (1913) 31 R.P.C. 45, at p. 46.
2. (1928) 45 R.P.C. 222, at p. 224.
3. (1912) 29 R.P.C., App. No. 22, pp. v to viii.
4. (1946) 73 C.L.R. 119.
The decision was given on 1st April 1968. On 19th April 1968 the opponent filed a notice of appeal in this Court. On 30th May 1968 it delivered at the Patent Office a written request that the notice of opposition be amended, "to clearly establish our locus standi as opponents in this matter", by striking out the statement originally included as stating the facts upon which its interest was based and substituting the following:
We are manufacturers of refractories, are the proprietors of Australian patents 244,198 and 269,790, hold a fifty per cent interest in Comalco Industries Pty. Limited, aluminium fabricators, a fifty-two per cent interest in Queensland Alumina Limited, Aluminium manufacturers, and all the issued shares but one of Kaiser Refractories Pty. Limited, refractory manufacturers, all being companies duly registered in Australia, and we believe that the grant of letters patent in respect of the instant application will be detrimental to our present and future interests in the Commonwealth of Australia.
The Patent Office very properly declined to proceed with this application to amend, giving as the reason the pendency of the appeal to this Court.
The appeal has been brought to a hearing on affidavits which do not show that the appellant, the opponent, is in fact a manufacturer of refractories, even abroad. But they show that the appellant holds substantial numbers of shares in the Australian companies mentioned in the proposed amendment of the notice of opposition. These companies I shall call respectively Comalco, Queensland Alumina and Kaiser Refractories. The affidavits show also that the appellant is the applicant in patent applications bearing the numbers mentioned in the proposed amendment; but counsel for the appellant concedes that the exploitation of the inventions to which these applications relate will not be prejudicially affected if the respondent's application for a patent be granted, and therefore I need not consider this aspect of the case. All I have to consider is whether the appellant's shareholding interests above referred to are sufficient to give the appellant an interest to oppose the grant, and, if so, whether the appellant is entitled to rely upon them after having omitted to mention them in its original notice of opposition or in any of the material it placed before the Deputy Commissioner. The facts appearing from the affidavits in relation to the shareholdings are as follows.
Comalco "and its subsidiary companies between them" manufacture and sell aluminium products, from the mining and processing of bauxite to the manufacture and selling of aluminium and aluminium semi-fabrications. On the date of the notice of opposition the appellant held and still holds all the issued B shares, namely 15,000, another company holding all the issued A and C shares, namely 15,000.
Queensland Alumina Limited processes bauxite to produce alumina. At the date of the notice of opposition its issued share capital was 1,350,025 shares of $2 each, divided into four classes. The appellant then held one share in class A, and a wholly-owned subsidiary of the appellant held the remainder of the issued shares of that class namely 702,012, the appellant thus holding or controlling fifty per cent of the issued capital of Queensland Alumina.
Kaiser Refractories manufactures, and has manufactured at least since July 1966, refractory products including refractory linings of the kind used in alumina reduction cells and smelting furnaces. On the date of the notice of opposition the appellant held, and still holds, all but one of the 5,000 issued shares in Kaiser Refractories.
For present purposes it will suffice to consider Kaiser Refractories. That company undoubtedly had, as a manufacturer, an interest which would have entitled it to oppose the respondent's patent application. Any prejudicial effect which the granting of the patent might have upon its business would be financially as significant for the appellant as if that business were the appellant's. In a sense it may be said that that effect would not be "immediately or directly" prejudicial to the appellant, but only derivatively or consequentially. But that, I think, is not the sense in which the words above quoted from the Comptroller-General's Notes of Rulings should be understood. A case which illustrates the proper application of the words arose in Lufft v. Weiss [1] , where a majority of this Court held that a firm selling rotary intaglio printing presses in Australia on commission as agent for a foreign manufacturer had no sufficient interest to entitle it to oppose the grant of a patent relating to that type of printing presses. But that was because the firm's interest was not shown by the evidence to consist of more than a not unreasonable hope, based upon two isolated transactions in the preceding thirty years, of earning commission by future sales: see per Latham C.J. [2] and per Dixon J. [3] . In the earlier case of Australian Radio Manufacturers' Patents Association Ltd. v. Neutrodyne Pty. Ltd. [4] the Court held that a company was not a competent opponent merely because its shareholders held patents in the field to which the applicant's invention related and it had been formed to protect their interests on their behalf.
1. (1946) 73 C.L.R. 119.
2. (1946) 73 C.L.R., at p. 123.
3. (1946) 73 C.L.R., at p. 127.
4. (1937) 57 C.L.R. 27.
Neither of these decisions seems to me to touch the present problem. Anything that adversely affects the business prospects of a company necessarily affects the financial interests of the company's shareholders. For that reason the view has been taken in the Patent Office in England that the financial interest of a holding company in its wholly-owned subsidiary suffices to entitle the holding company to oppose the grant of a patent which the subsidiary might have opposed: Badische Anilin & Sodafabrik AG.'s Application [1] . This has been extended to a case where the opponent had a two-thirds interest in a manufacturing company which itself was a competent opponent: Continental Oil Company's Application [2] . Whether a comparatively small shareholding in a large company should likewise be held to give the requisite interest may be a question of degree, but I have not to consider it in this case since Kaiser Refractories is the appellant's wholly-owned subsidiary. The view adopted in the Badische Anilin Case [1] seems to me to be the common-sense view upon what is, on the authorities as I read them, not a technical legal question but a practical question which it is a mistake to attempt to answer by confining the expression "a person interested" in s. 59 to cases falling within rigid categories. Early attempts to restrict the relevant kind of interest to an interest as a holder of patents or a manufacturing interest had to be departed from in order to admit a trading interest. These classes of interests, however, are but illustrations. Lord Buckmaster's general proposition goes, in my opinion, as far as it is legitimate to go towards defining the interest which the legislature has chosen to leave without express definition. In my opinion the decision in the Badische Anilin Case correctly applies that proposition.
1. [1963] R.P.C. 19.
2. [1963] R.P.C. 32.
3. [1963] R.P.C. 19.
The respondent, however, contends that even if the appellant has such an interest as makes it a competent opponent, the evidence which establishes the interest is inadmissible because the notice of opposition did not state the relevant facts. An analogy was suggested between a notice of opposition under the Patents Act and a notice of objection to an assessment under the Income Tax Assessment Act 1936 Cth. In my opinion there is no such analogy, for the former Act contains no provision corresponding with s. 190 (a) of the latter. The argument against admitting the evidence rests upon reg. 20 of the Patents Regulations, which provides that a notice of opposition to the grant of a patent shall be in accordance with form 12. That form contains the words "My interest in this matter is based on the following facts:—"; but there is nothing in the Act or the Regulations to make a statement of facts sufficient to give a locus standi a condition precedent to the right of objection or the right of appeal. On the contrary, s. 59 gives "a person interested" an unqualified right to oppose the grant of the patent by notice in writing lodged at the Patent Office. Regulation 20 would, I think, be inconsistent with the Act and therefore beyond the regulation-making power in s. 177 if it meant that unless form 12 were complied with to the extent of stating the facts upon which the opponent's interest depends a person in fact interested should not be entitled to oppose the grant by lodging the notice. The terms of s. 59 by which the right of opposition is limited to a right to oppose "by notice in writing lodged at the Patent Office" require no more for a valid opposition than what Evatt J. called "a de facto notice": R. v. Commissioner of Patents; Ex parte Weiss [1] . The provision in form 12 for stating the facts as to interest is to be understood, in my opinion, as directory only, with the result that the absence of the statement does not make the notice something less than a notice of opposition, whatever may be the effect as regards costs.
1. (1939) 61 C.L.R. 240, at p. 261.
The appeal is, of course, only an appeal in name. In truth it is an original proceeding, being the first judicial proceeding in the matter of the opposition. The right of appeal is given to an opponent who, in the opinion of the Appeal Tribunal, "is entitled to be heard in opposition to the grant", and a person who proves before the Tribunal, as the appellant has proved in this case, that he had an interest which entitled him to oppose the grant of the patent and still has that interest answers that description. The appeal is therefore competent. It must be decided upon the evidence adduced before this Court, even though that evidence presents on the question of interest a case completely different from the case which was suggested before the Deputy Commissioner. This appears to me to follow from the nature of the jurisdiction under s. 76 (ii.) of the Constitution as to which see Federal Commissioner of Taxation v. Lewis Berger & Sons (Australia) Ltd. [2] ; Commissioner of Taxation v. Finn [3] ; and indeed it appears from the general provision in s. 149 that upon the hearing of an appeal the Appeal Tribunal may (inter alia) admit further evidence and give such judgment or make such order as it thinks fit in all the circumstances: cf. Jafferjee v. Scarlett [1] . For the reasons above stated I am satisfied that the appellant has a locus standi to oppose the grant of a patent.
1. (1927) 39 C.L.R. 468, at p. 469.
2. (1960) 103 C.L.R. 165, at pp. 167, 168.
3. (1937) 57 C.L.R. 115, at pp. 119, 126.
The respondent contended that the power to admit further evidence implies a discretion, and that I should exercise the discretion by refusing to allow the appellant to depart from the notice of opposition and to make here a case which it did not choose to make before the Deputy Commissioner. In my opinion, however, it is in the public interest that a serious opposition by a person entitled in fact to oppose the grant of a patent should be dealt with on the merits, rather than that it should be shut out in consequence of a failure in procedure, lamentable though the failure may be. I was referred to the principles upon which applications for leave to give further evidence are dealt with in England: see Brownie Wireless Co.'s Application [2] ; Toyo Tsushinki Kabushiki Kaisha's Application [3] . Rule 7 of the Patent Appeal Tribunal Rules in England, however, excludes further evidence on appeal, except with the leave of the Appeal Tribunal. In Australia there is not, and constitutionally there could not be, such a rule, and the English principles are, in my opinion, inapplicable.
1. (1928) 46 R.P.C. 457, at p. 461.
2. [1962] R.P.C. 9.
This leaves a question of costs. When both parties had closed their cases and the addresses were almost completed, the appellant's counsel found himself under a necessity of applying for leave to adduce further evidence. Very properly he undertook to abide by an order that the appellant pay the respondent's costs of the appeal up to that time. As no further hearing has been necessary there cannot be any significant difference between those costs and the whole costs of the appeal. Even without the undertaking I should have been disposed to order the appellant to pay the costs, for if the notice of opposition and the material before the Deputy Commissioner had been prepared as they should have been the appeal would have been unnecessary.
Both parties have asked that if I should be in favour of the appellant on the question of locus standi I should remit the case to be decided on the merits in the Patent Office. I agree that that is the right course to adopt, for if this Court is to decide the merits of the opposition it should have the benefit of the opinion of the Commissioner or Deputy Commissioner.
The order I shall make is that the appeal be allowed; that the Deputy Commissioner's dismissal of the opposition and his direction that the application proceed to grant be set aside; that the matter of the opposition be remitted to the Commissioner to be decided; and that the appellant pay the respondent's costs of the appeal. The Deputy Commissioner's award of costs against the opponent will stand. |
high_court_of_australia:/showbyHandle/1/11493 | decision | commonwealth | high_court_of_australia | text/html | null | Commissioner of Taxation (Cth) v Westraders Pty Ltd [1980] HCA 24 | https://eresources.hcourt.gov.au/showbyHandle/1/11493 | 2024-09-13T22:55:28.024754+10:00 | High Court of Australia
Barwick C.J. Mason, Murphy, Aickin and Wilson JJ.
Commissioner of Taxation (Cth) v Westraders Pty Ltd
[1980] HCA 24
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
1980, Aug. 5
Barwick C.J.
The facts of this case disclose an ingenious use of the provisions of ss. 36 and 36A of the Income Tax Assessment Act, 1936 Cth, as amended (the Act) to produce what is claimed to be an allowable deduction from a taxpayer's assessable income. The facts were found by the Supreme Court of New South Wales (Rath J.) [20] . They were found on available evidence and have not been challenged at any time in the course of the proceedings in the case. Further, they were confirmed as correct by the majority of the Federal Court (Deane and Toohey JJ.) [21] and, as I think, also by Brennan J. although he found himself able to reach a different ultimate conclusion of fact, which his Honour thought not inconsistent with the primary judge's findings.
1. (1977) 17 A.L.R. 232; 8 A.T.R. 43; 77 A.T.C. 4444; (1979) 38 F.L.R. 306; 24 A.L.R. 139.
2. (1979) 9 A.T.R. 558; 79 A.T.C. 4089.
Because of the employment of the provisions of the Act to produce a very large diminution of tax, the case affords an occasion to point out the respective functions of the Parliament and of the courts in relation to the imposition of taxation. It is for the Parliament to specify, and to do so, in my opinion, as far as language will permit, with unambiguous clarity, the circumstances which will attract an obligation on the part of the citizen to pay tax. The function of the court is to interpret and apply the language in which the Parliament has specified those circumstances. The court is to do so by determining the meaning of the words employed by the Parliament according to the intention of the Parliament which is discoverable from the language used by the Parliament. It is not for the court to mould or to attempt to mould the language of the statute so as to produce some result which it might be thought the Parliament may have intended to achieve, though not expressed in the actual language employed. In this connection, I would indorse what was said by Deane J. in his reasons for judgment in this case, and which, in my opinion, are worthy of repetition. Speaking of the result of this case in upholding the taxpayer's claim to deduction, his Honour said [1] :
That result may seem both contrary to the general policy of the Act (if it be possible to discern any general policy other than that people pay income tax) and unfair to the ordinary taxpayer who willingly or reluctantly contributes, without resort to tax avoidance, the share of his net income which the Parliament has determined is required by the nation for the common good. If there be, in truth, such contrariety or unfairness, the fault lies with the form of the legislation at the relevant time and not with the courts whose duty it is to apply the words which the Parliament has enacted. For a court to arrogate to itself, without legislative warrant, the function of overriding the plain words of the Act in any case where it considers that overall considerations of fairness or some general policy of the Act would be best served by a decision against the taxpayer would be to substitute arbitrary taxation for taxation under the rule of law and, indeed, to subvert the rule of law itself (see Ransom v. Higgs [2] ; Inland Revenue Commissioners v. Duke of Westminster [3] ).
1. (1979) 38 F.L.R., at pp. 319-320; 24 A.L.R., at p. 151; 9 A.T.R., at p. 568; 79 A.T.C., at p. 4098.
2. [1974] 1 W.L.R. 1594, at p. 1617.
3. [1936] A.C. 1, at p. 19.
The principle to which his Honour calls attention is basic to the maintenance of a free society.
Parliament having prescribed the circumstances which will attract tax, or provide occasion for its reduction or elimination, the citizen has every right to mould the transaction into which he is about to enter into a form which satisfies the requirements of the statute. It is nothing to the point that he might have attained the same or a similar result as that achieved by the transaction into which he in fact entered by some other transaction, which, if he had entered into it, would or might have involved him in a liability to tax, or to more tax than that attracted by the transaction into which he in fact entered. Nor can it matter that his choice of transaction was influenced wholly or in part by its effect upon his obligation to pay tax. Of course, the transaction must not be a pretence obscuring or attempting to supplant some other transaction into which in fact the taxpayer had earlier entered. Again, the freedom to choose the form of transaction into which he shall enter is basic to the maintenance of a free society.
Section 36 (1) of the Act provides:
Subject to this section, where—
(a) a taxpayer disposes by sale, gift, or otherwise of property being trading stock, standing or growing crops, crop-stools, or trees which have been planted and tended for the purpose of sale;
(b) that property constitutes or constituted the whole or part of the assets of a business which is or was carried on by the taxpayer; and
(c) the disposal was not in the ordinary course of carrying on that business,
the value of that property shall be included in the assessable income of the taxpayer, and the person acquiring that property shall be deemed to have purchased it at a price equal to that value.
In 1951 this Court decided that s. 36 (1) was only applicable to the disposal of the entirety of the ownership in an article of trading stock and inapplicable to the disposal of an undivided fractional interest in such an article (Rose v. Federal Commissioner of Taxation [4] ).
1. (1951) 84 C.L.R. 118.
The facts of that case were that a father, the owner of a pastoral business, with livestock as part of its stock in trade, entered into partnership with his two sons. It was agreed between the three that the lands and stock owned by the father should constitute the capital of the partnership, the father making a gift to each of the sons of a one-third interest therein. The Court held that s. 36 (1) did not apply to these facts.
In 1952 the Parliament inserted s. 36A into the Act, evidently to reverse the consequence of s. 36 (1) perceived by this Court in Rose's Case. Section 36A (1) provides:
Where, for any reason, including—
(a) the formation or dissolution of a partnership; or
(b) a variation in the constitution of a partnership, or in the interests of the partners,
a change has occurred in the ownership of, or in the interests of persons in, property constituting the whole or part of the assets of a business and being trading stock, standing or growing crops, crop-stools, or trees which have been planted and tended for the purpose of sale, and the person, or one or more of the persons, who owned the property before the change has or have an interest in the property after the change, section thirty-six of this Act applies as if the person or persons who owned the property before the change had, on the day on which the change occurred, disposed of the whole of the property to the person, or all the persons, by whom the property is owned after the change.
The appellant first submitted that a transaction would not fall within the operation of s. 36A (1) unless it did not occur in the ordinary course of business within the meaning of s. 36 (1) (c): in other words, that it was not enough that the transaction satisfied the requirements of s. 36A (1): it must also satisfy all the requirements, including that of par. (c), of s. 36 (1). In my opinion, this submission should be rejected. In the first place, s. 36A (1) provides its own conditions on which s. 36 (1) is to apply to the transaction. In the next place, s. 36A (1) erects a notional or fictional transaction in order that s. 36 (1) may apply. It is scarce to be thought that a notional or fictional transaction, one which has not taken place, should be required to have taken place in the ordinary course of business.
The appellant then relies on the reasons for judgment of Brennan J. to submit that the shares disposed of by Jensen Mining and Investment Ltd. (Jensen) to Jenspart Trading Company (Jenspart) were not at the time of their disposal stock in trade of Jensen.
To enable this submission to be understood, it is necessary to summarise the relevant facts as found by the primary judge. Jensen was at all material times a share trader. It had acquired some shares in order to gain access to the assets of the companies in which they were held and in order by declaration and payment of a dividend to reduce their value on disposal. Undoubtedly, whatever the motivation to acquire these shares, when acquired they formed part of Jensen's stock in trade as a share trader. They were bought to be sold, though not till value had been taken from them by the payment of a dividend.
Some months before these shares were disposed of and after their value had been diminished, Jensen decided to promote partnerships, in which it would be a participant. The plan devised by Jensen was to dispose of shares whose value had been so diminished to these partnerships so that each partnership could exercise the election given by sub-s. (2) of s. 36A, i.e. by nominating the cost of the shares to Jensen as the notional cost to the partnership. The disposal of such shares at market value would thus disclose a loss deductible under s. 51.
One such parcel of shares was disposed of to Jenspart of which Jensen was a member to the extent of a 25 per cent interest. The value placed on the shares for the purpose of fixing the extent of Jensen's interest was their market value, the whole of which was treated as Jensen's contribution to the capital of the partnership. But the shares vested in the partnership as a whole. The partnership, including Jensen (who obtained a fee for joining in the election), having given a notice of election under s. 36A (3), disposed of the shares on the day they were transferred to it at a price slightly in excess of the market value placed on them when received from Jensen. However, if ss. 36 (1) and 36A (1) were applicable to the partnership in its dealing with the shares, the result of the election of the partnership under s. 36 (1) was a loss of some $6,463,484 being the difference between the cost of the shares to Jensen, i.e. before their value had been diminished, and the sum realised on their sale by the partnership.
One of the members of the partnership, Jenspart, was the respondent. It claimed against its assessable income a deduction of its proportion of this partnership loss. The appellant disallowed the deduction. This disallowance gave rise to the respondent's appeal to the Supreme Court, to the appellant's appeal to the Federal Court and to his appeal to this Court.
The appellant says that, although the shares disposed of to Jenspart were stock in trade of Jensen when acquired, they ceased to be so when Jensen formed the intention of disposing of them to a partnership which Jensen would form and of which it would be a member. It is said that such a method of disposal was not part of the business of a share trader but a departure from it and a distinct and disparate business, as it were, sui generis.
This submission is, in my opinion, in flat opposition to the express finding of fact of the primary judge. As appears from his judgment, Rath J. was well aware of the so-called new development of Jensen's business, i.e. the plan to form the partnerships, but, none the less, he expressly found the shares in question to have been trading stock of Jensen at the time of their disposal to the partnership Jenspart.
However, in any case, it is to my mind fallacious to conclude that the disposal to a partnership of which the disponer was to be a member was not a manner of disposal of the shares in a business of share trading. Such a method of disposal was to an extent novel. But it was, however unusual, a method of disposing of the shares bought and held for disposal. To decide upon such a method of disposal did not involve, in my opinion, an abandonment of the business of share trading or the doing of something outside the scope of that business.
The matter might be pointed up by attempting to apply the reasoning of Brennan J. to the facts of Rose's Case [5] . Consistently with that reasoning, s. 36A (1) would not apply to those facts. If the reasoning is correct, it should be held that the father, in deciding to form the partnership with his sons and to dispose of his stock to the partnership, removed them from his stock in trade so that when disposed of to the partnership they were no longer part of his stock in trade. Thus would s. 36A (1), which was designed to enable the effect of Rose's Case to be reversed, fail entirely of its purpose.
1. (1951) 84 C.L.R. 118.
In my opinion, the primary judge's finding should stand: and, if it matters, it was in my opinion a correct finding.
The appellant, as a variant of the primary submission that to satisfy s. 36A (1) the disposal of the stock in trade must not be in the ordinary course of business, submits that ss. 36 and 36A are designed to deal only with transactions which do not arise in the ordinary course of business. Therefore, if the shares disposed of to Jenspart were part of Jensen's stock in trade at the time of that disposal, the transaction between Jensen and Jenspart in relation to the shares was in the ordinary course of Jensen's business and fell for that reason outside the scope of ss. 36 and 36A.
But s. 36A (1) sets out particular conditions upon the fulfilment of which s. 36 (1) is attracted. It is unconcerned with the question whether or not the transaction which satisfies the conditions it specifies is a transaction in the ordinary course of business. I can see no warrant for holding that ss. 36 (1) and 36A (1) are only concerned with transactions which are not in the ordinary course of business. It seems to me that this submission must be rejected.
The final submission of the appellant was that the shares received by Jenspart from Jensen did not form part of the trading stock of Jenspart. This submission is immediately answered, in my opinion, by the terms of the sections with which we are concerned. There is no requirement that the shares should become trading stock in the hands of the disponee. It suffices that they were part of the trading stock of the disponer at the time of their disposition.
In my opinion, the majority of the Federal Court reached a correct decision in holding that the respondent was entitled to the claimed deduction. Accordingly, the appeal should be dismissed.
Mason J.
This is an appeal by the Commissioner from the judgment of the Federal Court of Australia [6] which by majority dismissed an appeal from the decision of the Supreme Court of New South Wales, Administrative Law Division (Rath J.) [7] which had allowed the respondent taxpayer's objection to the assessment of income tax made by the Commissioner upon income derived by the taxpayer during the year ended 30th June 1975 ("the 1975 year").
1. (1979) 38 F.L.R. 306; 24 A.L.R. 139; 9 A.T.R. 558; 79 A.T.C. 4089.
2. (1977) 17 A.L.R. 232; 8 A.T.R. 43; 77 A.T.C. 4444.
For the 1975 year the respondent taxpayer claimed a deduction of $248,844.00 as "Tax Loss in Share Trading Partnership Jenspart Trading Co." The members of this partnership ("Jenspart") were the taxpayer, Jensen Mining & Investments Ltd. ("Jensen") and seventeen others. Section 92 of the Income Tax Assessment Act 1936, as amended ("the Act") provides that a partner's individual interest in a partnership loss incurred in the year of income shall be an allowable deduction. The deduction claimed was disallowed by the Commissioner.
Jenspart showed a loss of $6,463,484.00 in its return for the 1975 year. In this return 3.85 per cent of the loss, amounting to $248,844.00, was assigned to the taxpayer. By its return the partnership claimed that it was a share trading partnership and that it had sustained, for taxation purposes, a very substantial loss on the sale of shares which it had acquired from Jensen in circumstances shortly to be described. After taking into account the actual cost of the shares which it sold, together with the actual cost of closing stock at 30th June 1975 and the price of the shares sold as well as stamp duty, brokerage and other expenses, Jenspart made a small "book profit". However, Jenspart and the taxpayer claimed that the profit was converted into a loss for tax purposes of $6,463,484.00 by reason of Jensen and the other members of the partnership having made an election under s. 36A (2) of the Act. The effect of this election, if validly made, was that the cost of the shares transferred by Jensen to Jenspart was deemed to be the price paid by Jensen for those shares. It was common ground that the price paid by Jensen for the shares which it transferred to Jenspart was $6,584,513.00.
In this Court, as in the Federal Court and the Supreme Court, the broad issue for determination is whether, in the circumstances disclosed in evidence, the election on which the taxpayer relies was validly made under s. 36A (2). The resolution of this issue depends on the interpretation of ss. 36 and 36A of the Act and upon the outcome of certain issues of fact to be discussed, in particular—(a) whether Jensen was carrying on business as a share trader; and (b) whether the shares transferred by Jensen to Jenspart formed part of the trading stock of Jensen in its business as a share trader. For the taxpayer to succeed in bringing into play the provisions of ss. 36 and 36A it is necessary that these two issues of fact be determined in its favour.
Section 36 (1) provides that where a taxpayer disposes of trading stock otherwise than in the ordinary course of business, the value of the trading stock shall be included in the assessable income of the taxpayer, and the person acquiring the trading stock shall be deemed to have purchased it at a price equal to that value. For this purpose "value" is the market value at the date of the disposal; or, if in the opinion of the Commissioner, there is insufficient evidence of market value on that day—the value which in his opinion is fair and reasonable (sub-s. (8)).
Section 36A (1) provides that where, for any reason including the formation of a partnership, a change has occurred in the ownership of trading stock, and the person who owned the trading stock before the change has an interest in the trading stock after the change, s. 36 applies as if the person who owned the trading stock before the change had, on the day on which the change occurred, disposed of the whole of the trading stock to the persons by whom the trading stock is owned after the change. Section 36A (2) provides that in certain circumstances the parties referred to in s. 36A (1) may elect that the value shall be cost, not market value, and the taxpayer contends that those circumstances exist in this case.
Jensen was at all material times a public company. It had commenced business in 1958 as a merchant banker, but in the financial years ending 30th June 1971 and 1972 ("the 1971 and 1972 years") it changed its business. The new business was described as that of a mining and investment company. In these two years it actively subscribed for, bought and sold shares in public and private companies. These activities were so regular, so continuous and of such magnitude that Rath J. held that Jensen carried on the business of a share trader. He also found that Jensen continued its share trading and dealing activities in the years ended 30th June 1973 to 1975 inclusive, notwithstanding that in the latter years Jensen's activity in buying and selling shares was apparently confined to the carrying out of schemes known in taxation circles as "Division 7 schemes". In essence these schemes involved the acquisition by Jensen of a substantial proportion of the share capital of private companies having large amounts of undistributed profits, the declaration and payment of substantial dividends out of those profits by the companies and the subsequent sale of the share capital in the companies at a lower price than that paid on acquisition.
In May 1975 Jensen made plans for the promotion of partnerships which were designed to take advantage of the deemed price provisions contained in ss. 36 and 36A. Jenspart was such a partnership. It was formed in May 1975. The Partnership Deed dated 28th May 1975 provided that the initial capital of the partnership was to consist of (a) $345,000.00 in cash to be contributed by the partners other than Jensen; and (b) $115,000.00 being the agreed market value of certain shares beneficially owned by Jensen which Jensen, from the commencement of the partnership, held on trust for the partnership until the shares were transferred to the partnership and registered in the names of the partners.
On 27th June 1975 Jensen executed transfers to Jenspart of the shares it had held in trust for the partnership, being parcels of shares in nineteen companies. On the same day Jenspart transferred all the shares contributed by Jensen, except a parcel of shares in a company known as Beneficial Finance Corp. Ltd., to four other companies.
As I have said, the original cost to Jensen of the shares transferred to Jenspart was $6,584,513.00. This price reflected the fact that the companies in which the shares were held had large amounts of undistributed profits available for distribution by way of dividend. After causing the profits to be distributed in the form of dividends, Jensen sold the shares to Jenspart for the greatly reduced figure of $111,284.20. In most instances Jensen had carried out what is known as a "dividend stripping" operation.
If, by virtue of s. 36A (1), s. 36 (1) applied to the transaction between Jensen and Jenspart, then the value of the shares transferred in the hands of Jenspart was the reduced value. If, however, s. 36A (2) applied to the transaction, then the value of the shares in the hands of Jenspart for the purposes of s. 36 was the cost of the shares to Jensen, viz. $6,584,513.00.
It is convenient in the first instance to consider the Commissioner's contentions that Jensen was not carrying on business as a share trader in the 1975 year and that even if it was, the shares which it transferred to Jenspart on 27th May 1975 did not form part of the trading stock of Jensen. After a detailed examination of the activities of Jensen, Rath J. concluded that Jensen was a share trader and that the relevant shares were part of Jensen's trading stock. I see no reason to disagree with these findings. However, in order to deal with the arguments advanced for the Commissioner it is necessary to canvass the facts in some detail.
The Commissioner does not contest Rath J.'s finding that Jensen carried on business as a share trader in the 1971 and 1972 years, conceding that it bought and sold shares in listed companies through brokers on an extensive scale in those years. However, he draws attention to Rath J.'s comments that the operations were not profitable, that the operations in the 1972 year were on a smaller scale and that the management might well have turned its mind "to the wisdom of continuing share trading operations in their then present form". In fact there was no direct evidence that the management gave consideration to this question.
The Commissioner then says that stock on hand at the end of the 1972 year, valued at $3,860.00 only, was disposed of in the 1973 year, with the exception of a parcel of shares in Arcadia Minerals N.L. which were of negligible value. To this observation he adds the comment that there were no new acquisitions after 30th June 1972 before the 1975 year. This comment ignores the acquisition of shares in seven companies in the 1973 year at a total cost of $3,293,026.00 which were purchased, according to the evidence, in the course of Jensen's share dealing operations. The comment also ignores the acquisition of shares in nine other companies in the 1974 year at a total cost of over $1,000,000.00 again, according to the evidence, in the course of the same business.
It is true that in its first return of income for the 1973 year Jensen did not claim that it was a share trader. But Rath J. expressly accepted the evidence given by Mr. Fox, the chairman of Jensen, that the return was lodged without his knowledge due to his absence overseas and that steps were subsequently taken to submit an amended return stating that the company was a share trader.
It is also true that Jensen's annual returns for the years up to 30th June 1974 ("the 1974 year") contain no express reference to share trading and that the 1974 report describes the principal activities of the company as "the financing and operation of mining and exploration ventures, the operation of wine bars and country bistro restaurants and a wide range of general investments similar to those undertaken in previous years". However, the accounts of Jensen lodged with its 1974 taxation return give these particulars of its profits and losses from share trading—
profit (loss) from share trading as per accounts Metropolitan Tenpin Bowling Limited 94,659 J. & J. Finance Pty. Limited ( 995,000) Norpe Investments Pty. Limited ( 995,000) Meik Pty. Limited ( 995,000) (2,890,341) Add amount provided in accounts in previous years 2,985,000 total profit 94,659 profit (loss) from share trading for taxation Metropolitan Tenpin Bowling Limited 94,659 J. & J. Finance Pty. Limited ( 995,000) Norpe Investments Pty. Limited ( 995,000) Meik Pty. Limited ( 995,000) (2,890,341)
The four companies referred to were companies in which shares were acquired in the 1973 year.
In its 1974 return Jensen gave these further particulars of its share dealing operations—
share dealing operations
As part of its business in share dealing, the company held at the end of the year of income the following shares:— Company Cost Austral Pacific Mining Corp. Limited 10,235 Renmore Pty. Limited 99,250 Toomar Investments Pty. Limited 153,552 N. & K. Properties Limited 454,080 Saxonvale Vineyards Limited 36,432 George Hudson Holdings Limited 761 Arcadia Minerals 1,612 Geear Pty. Limited 100 Colmar No. 1 Pty. Limited 105,500 Scarf Bros. Corp. Pty. Limited 600,930 Hero Scarf Bros. Pty. Limited 283,140 Demos Pty. Limited 74,250 Clabcaux Pty. Limited 27,720 1,847,562
By virtue of S. 31 of the Income Tax Assessment Act, the taxpayer elects the value of the above trading stock to be its cost price.
Three of the companies mentioned were companies in which shares were acquired in the 1973 year.
The Commissioner attaches importance to the circumstance that most of the shares acquired by Jensen after the 1972 year and that all the shares in eighteen of the nineteen companies acquired by Jenspart were private company shares, the exception being the shares in Beneficial Finance Corp. Ltd. It is said that shares in private companies are not normally the subject of trading transactions, unlike, for instance, manufactured articles or commodities. No doubt it is true to say that shares in public companies are much more frequently dealt with by traders than shares in private companies, but I can see no reason why private company shares should lie outside the realm of share dealing. In recent years it seems that there has been a strong demand for various classes of private company shares, e.g. shares in loss companies and excess distribution companies. The fact that there are restrictions on the transfer of private company shares does not prevent a person from dealing in them.
The Commissioner then advances a number of reasons with a view to supporting the conclusion that Jensen, in acquiring shares after the 1972 year, was not motivated by a desire to make a profit on the resale of shares and that it was "on the take-over trail", bent on acquiring cheaply the assets of other companies. Thus it is said that shares in Toomar Investments Pty. Ltd. and Renmore Pty. Ltd. were acquired so that Jensen might purchase inexpensively land which was an asset of these companies. In some instances, such as J. & J. Finance Pty. Ltd., the dividends received exceeded the price paid for acquisition of the shares and in other cases Jensen derived special advantages from the acquisition of shares, e.g. the acquisition of shares in Metropolitan Ten Pin Bowling Ltd. resulted in the ownership by Jensen of its operating subsidiary.
However, neither the circumstance that Jensen was "on the take-over trail", whatever that colourful expression may mean, nor the fact that it derived special advantages from its acquisitions, not being the making of a profit on resale, nor the fact that the acquisitions took place in the course of carrying out "Division 7 schemes", is enough to justify the conclusion that Jensen was not, or had ceased to be, a share trader in the 1975 year.
The point is that Jensen engaged in diverse share trading activities and that the character of those activities changed over the years. The cases of Investment and Merchant Finance Corporation Ltd. v. Federal Commissioner of Taxation [8] and Federal Commissioner of Taxation v. Patcorp Investments Ltd. [9] , clearly establish that the purchase of shares in companies having large amounts of undistributed profits, the payment by way of dividends from those profits and then the sale of the shares at a reduced price are transactions of a trading nature and may therefore form part of the activities of a share trader. The two cases also establish that shares so acquired may be considered trading stock. As Walsh J. put it in Investment and Merchant Finance Corporation Ltd. v. Federal Commissioner of Taxation [10] :
But when shares are bought by a dealer in shares and it is intended that they are to be resold and that this will probably occur in the not distant future, I do not think they are to be denied the description of trading stock, either because the trader expects or intends that they will be sold at less than their cost price or because he seeks to obtain a commercial advantage from the transaction otherwise than from a profit on the resale, that is, an advantage from an expected dividend and from an expected taxation benefit.
See also Patcorp [11] , per Gibbs J. I agree with these observations. They accord with the notion expressed in the statutory definition of trading stock in s. 6—"anything purchased for purposes of sale". See also Federal Commissioner of Taxation v. St. Hubert's Island Pty. Ltd. (In liq.) [12] .
1. (1971) 125 C.L.R. 249.
2. (1976) 140 C.L.R. 247.
3. (1971) 125 C.L.R., at pp. 270-271.
4. (1977) 140 C.L.R., at pp. 290-291.
5. (1978) 138 C.L.R. 210.
I acknowledge that in the present case Jensen was not in 1975 buying and selling shares through brokers as an orthodox share trader would. Indeed, Jensen's transactions in the later years were limited to Div. 7 schemes and the promotion of s. 36A partnerships. None the less I regard its activities in buying and selling shares, connected though they were with the carrying out of Div. 7 schemes, as constituting the business of share trading. Jensen's earlier activities as an orthodox share trader assist in arriving at this conclusion. But I do not regard them as essential to the conclusion.
The Commissioner's third submission is that even if Jensen was considered a share trader in the relevant period and the shares were considered part of Jensen's trading stock prior to 27th May 1975, the shares ceased to be trading stock at the time of their transfer to Jenspart. This was the view taken by Brennan J., who dissented in the Federal Court. In support of his submission the Commissioner cited the cases of Danmark Pty. Ltd. v. Federal Commissioner of Taxation [13] and Watson Bros. v. Hornby (H.M. Inspector of Taxes) [14] as examples of situations in which assets cease to be trading stock and are converted into capital assets. The two cases demonstrate that assets initially acquired as trading stock in a business may in some circumstances be changed into investments or capital assets.
1. (1944) 7 A.T.D. 333.
2. (1942) 24 T.C. 506.
Although it is clear that a company may change the nature of its activities, there must be sufficient evidence to support such an alteration. Here, as Rath J. found, all the evidence supported the view that Jensen was a share trader and that the shares which it purchased were trading stock. Rath J. saw the promotion of "s. 36A partnerships" as "another business activity" of Jensen's. The relevant shares which were transferred to Jenspart were "trading stock in a business carried on by Jensen".
Watson Bros v. Hornby (H.M. Inspector of Taxes) which was approved by Sharkey v. Wernher [15] establishes that a trading asset may in some circumstances subsequently be treated as a capital asset. But it has no relevance to a situation, as here, where a trading company is engaged in diverse trading activities, using in a new trading venture or trading phase assets which were clearly trading stock of its business activities prior to the new venture.
1. [1956] A.C. 58.
The next argument of the Commissioner was that Jenspart was not a share trader and the shares which were transferred on 27th May 1975 were not trading stock of Jenspart. This is said to be an essential condition of the application of s. 36A. The argument is that because s. 36 states that the value of the property (shares) shall be included in the assessable income of the transferor and because it also states that the purchaser of the property shall be deemed to have purchased it at a price equal to that value, it is to be inferred that both transferor and transferee are traders and that the property is trading stock in the business of each of them. The Commissioner also argues that as s. 36A (1) provides for the notional application of s. 36 in the circumstances postulated in s. 36A (1), it is necessary that the relevant property constitute trading stock in the hands of transferor and transferee if the latter is to have the option under s. 36A (2).
In my opinion there are two distinct reasons for rejecting this submission. First, as Toohey J. stated in the Federal Court [16] —
"In contrast with the opening words of s. 36A (1) the requirement" [in s. 36A (2)] "is that the property becomes an asset of a business carried on by a person or persons by whom the property is owned after the change; the additional requirement of being trading stock does not exist. There is nothing in the language of the section that requires the property to be received as trading stock. What is necessary is that it becomes upon the change in ownership an asset of a business carried on."
Secondly, Rath J. [17] accepted that:
Jenspart was in business as a share trader from the day after its formation. The shares transferred to it from Jensen were sold as part of its share-trading activities, and were an asset of the business carried on by it within the meaning of s. 36A (2) (a).
I see no reason to disagree with this finding, despite the Commissioner's challenge to it.
1. (1979) 38 F.L.R., at p. 325; 24 A.L.R., at p. 157; 9 A.T.R., at p. 563; 79 A.T.C., at p. 4101.
2. (1977), A.L.R., at p. 252; 8 A.T.R., at p. 61; 77 A.T.C., at p. 4459.
The fifth and final submission of the Commissioner is that s. 36 and s. 36A should be read together so that the requirement in s. 36 (1) (c) that "the disposal was not in the ordinary course of carrying on that business" is imported into s. 36A so that a "change" referred to in s. 36A (1) is one that occurs otherwise than in the ordinary course of business. It is further submitted that this transfer of shares from Jensen to Jenspart was in the ordinary course of Jensen's partnership promotion business and therefore that s. 36A had no application to the transaction in question.
In his reasons for judgment Rath J. rejected this submission, as did Toohey J. in the Federal Court, with whom Deane J. agreed. I am in agreement with their Honours' conclusion.
The terms of s. 36A are quite clear. The section provides its own criteria for a change in the ownership of property coming within its scope. To come within s. 36A (1), there must be (a) a change in the ownership of, or in the interests of persons in, property, (b) the property must constitute the whole or part of the assets of a business and must be trading stock or standing or growing crops, crop-stools or trees planted and tended for the purpose of sale, and (c) the person, or one or more of the persons who owned the property before the change must have an interest in the property after the change. Once these three conditions are satisfied the legal consequences of s. 36 attach to the change in ownership, i.e.: "The value of that property shall be included in the assessable income of the taxpayer, and the person acquiring that property shall be deemed to have purchased it at a price equal to that value." The "value" mentioned is then ascertained by reference to s. 36 (8), unless an election is made under s. 36A (2).
The Commissioner relies strongly on Rose v. Federal Commissioner of Taxation [18] , in consequence of which s. 36A was introduced, as demonstrating that s. 36A was designed merely to overcome the shortcomings in s. 36 which the decision disclosed. There the Court held that property in the assets of a business moving under a partnership deed from the sole ownership of one person to the co-ownership of that person and two other persons as partners in equal shares was not "disposed of" within the meaning of s. 36 (1). The inference to be drawn, the Commissioner suggests, is that s. 36 was given an operation in relation to the disposition of undivided fractional interests in property in the circumstances set out in pars. (a), (b) and (c) of s. 36 (1) and not otherwise.
1. (1951) 84 C.L.R. 118.
Mr. Priestley for the Commissioner seeks to give additional force to this argument by pointing to the different provisions made by the Act with respect to (a) sales of trading stock made by a taxpayer in the ordinary course of carrying on a business (ss. 25 and 51) and the taking into account of trading stock of a taxpayer carrying on a business in ascertaining his taxable income (ss. 28 and 31); and (b) the taxation of disposals of trading stock made by a taxpayer otherwise than in the ordinary course of carrying on his business—see s. 36 (1). This argument would have great force if the provisions referred to in (a) above were capable of applying to undivided fractional interests in property and to transactions relating to such interests. Then there would be a compelling reason for regarding s. 36A as a provision aimed directly and exclusively at the gap in s. 36 revealed by the decision in Rose .
Of necessity the answer to this argument is not without some complication. First, I am unable to conclude that ss. 28 and 31, unlike s. 36, apply to undivided fractional interests in property forming part of trading stock. The definition of trading stock in s. 6 which "includes anything produced, manufactured, acquired or purchased for purposes of manufacture, sale or exchange, and also includes livestock" and the reference in s. 31 to "each article of trading stock" suggest that ss. 28 and 31, like s. 36, are not speaking with reference to undivided fractional interests in assets, but to the entirety of the ownership in assets. Even if the judgment of Latham C.J. and the decision in Farnsworth v. Federal Commissioner of Taxation [19] did not deal with this precise topic, they at least raised a very serious question as to the application of ss. 28 and 31 to undivided fractional interests in assets said to constitute trading stock. The application of s. 25 to the proceeds of sale of an undivided fractional interest in property hitherto forming part of the vendor's trading stock would raise another problem.
1. (1949) 78 C.L.R. 504, at pp. 512-513.
The construction and effect of s. 36A (1) should accordingly be approached on the footing that there was a problem in 1952 relating to disposals of undivided fractional interests in property said to constitute trading stock, whether made in the ordinary course of carrying on a business or not, and that the problem was not one which was confined to s. 36. Moreover, I note that when in 1952 s. 36A was introduced into the Act, s. 36 (1) was amended so as to include the present par. (c). Despite the earlier absence of the provision which is now contained in this paragraph, the Court had concluded that s. 36 (1) "had no application to the regular disposal of trading stock in the ordinary course of carrying on a business" (Federal Commissioner of Taxation v. Wade [20] ; Farnsworth's Case [21] ). The purpose of this amendment, so it seems to me, was to ensure that s. 36 itself would of its own force continue to have the operation which the Court had conceded to it, notwithstanding that the new section 36A gave it an independent and additional operation.
1. (1951) 84 C.L.R. 105, at p. 111.
2. (1949) 78 C.L.R., at p. 514.
It is against this background of judicial interpretation and legislative amendment that s. 36A has to be considered. The first point to be made is that the very general words of s. 36A (1) travel beyond the situation which the Commissioner's argument postulates. Secondly, it is of great significance that, whereas the relevant elements of pars. (a) and (b) of s. 36 (1) are expressly reiterated in s. 36A (1), par. (c) of s. 36 (1) is not reflected in any way in the later subsection, notwithstanding its contemporaneous introduction into the earlier subsection. The legislative intention, as I read it, was that s. 36 was to have the operation which had been conceded to it by judicial interpretation, par. (c) being inserted to ensure this result, and s. 36A was to have a comprehensive application to disposals of undivided fractional interests in trading stock whether made in the ordinary course of carrying on a business or not, this application being ensured by the absence of any counterpart to par. (c) of s. 36 (1). By giving s. 36A this comprehensive operation the Parliament not merely cured the defect in s. 36 revealed by Rose [22] , it also took action to resolve the doubts which were engendered in relation to ss. 28 and 31 by Farnsworth [23] .
1. (1951) 84 C.L.R. 118.
2. (1949) 78 C.L.R. 504.
For these reasons I would dismiss the appeal.
Murphy J.
This case arises out of what the taxpayer, Westraders Pty. Ltd., acknowledges is a sophisticated tax avoidance scheme.
A company, Jensen Mining & Investment Ltd. ("Jensen"), engaged in massive share trading and by 1975 had acquired millions of dollars of shares. Many of these were in companies whose main assets were undistributed profits. It "dividend-stripped" these companies and disposed of the stripped shares at their reduced value to partnerships (including itself). The other members of the partnerships had entered them only to avoid taxation by incurring fictional losses in order to claim allowable deductions and reduce their taxable income from other sources. In 1975, Jensen established five such partnerships. The particular partnership which Westraders joined was called Jenspart Trading Company, ("Jenspart"). On 27th June 1975, Jenspart bought shares from Jensen at $111,284, and sold them on the market the same day at $125,200 (which may be treated as the market value). An actual profit of several thousand dollars was made, and there was also a small profit from other share trading. In all, a profit of $9,072 was made, of which Jenspart's share was $349. Jenspart claims to have incurred a fictional loss of $6,463,484 by claiming that the shares Jensen disposed of were acquired not at $111,284 but at $6,584,513, which was the cost of the shares when Jensen originally acquired them. Westraders claimed a deduction of $248,844, being its proportionate share of the claimed "Tax Loss in Share Trading Partnership".
The Act provides for valuation of trading stock in various circumstances. Section 31 of the Income Tax Assessment Act 1936 Cth, as amended, provides that the value of each article of trading stock to be taken into account at the end of the year of income shall be, at the taxpayer's option, the cost price or market selling value or the value at which it can be replaced. Where a business or part of a business is transferred, the valuation of trading stock is market value or, if that would be inappropriate, the Commissioner's assessment (see s. 36 (8)). Where the disposal is to a partnership of which the taxpayer is a member, if a taxpayer retains an interest (of at least one quarter of its value) in the stock disposed of, as here, the taxpayer and the purchaser (that is, the partnership) may elect to use a value for the stock on the purchaser's acquisition at either the market value or the value "that would have been taken into account at the end of the year of income if no disposal had taken place" (see s. 36A (2)). The issue is whether the election on which Westraders relies was validly made under s. 36A (2). I share Wilson J.'s view that these provisions do not apply to a disposition in the ordinary course of a taxpayer's business. In the peculiar circumstances of this case, the setting up of such partnerships and dispositions to them of stock (being shares) for tax avoidance purposes had become (as the trial judge found) part of Jensen's ordinary business at the time of the disposal in question. The trial judge also found [24] :
Early in May 1975 Jensen made plans for another business activity, namely the promotion of partnerships. This new business was intended to take advantage of the deemed price provisions of ss. 36 and 36A. In order that the desired result might be achieved, it was necessary for Jensen to be a member of the partnership, and to bring into the partnership shares which by some process had suffered a considerable diminution in value since their acquisition by Jensen. These shares had to be trading stock in a business carried on by Jensen. The shares transferred to Jenspart answered this description, having been acquired for the purpose of sale in Jensen's business as a share trader.
For this reason, the election was not validly made and the appeal should be allowed.
1. (1977), 17 A.L.R., at p. 250; 8 A.T.R., at p. 59; 77 A.T.C., at p. 4457.
There is an aspect of this case which troubles me. I state my views on it tentatively because no argument was addressed to it. The "stock" Jensen disposed of to Jenspart was materially different to that which Jensen originally acquired, even if its description had not changed. Jensen's business was dividend-stripping. It acquired shares in companies, then caused the companies' assets to be sold and the proceeds disposed of by way of dividends. The companies were left as shells, the shares being worthless or nearly so. The stock was changed so materially that the value of shares in the stripped companies was less than 2 per cent of the original cost. This can be compared with a jeweller in the business of buying and selling old rings who purchases a considerable number of rings with valuable stones which he removes, leaving none or only the almost worthless chips which once surrounded the main stones, and disposes of the valuable stones in some way. The rings divested of their valuable stones are still trading stock but now worth only a small fraction of the original rings. If the jeweller then disposes of the rings as part of the sale of whole or part of the business or some more elaborate scheme, as in this case, to a partnership of which he is a member, it would be absurd to apply the election provision in s. 36A to allow the value of the stoneless rings to be deemed to be the cost of the original rings. This is basically what has been asserted in this case. Shares subjected to a dividend-stripping operation may be trading stock (see Investment and Merchant Finance Corporation Ltd. v. Federal Commissioner of Taxation [25] ; Federal Commissioner of Taxation v. Patcorp Investments Ltd. [26] ), just as rings stripped of their stones may be. It is not commonsense to treat the worthless or nearly worthless shares left after a dividend-stripping operation as if they were the same stock as the shares held before the operation, so that the cost of the original shares is treated as the value "that would have been taken into account at the end of the year of income if no disposal had taken place".
1. (1971) 125 C.L.R. 249.
2. (1976) 140 C.L.R. 247.
In this case, the trader, Jensen, was responsible for the stripping and the alteration in a commercial and realistic sense of the stock so that it should not be regarded as the same stock even though the description remains the same. It is another question when shares are drastically reduced in value by events beyond the control of those involved in a disposition of the shares.
Determining whether stock disposed of is the same as the original stock for the purpose of the election provision may raise questions of degree, which is no novelty. But in this case, the change was a qualitative one. The effect of the dividend-stripping was to divest the shares of their valuable quality and hence their value. The essence of this tax avaoidance scheme was to get something of value which could be dealt with as trading stock, to do something to it to remove its valuable quality (and use it in some other way which does not concern us) and then dispose of the thing in its reduced state, using the election provision of s. 36A to claim the original cost as its value for tax purposes. Jenspart sold the stock at its reduced value and now claims as an allowable deduction the fictional loss between the cost of acquiring it (using the original cost to Jensen of the shares in the unstripped company) and the sale price of the shares in the stripped company. This is a feat of modern magic, successful only because observers allow themselves to be deceived. In commercial reality, the asset-stripped shares Jensen disposed of (at $111,284) were not the same trading stock as the shares originally acquired by it (at $6,584,513).
In general, the provisions of the Income Tax Assessment Act are intended to apply to commercial realities. Some sections, for example, s. 260, are directed specifically at tax avoidance. Other provisions contemplate application in a commercial and realistic way, not in artificial and contrived circumstances. Section 36A and ancillary sections were intended to deal in an orderly way with the tax consequences of the transfer of businesses in which there was trading stock. They were never intended to be used as a vehicle for artificial and contrived transactions for tax avoidance purposes. It is a mistake to hold that any circumstances (however artificial and contrived) which literally fit the words in s. 36A therefore comply with them.
Elsewhere such transparent schemes have generally received no encouragement. The United States Supreme Court, for example, has stressed that a transaction will be disregarded if it is sham or unrealistic. In Gregory v. Helvering, Commissioner of Internal Revenue [27] the Court said of a claimed corporate reorganization:
The whole undertaking was in fact an elaborate and devious form of conveyance masquerading as a corporate reorganization, and nothing else. To hold otherwise would be to exalt artifice above reality and to deprive the statutory provision in question of all serious purpose.
In Commissioner of Internal Revenue v. Court Holding Co. [28] it said:
To permit the true nature of a transaction to be disguised by mere formalisms, which exist solely to alter tax liabilities, would seriously impair the effective administration of the tax policies of Congress.
1. (1935) 293 U.S. 465, at p. 470 [79 Law.Ed. 596, at p. 599].
2. (1945) 324 U.S. 331, at p. 334 [89 Law.Ed. 981, at p. 985].
The transactions in this case are conceded to be a major tax avoidance scheme. The supporters of the scheme seize upon the bar words of s. 36A and claim that these should be applied literally even if for purposes not contemplated by Parliament. The history of interpretation shows the existence of two schools, the literalists who insist that only the words of an Act should be looked at, and those who insist that the judicial duty is to interpret Acts in the way Parliament must have intended even if this means a departure from the strict literal meaning (see the somewhat acid debate by the House of Lords, 13th February 1980). It is an error to think that the only acceptable method of interpretation is strict literalism. On the contrary, legal history suggests that strict literal interpretation is an extreme, which has generally been rejected as unworkable and a less than ideal performance of the judicial function.
It is universally accepted that in the general language it is wrong to take a sentence or statement out of context and treat it literally so that it has a meaning not intended by the author. It is just as wrong to take a section of a tax Act out of context, treat it literally and apply it in a way which Parliament could not have intended. The nature of language is such that it is impossible to express without bewildering complexity provisions which preclude the abuse of a strict literalistic approach.
It has been suggested, in the present case, that insistence on a strictly literal interpretation is basic to the maintenance of a free society. In tax cases, the prevailing trend in Australia is now so absolutely literalistic that it has become a disquieting phenomenon. Because of it, scorn for tax decisions is being expressed constantly, not only by legislators who consider that their Acts are being mocked, but even by those who benefit. In my opinion, strictly literal interpretation of a tax Act is an open invitation to artificial and contrived tax avoidance. Progress towards a free society will not be advanced by attributing to Parliament meanings which no one believes it intended so that income tax becomes optional for the rich while remaining compulsory for most income earners. If strict literalism continues to prevail, the legislature may have no practical alternative but to vest tax officials with more and more discretion. This may well lead to tax laws capable, if unchecked, of great oppression.
The circumstances envisaged by Parliament for the operation of s. 36A do not include a scheme such as this and I am not satisfied that the taxpayer has discharged the onus of proof that the assessment is excessive (see s. 190 (b); Macmine Pty. Ltd. v. Federal Commissioner of Taxation (Cth) [29] ; McCormack v. Federal Commissioner of Taxation (Cth) [30] ).
1. (1979) 53 A.L.J.R. 362.
2. (1979) 143 C.L.R. 284.
The appeal should be allowed.
Aickin J.
I have had the advantage of reading the judgments prepared by the Chief Justice and by Mason J. I agree with their reasons and the conclusion at which each of them arrives. I have nothing to add.
Wilson J.
I have had the advantage of reading the judgments of Barwick C.J. and Mason J. With one important exception, I agree with what their Honours have said in relation to the different issues canvassed in the case. However, the matter upon which I have come to a different conclusion is fundamental to the resolution of the appeal, with the result that I think it should be determined in favour of the Commissioner.
In my opinion, s. 36A, on its proper construction has no application to transactions in the ordinary course of business. It seems to me that there are two possible routes by which one might arrive at this conclusion, a narrow way and a broad way. The narrow way is the route considered and rejected by Rath J. and the learned Justices in the Federal Court. That is the way of reading pars. (a), (b) and (c) of s. 36 (1) into s. 36A (1), a task which gives rise to extraordinary complexity if only because the latter provision has already in its own words covered the ground which forms the subject matter of pars. (a) and (b). I do not attempt to travel by that route.
However, Mr. Priestley, for the Commissioner, pointed us also to the broad way, a route on which it appears that I may travel alone. This route takes for its signpost not simply ss. 36 and 36A in isolation, but it places them in the context of the general charging sections of the Act in their application to trading stock. That context exhibits the features that purchases are allowable deductions under s. 51, sales constitute income under s. 25, and the position of stock on hand at the end of the financial year is regulated by ss. 28 and 31. In my opinion, there is nothing to be gleaned from s. 36A or any other section of the Act to yield a legislative intent that these sections to which I have just referred are abrogated in their application to transactions in the ordinary course of business which possess the added feature that the purchaser is a partnership of which the vendor is a member. Section 36A on its proper construction has no application to such transactions.
There is a further consideration in support of this construction. Given the conditions of its application, s. 36A (1) applies the legal consequences of s. 36 to the change in ownership but on the basis of a fiction that the disponer had disposed of the whole of the property. The effect of so applying s. 36 is to include the value of that property in the assessable income of the taxpayer, and the disponee shall be deemed to have purchased it at a price equal to that value. In my respectful opinion, the effect of these provisions is to emphasise that these fictions are introduced in order to adapt a disposition that is effected otherwise than in the ordinary course of business to fit into the general scheme. There is neither necessity nor occasion to "deem" anything in the case of transactions in the ordinary course of business. Resort to a fiction is unwarranted in such circumstances, resulting from a misconception of the true operation of s. 36A.
It remains for me to point out the consequence of this conclusion in the present case. The sale of the shares from Jensen to Jenspart was, as found by the primary Judge, a transaction in the ordinary course of Jensen's business as a share trader. The sale was effected at market value, and I am unable to appreciate why the fact that the purchaser was a partnership which included the vendor as a member should have destroyed its evident character. Indeed, from a tax point of view, the transaction brought to an end the entire interest of Jensen as an individual trader in the trading stock in question. Henceforth, its interest for tax purposes in that stock fell to be determined pursuant to the provisions of Div. 5 of Pt III of the Act.
In my opinion, the taxpayer was not entitled to the benefit of an election under s. 36A (2), and the Commissioner acted correctly in disallowing the claimed deduction.
I would therefore allow the appeal. |
high_court_of_australia:/showbyHandle/1/11598 | decision | commonwealth | high_court_of_australia | text/html | null | Mullane v Mullane [1983] HCA 4 | https://eresources.hcourt.gov.au/showbyHandle/1/11598 | 2024-09-13T22:55:32.386951+10:00 | High Court of Australia
Mason A.C.J. Wilson, Brennan, Deane and Dawson JJ.
Mullane v Mullane
[1983] HCA 4
ORDER
Appeal allowed. Order of the Full Court of the Family Court of Australia set aside. Matter remitted to the Full Court of the Family Court of Australia for reconsideration in accordance with the judgment of this Court.
Cur. adv. vult.
1983, Feb. 23
Mason A.C.J., Wilson, Brennan, Deane and Dawson JJ.
The Court delivered the following written judgment:—
This is an appeal by special leave from a decision of the Family Court of Australia (Evatt C.J., Butler and Lindenmayer JJ.) on a special case stated by Hogan J. pursuant to s. 94A of the Family Law Act 1975 Cth as amended ("the Family Law Act ").
The material facts may be stated briefly. In 1967, on the petition of the wife, the marriage of the parties was dissolved by order of the Supreme Court of New South Wales. There were three children of the marriage and they were then aged nine, five and one years respectively. By its decree, the court ordered, inter alia,
4. That by consent the Petitioner have the exclusive occupation of the property situate at and known as Number Thirty-four Careebong Road, French's Forest and being the land comprised in Certificate of Title Volume 7705 Folio 182 until such time as all three of the said children of the marriage shall have become self-supporting or the Petitioner shall have remarried whichever event shall first occur.
5. That by consent the Respondent pay all capital and interest due under the mortgage on the aforesaid property as well the Municipal and Water Rates assessed in respect of the property together with ordinary Fire and Burglary Insurance in respect of the property and the cost of all reasonable repairs and maintenance thereto.
6. That by consent the Petitioner be at liberty to apply for such further injunctions or other Orders as may be necessary to give full effect to Order (5) herein.
Consequent on the orders, the wife and three children have continued to occupy the property for the past fifteen years. At all material times the property has been registered solely in the name of the husband and has been subject to a mortgage. He has maintained payments due under the mortgage and has paid municipal and water rates and insurances in respect of the property.
In August 1978 the Family Court of Australia sitting in Sydney (Hogan J.) commenced the hearing of an application by the wife for an order in the following amended terms:
That at the expiration of the Applicant's period of occupation of the property at 34 Careebong Road, French's Forest, pursuant to Order made by the Supreme Court of New South Wales on 27 September, 1967, the Husband do all acts and things and execute all deeds and instruments necessary to effect a sale of the lands and premises at 34 Careebong Road, French's Forest, and out of the net proceeds of sale therefrom after payment out of the amount required to discharge the first registered mortgage thereon, agent's commission and legal costs, a division and payment as to two-thirds thereof to the Applicant and as to one-third thereof to the husband.
It was then submitted for the husband that the court had no power to entertain the application and in due course his Honour on 22 March 1979 stated the case which is now before this Court. In the case the learned judge presented the problem to the Full Court in the form of fourteen separate questions. However, the grant of special leave by this Court was expressly confined to the single question of substance. That question is one of jurisdiction and concerns the effect of the order numbered 4 in the decree made in 1967. That order was made in the exercise of jurisdiction conferred by the Matrimonial Causes Act 1959 Cth, an Act which was repealed by the Family Law Act. By virtue of s. 3(2)(c) of the later Act the order survives the repeal of the earlier Act and is to be treated as if it had been made under the Family Law Act. It is argued for the husband that the order in question effected an alteration of interests in property and is therefore to be treated as if it had been made under s. 79 of the last-mentioned Act. The material part of that section reads as follows:
In proceedings with respect to the property of the parties to a marriage or either of them, the court may make such order as it thinks fit altering the interests of the parties in the property, including an order for a settlement of property in substitution for any interest in the property and including an order requiring either or both of the parties to make, for the benefit of either or both of the parties or a child of the marriage, such settlement or transfer of property as the court determines.
The effect of treating the order as if it had been made under s. 79 is that, subject to a limited jurisdiction to vary it or set it aside, the power of the Family Court to make an order under s. 79 is treated as having been exercised and as exhausted by that notional exercise. The limited jurisdiction to set aside or vary such an order is that conferred by s. 79A and exists only in special circumstances, namely, where the court is satisfied that there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence, the giving of false evidence or any other circumstance: s. 79A, and cf. In the Marriage of Taylor [1] and on appeal sub nom. Taylor v. Taylor [2] ; In the Marriage of Branchflower [3] . It is common ground that s. 79A has no application in the present case.
1. (1977) 30 F.L.R. 17; 15 A.L.R. 266; 3 Fam. L.R. 11,220; [1977] F.L.C. 76,187.
2. (1979) 143 C.L.R. 1.
3. (1979) 44 F.L.R. 16; 6 Fam. L.R. 188; [1980] F.L.C. 75,439.
The contrary argument, advanced for the wife, is that the Family Law Act applies to the order as if it were an order in the nature of maintenance pursuant to s. 74 of the Act, or, alternatively, an injunction made pursuant to s. 114(1). If it be properly treated as an order for maintenance, it is argued that the general powers of variation contained in s. 83 of the Act would be applicable to it and that, there being no order which was required to be treated as if it had been made under s. 79, the power to make an order with respect to the property of the parties remains available.
Much of the argument, both in the Full Court and in this Court, has been concerned with the question whether the order was "a settlement of property" within the meaning of that term in s. 86 of the Matrimonial Causes Act. With all respect to their Honours who constituted the Full Court and who, with a proper regard to the principle of stare decisis, were following the approach adopted by that Court in In the Marriage of King [No. 2] [4] , the formulation of the question in that way tends in our opinion to distract attention from the essential point. It does not matter how the order in question would be characterized by reference to the repealed Act. It is now to be treated as if it had been made under the Family Law Act and the question is whether, so treated, it precludes the making of a further order in relation to the former matrimonial home, in the admitted absence of any of the grounds specified in s. 79A.
1. (1977) 30 F.L.R. 160; 3 Fam. L.R. 11,564; [1977] F.L.C. 76,577.
In stating the issue in that way we have regard to the single issue of jurisdiction to which the grant of special leave was limited. There are important questions of principle touching the merits of the application which may remain even though this Court makes a finding in favour of jurisdiction in terms of the stated case. In addition, Mr. Neil, counsel for the respondent husband, was at some pains to reserve his right to challenge, on other grounds, the right of the wife to make the present application.
The order under consideration declares that the wife shall have exclusive occupation of the matrimonial property until such time as all three of the children of the marriage shall have become self-supporting or until she shall have remarried whichever event shall first occur. In King , the Full Court of the Family Court characterized a similar order in the following terms [5] :
the effect of an exclusive occupation order is that the owner, who is otherwise entitled to possession and occupation, is thereafter deprived of the right to occupy during the term of the order. It seems clear that this effects an alteration in the nature of his or her interests in the property. The attributes of ownership have been changed by the order; in effect the right to occupy is settled exclusively on the wife during the term of the order. When the term expires the parties revert to their former position as joint owners, with such rights and remedies as are open to them. It follows that an order which grants one spouse occupation rights in the matrimonial home to the exclusion of the other spouse, whether or not that other spouse is a joint owner or a sole owner, is an order settling property within the meaning of s. 86 of the Matrimonial Causes Act and an order altering the interests of that other spouse in the property within the meaning of s. 79 of the Family Law Act.
Notwithstanding the clarity of this statement by the Full Court, the problem would not go away: see In the Marriage of Prindable [6] , per Watson S.J.; In the Marriage of Sieling [7] ; In the Marriage of Maisey [8] . In Sieling , Evatt C.J. and Marshall S.J. emphasized the variable character of an occupancy order, in saying [9] :
It is possible that use or occupancy orders can be framed in such a way that they are of a personal and temporary nature only: Such orders would not be referable to s. 79. It may also be possible to frame a use and occupancy order which derives from the court's powers to deal with maintenance, The categorization of the order depends on the nature of the proceedings and on the terms of the order.
Again, in the present case, Evatt C.J. and Butler J. said:
It must be acknowledged that the categorization of an order for exclusive occupation of the home gives rise to difficulties. Such an order is in many ways a "hybrid" order sharing some of the characteristics of other kinds of orders which can be seen clearly as orders for maintenance, property settlement or injunction. It was not always necessary to categorize such orders under the Matrimonial Causes Act, but it is necessary to do so under the Family Law Act. The question of this categorization has been decided by the Full Court in King and King [10] and that decision has not been shown to be demonstrably wrong.
The Full Court derived support for the view expressed in King from the decision of Bray C.J. in Tansell v. Tansell [11] , where his Honour said that an order granting the wife occupancy of a jointly owned property for life would "alter the interests of the parties in the property within the meaning of s. 79". Nevertheless, his Honour immediately went on to cite with apparent approval the words of Murray J. in In the Marriage of Farr [12] :
In my view it is a question of degree in every case as to when a proprietary interest becomes so affected as to be altered, but I am of the opinion that a temporary suspension of a party's right to deal with his property does not so affect his interest in the property as to alter it within the meaning of s. 79.
1. (1977) 30 F.L.R., at p. 167; 3 Fam. L.R., at p. 11,570; [1977] F.L.C., at p. 76,582.
2. (1978) 34 F.L.R. 204; [1978] F.L.C. 77,494.
3. (1979) 35 F.L.R. 458; 24 A.L.R. 357; 4 Fam. L.R. 713; [1979] F.L.C. 78,250.
4. (1980) 6 Fam. L.R. 180; [1980] F.L.C. 75,488.
5. (1979) 35 F.L.R., at pp. 468-469; 24 A.L.R., at pp. 365-366; 4 Fam. L.R., at p. 720; [1979] F.L.C., at p. 78,258.
6. (1977) 30 FL.R. 160; 3 Fam. L.R. 11,564.
7. (1977) 35 F.L.R. 272, at p. 284; 19 S.A.S.R. 165, at p. 176; 3 Fam. L.R. 11,441, at p. 11,451; [1977] F.L.C. 76,487, at pp. 76,495-76,496.
8. (1976) 29 F.L.R. 70, at p. 74; 13 A.L.R. 514, at pp. 517-518; 2 Fam. L.R. 11,300, at p. 11,304; [1976] F.L.C. 75,632, at p. 75,635.
It appears from these decisions that it has been the practice, when a question of jurisdiction arises under s. 79 of the Family Law Act by reason of a pre-existing order relating to property under the Matrimonial Causes Act, to proceed by categorizing the earlier order by reference to s. 86 of the Act under which it was made. That practice explains the approach adopted in the present case to which we referred earlier in these reasons. The concept of "settlement of property" as that term was used in s. 86 no doubt carried a wide denotation: Sanders v. Sanders [13] . However, the consequence that a wide range of orders might be referred to the power conferred by s. 86 did not attract any difficulty in the exercise of jurisdiction under that Act because of the existence of a wide power of review of such orders: see s. 87(1)(j). Indeed, the existence of that power of review in relation to settlements of property extended also to orders for maintenance and the custody of children, thereby rendering it unnecessary in many cases to categorize the orders in question at all. The Family Law Act, however, introduces an important distinction between orders altering interests in property and other orders. Each category has its specific provision authorizing discharge or variation of an order of the specified description. Thus, orders for custody may be discharged or varied pursuant to s. 64(7), orders for maintenance pursuant to s. 83 and orders altering property interests pursuant to s. 79A. As we have noted, the jurisdiction to vary orders pursuant to s. 79A is very limited indeed.
1. (1967) 116 C.L.R. 366, at pp. 375, 382.
There is no reason to suppose, given the different wording used in s. 79 as compared with s. 86 and, more importantly, the different context, that because an order may be categorized as an order made under s. 86 of the Matrimonial Causes Act that it therefore must be treated, pursuant to s. 3(2)(c), as if it were made under s. 79. It could frequently happen, as recognized in Sanders , that the court would choose to "settle" property upon the wife as a means of providing maintenance for her and the children of the marriage. There was no necessity for permanence to be associated with such an order. As circumstances altered, the powers of the court as provided by s. 87(1)(j) could be invoked to match the order to the changing needs of the wife or children. In such a context, there is no practical problem in categorizing an occupancy order as a settlement of property, however much it may seem to strain the language.
On the other hand, the Family Law Act clearly reveals the intention of the Parliament that if the court, in proceedings with respect to the property of the parties to the marriage or either of them, makes an order "altering the interests of the parties in the property", and the making of that order has not been attended by any circumstance amounting to a miscarriage of justice, then such order is not open to any review or variation. In drawing that conclusion as to the proper construction of the Act, we rely on the decision of this Court in Taylor to the effect that notwithstanding any possible implication it may have in relation to the maintenance of a party, an order made under s. 79 is not open to review under s. 83.
In our opinion, such a radical change of intention compels a fresh approach to the construction of the subject matter of the section. It can no longer remain a question of degree in every case as to when a proprietary interest becomes so affected as to be "altered" within the meaning of s. 79. In the present case, the Full Court supported its adherence to the decision in King [14] by reasoning as follows:
Because of that order [the s. 86 order], his interest in the property is in a sense charged with the entitlement of the wife and children to remain in occupation. The wife has a right, enforceable against the husband, to remain in occupation of the specific property referred to in the order, and the husband is under a corresponding legally enforceable obligation to allow her to do so. If the husband were to attempt to dispose of the property, whilst he might effectively transfer his title to the purchaser, he could not give vacant possession without being in breach of the order.
His inability to give possession to a purchaser consistently with his obligations under the order is an important restriction upon his rights as an owner of the property.
His interest in the property is diminished, even though the wife may not have acquired an interest capable of registration or of protection by caveat.
1. (1977) 30 F.L.R. 160; 3 Fam. L.R. 11,564.
With respect to their Honours, this statement of the effect of the order could apply with complete accuracy to the effect of an injunction under s. 114(1) of the Family Law Act. Admittedly, the order is not in its terms expressed as a restraining order but having regard to the legislative intention to which we have referred its substance is more important than its form. Alternatively, there is no reason why an order made pursuant to s. 74 "for the provision of maintenance" of a party to a marriage or of a child of a marriage could not achieve precisely the same effect as that attributed by their Honours to the present order. In the course of argument, reference was made to the statement by Windeyer J. in Sanders [15] when, referring to the sections of the Matrimonial Causes Act conferring power to make orders with respect to maintenance (s. 84) and settlements (s. 86), his Honour said:
The basic distinction between s. 84 and s. 86(1) is that a provision for maintenance under s. 84 does not involve an order relating to some particular item of property or an interest therein.
Taken literally and out of context, that statement may be misunder-stood. However, the succeeding sentences make it quite clear, in our respectful opinion, that his Honour intended to emphasize, rightly, that an order under s. 84 did not necessarily involve a reference to some particular item of property. There is no reason why a court, in particular circumstances, cannot provide maintenance for the wife and children of a marriage by securing to them for a suitable period the occupation of the matrimonial home. The inclusion of the condition that the right to occupy the home shall continue until "the children of the marriage shall have become self-supporting" is a strong indication that the order is properly categorized as an order for maintenance.
1. (1967) 116 C.L.R., at p. 380.
In our opinion, therefore, s. 79 on its proper construction refers only to orders which work an alteration of the legal or equitable interests in the property of the parties or either of them. An interest in property is a right of a proprietary nature, not a mere personal right: Stow v. Mineral Holdings (Aust.) Pty. Ltd. [16] ; Reg. v. Toohey; Ex parte Meneling Station Pty. Ltd. [17] . It does not exclude every interest which is not assignable or transferable (cf. per Mason J. in Meneling Station [18] ). Thus an order under s. 79 may give rise to an interest in property which is defeasible on assignment or transfer to a third party, or on the occurrence of some other event, or which the holder is enjoined from assigning or transferring.
1. (1977) 51 A.L.J.R. 672, at p. 679.
2. Ante, pp. 343, 350-351.
3. Ante, p. 343.
It follows, then, that s. 79 does not authorize a mere modification of a liberty to enjoy property. An order which merely excludes one spouse from the enjoyment of property, albeit for many years, in order to permit its better enjoyment by the other does not alter an interest in that property, though a spouse acquiring an interest in property under a s. 79 order may be entitled, in virtue of that interest, to exclude the other from its enjoyment. Where the section refers to a settlement of property, it should be understood as using that expression in a sense which is closely related to the meaning which the expression bears in the law of real and personal property.
The application of the wife which provoked these proceedings seeks an order that on the expiration of her right to occupancy the property be sold and the net proceeds thereof be divided as to two-thirds to her and one-third to the respondent. The application clearly seeks an alteration of the interests of a party in the property within s. 79. Special leave to appeal was granted in order to examine the question whether the Full Court was correct in denying jurisdiction to Hogan J. to deal with the application for the reason that the exclusive occupancy order made in 1967 should be treated as if it had been made under s. 79. It follows from the reasons we have outlined that in our opinion the Full Court erred in coming to that conclusion and that the denial of jurisdiction on that ground was not justified.
The appeal should be allowed. It was agreed between the parties that the appropriate course to be adopted in that event is to remit the matter to the Full Court of the Family Court for reconsideration in accordance with the judgment of this Court. |
high_court_of_australia:/showbyHandle/1/9746 | decision | commonwealth | high_court_of_australia | text/html | null | Jiminez v The Queen [1992] HCA 14 | https://eresources.hcourt.gov.au/showbyHandle/1/9746 | 2024-09-13T22:55:35.782575+10:00 | High Court of Australia
Mason C.J. Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ.
Jiminez v The Queen
[1992] HCA 14
ORDER
Special leave to appeal granted. Appeal allowed. Set aside the orders of the Court of Criminal Appeal of New South Wales and in lieu thereof allow the appeal against conviction to that Court, quash the conviction and enter a verdict of acquittal.
Cur. adv. vult.
The following written judgments were delivered:—
May 6
Mason C.J., Brennan, Deane, Dawson, Toohey and Gaudron JJ.
The applicant, Michael Jiminez, seeks special leave to appeal against his conviction of culpable driving for which he was sentenced to six months' imprisonment to be served by way of periodic detention.
At about 11.00 p.m. on 13 June 1988, the applicant set out to travel south in his B.M.W. sedan from the Gold Coast in Queensland to Sydney in New South Wales. He was accompanied by three female companions, one of whom was Janelle May Stephanoni. Before setting out the applicant slept for four hours from about five o'clock in the afternoon. Stephanoni first drove the car for about 400 kilometres during which time the applicant slept. At about 3.30 a.m. on 14 June 1988, the applicant took over the driving of the car. At about 6.00 a.m. at Eungai Creek on the Pacific Highway approximately 30 kilometres north of Kempsey, the car failed to take a moderate right-hand curve in the highway. It travelled on to the eastern gravel shoulder, continued on and collided with a tree and then with two other trees. Stephanoni, who was sitting in the front passenger seat and not wearing a seat-belt, was killed. The other two passengers were in the rear seat.
At the scene of the accident there were four wheel marks commencing on the eastern gravel shoulder and extending south for some thirty-seven metres. The marks ended at the base of the first tree. About ten metres south of this tree were the two other trees against which the car had come to rest. There were patches of fog in the low-lying areas along the highway.
The applicant was taken to a local hospital where he was treated. Subsequently he was taken to the home of a Salvation Army minister who had attended the scene of the accident and he slept for some three to four hours.
A police constable, who also attended the scene of the accident, asked the applicant what had happened. He replied: "I went to sleep." Subsequently a record of interview with the applicant was made which contained the following questions and answers:
Q. How did the collision occur?
A. I really don't know. Before the accident there was a lot of fogs in the road, I lost control of the car. Everybody was asleep, the three girls and then it happened. I [sic] was just for a second. I lost control when I fell asleep. I'm not sure what happened.
Q. What is the last thing you remember before losing control?
A. I was in the road the last thing I remember. Before the accident I was going down a hill. The road goes around to the right and then I lost control of the car. I hit the tree.
Q. What speed were you travelling at immediately prior to losing control of the car?
A. Between 80 and 90 kms.
Q. In answer to Q.29 [the first question quoted above] you said in part, I lost control when I fell asleep, were you feeling tired prior to the collision?
A. I don't know what happened, I was driving, I was thinking about stopping in the next town. The heater was on.
Q. What caused your vehicle to run off the road?
A. I don't know why, I just lost control.
At the hospital the applicant was asked what happened by another policeman. He replied:
Janelle drove from the Gold Coast. She drove for about 400 kms. I took over driving around Coffs Harbour somewhere. I think I was travelling around a right hand curve and on to a straight section of road. I think I was travelling 80 to 100 kph. I think I must have gone to sleep. I woke up and the car was out of control to the left side of the road. I tried to control the car but I think I hit a tree.
In an unsworn statement at his trial the applicant said that at the time of the accident he intended to stop at the next main town for breakfast and that he did not feel like sleeping at all. He continued:
Suddenly my car was off the road. I think I must have closed my eyes for a second. When I opened my eyes the car was off the road and I lost control.
The offence of culpable driving is created by s. 52A of the Crimes Act 1900 N.S.W. and is relevantly as follows:
(1) Where the death of any person is occasioned through:
(a) the impact with any object of a motor vehicle in or on which that person was being conveyed (whether as a passenger or otherwise);
and the motor vehicle was at the time of the impact being driven by another person:
(f) at a speed or in a manner dangerous to the public, the person who was so driving the motor vehicle shall be guilty of the misdemeanour of culpable driving.
(3) It shall be a defence to any charge under this section that the death was not in any way attributable to the speed at which or the manner in which the vehicle was driven.
The only feature of the applicant's driving that is said to bring it within s. 52A is that, on the evidence, it was open to a jury to conclude that he was, while driving the car, tired and drowsy and had fallen asleep.
If the applicant did fall asleep, even momentarily, it is clear that while he was asleep his actions were not conscious or voluntary (an act committed while unconscious is necessarily involuntary) and he could not be criminally responsible for driving the car in a manner dangerous to the public. The offence of culpable driving is, in this respect, no different to any other offence and requires the driving, which is part of the offence, to be a conscious and voluntary act [1] .
1. R. v. Coventry (1938), 59 C.L.R. 633, at p. 638.
Upon the evidence, it appears that there was a short period of time after the applicant fell asleep and before the impact during which the applicant awoke and attempted to regain control of the car. It was not suggested that, while he was attempting to regain control, the applicant was driving dangerously. Drivers are often confronted with an emergency which requires them to take steps to avoid an accident. Even if the evasive action fails to avoid the accident it does not necessarily amount to driving in a dangerous manner [2] .
1. (1938) 59 C.L.R., at p. 638; see also Simpson v. Peat , [1952] 2 Q.B. 24, at p. 28.
The offence of culpable driving as it applies in the present case requires a motor vehicle to have been driven in a manner dangerous to the public at the time of the impact which occasioned death. Even if the motor vehicle was not being driven dangerously at the precise moment of impact, a preceding period of driving in a dangerous manner may be so nearly contemporaneous with the impact as to satisfy this element of the offence. Contemporaneity is a question for the jury [3] .
1. See McBride v. The Queen (1966), 115 C.L.R. 44, at pp. 47, 51, 52.
In the South Australian case of Reg. v. Kroon [4] , King C.J. observed that an offence such as culpable driving requires the relevant driving to have been voluntary and that driving while asleep does not constitute a voluntary act. Thus, he said, "a driver cannot be convicted of causing death or bodily injury by dangerous driving in respect of a period during which the driver is asleep". But he went on to say [5] :
Every act of falling asleep at the wheel is preceded by a period during which the driver is driving while awake and therefore, assuming the absence of involuntariness arising from other causes, responsible for his actions. If a driver who knows or ought to know that there is a significant risk of falling asleep at the wheel, continues to drive the vehicle, he is plainly driving without due care and may be driving in a manner dangerous to the public. If the driver does fall asleep and death or bodily injury results, the driving prior to the falling asleep is sufficiently contemporaneous with the death or bodily injury (McBride [6] , per Barwick C.J.) to be regarded as the cause of the death or bodily injury.
The cases must be rare in which a driver who falls asleep can be exonerated of driving without due care at least, in the moments preceding sleep.
As King C.J. recognizes, where the question is whether a driver who falls asleep at the wheel is guilty of driving in a manner dangerous to the public, the relevant period of driving is that which immediately precedes his falling asleep. Not only must the period be sufficiently contemporaneous with the time of impact to satisfy the requirement of s. 52A but the driving during that period must be, in a practical sense, the cause of the impact and the death. The relevant period cannot be that during which the driver was asleep because during that time his actions were not conscious or voluntary. And, for the reasons which we have given, if the driver's actions upon waking up amount to no more than an attempt to avoid an accident, it cannot be that period of driving.
1. (1990) 52 A. Crim. R. 15, at p. 18.
2. ibid., at pp. 18-19.
3. (1966) 115 C.L.R., at p. 51.
The manner of driving encompasses "all matters connected with the management and control of a car by a driver when it is being driven" [7] . For the driving to be dangerous for the purposes of s. 52A there must be some feature which is identified not as a want of care but which subjects the public to some risk over and above that ordinarily associated with the driving of a motor vehicle, including driving by persons who may, on occasions, drive with less than due care and attention [8] . Although a course of conduct is involved it need not take place over any considerable period [9] . Nor need the conduct manifest itself in the physical behaviour of the vehicle. If the driver is in a condition while driving which makes the mere fact of his driving a real danger to the public, including the occupants of the motor vehicle, then his driving in that condition constitutes driving in a manner dangerous to the public. In the same way, driving a motor vehicle in a seriously defective condition may constitute driving in a manner dangerous to the public [10] , even though the defect does not manifest itself until such time as the vehicle is out of the control of the driver. But it should be emphasized, and it must always be brought to the attention of the jury, that the condition of a driver must amount to something other than a lack of due care [11] before it can support a finding of driving in a manner dangerous to the public. Driving in that condition must constitute a real danger to the public. As Barwick C.J. said in McBride v. The Queen [12] :
The section speaks of a speed or manner which is dangerous to the public. This imports a quality in the speed or manner of driving which either intrinsically in all circumstances, or because of the particular circumstances surrounding the driving, is in a real sense potentially dangerous to a human being or human beings who as a member or as members of the public may be upon or in the vicinity of the roadway on which the driving is taking place.
It follows that for a driver to be guilty of driving in a manner dangerous to the public because of his tired or drowsy condition that condition must be such that, as a matter of objective fact, his driving in that condition is a danger to the public. Various matters will be relevant in reaching such a conclusion. The period of the driving, the lighting conditions (including whether it was night or day) and the heating or ventilation of the vehicle are all relevant considerations. And, of course, it will be necessary to consider how tired the driver was. If there was a warning as to the onset of sleep that may be some evidence of the degree of his tiredness. And the period of driving before the accident and the amount of sleep that he had earlier had will also bear on the degree of his tiredness. But so far as "driving in a manner dangerous" is concerned, the issue is not whether there was or was not a warning of the onset of sleep, but whether the driver was so tired that, in the circumstances, his driving was a danger to the public. The various matters which bear on that question, and the way in which they bear on it, should be carefully drawn to the attention of the jury.
1. R. v. Coventry (1938), 59 C.L.R., at p. 639.
2. McBride v. The Queen (1966), 115 C.L.R., at pp. 50, 51, per Barwick C.J.; Reg. v. Buttsworth , [1983] 1 N.S.W.L.R. 658, at pp. 686-687.
3. See R. v. Coventry (1938), 59 C.L.R., at p. 638.
4. See Giorgianni v. The Queen (1985), 156 C.L.R. 473, at p. 499.
5. McBride v. The Queen (1966), 115 C.L.R., at p. 50, per Barwick C.J.
6. ibid., at pp. 49-50.
In Hill v. Baxter [13] the respondent's motor-van behaved erratically after a period during which it had apparently been driven skilfully. The defendant was charged with the offence of driving in a dangerous manner. He could remember nothing after a certain point. Lord Goddard C.J. said [14] :
There was in fact no evidence except that of the respondent, and while the justices were entitled to believe him, his evidence shows nothing except that after the accident he cannot remember what took place after he left Preston Circus. This is quite consistent with being overcome with sleep or at least drowsiness. That drivers do fall asleep is a not uncommon cause of serious road accidents, and it would be impossible as well as disastrous to hold that falling asleep at the wheel was any defence to a charge of dangerous driving. If a driver finds that he is getting sleepy he must stop.
I agree that there may be cases where the circumstances are such that the accused could not really be said to be driving at all. Suppose he had a stroke or an epileptic fit, both instances of what may properly be called acts of God; he might well be in the driver's seat even with his hands on the wheel, but in such a state of unconsciousness that he could not be said to be driving. A blow from a stone or an attack by a swarm of bees I think introduces some conception akin to novus actus interveniens. In the present case I am content to rest my judgment on the ground that there was no evidence which justified the justices finding that he was not fully responsible in law for his actions, and that his intention was immaterial as there was here an absolute prohibition.
1. [1958] 1 Q.B. 277.
2. ibid., at pp. 282-283.
The offence of driving at a speed or in a manner dangerous to the public [15] , or the more serious but related offence of culpable driving, is not an absolute offence, at all events in the sense in which that term is used in this country. But we shall return to that later. If, in the passage which we have set out above, his Lordship was saying that falling asleep at the wheel is inevitably preceded by a period of drowsiness such that the driver has an opportunity to stop, then we are, with respect, unable to agree. That may be a convenient assumption upon the view that "it would be impossible as well as disastrous to hold that falling asleep at the wheel was any defence to a charge of dangerous driving", but it is not otherwise supportable. No doubt it may be proper in many cases to draw an inference that a driver who falls asleep must have had warning that he might do so if he continued to drive or that otherwise he knew or ought to have known that he was running a real risk of falling asleep at the wheel. But it does not necessarily follow that because a driver falls asleep he has had a sufficient warning to enable him to stop [16] .
1. See Traffic Act 1909 N.S.W., s. 4(1).
2. See Dennis v. Watt (1943), 43 S.R. (N.S.W.) 32; Reg. v. Kroon (1990), 52 A. Crim. R. 15.
Further, the passage which we have quoted may suggest that a person while asleep is capable of driving consciously and voluntarily. Such is clearly not the case and if that is the suggestion it appears to be made upon the basis that a driver can avoid lapsing into sleep, whereas he cannot avoid other states of unconsciousness or involuntariness, such as those induced by epilepsy or being stung by a swarm of bees. But if a person's condition is such that his actions are unconscious or involuntary, it does not matter what the cause is: he cannot be found guilty of an offence, whether statutory or otherwise, unless the acts which constitute it have been done voluntarily [17] . As we have said, a driver who drives when tired or drowsy may, depending upon all the circumstances, be guilty of driving in a manner dangerous to the public. But if he does fall asleep, his actions during the period of sleep are neither conscious nor voluntary.
1. See Reg. v. O'Connor (1980), 146 C.L.R. 64.
A statutory offence which imposes absolute liability is one which, in addition to excluding the requirement of mens rea, also excludes a defence of honest and reasonable mistake [18] . In a well-known passage in Proudman v. Dayman [19] , Dixon J. drew a distinction between mens rea as an ingredient of an offence and an honest and reasonable belief in a state of facts which, if they existed, would make a defendant's act innocent. If honest and reasonable mistake is not excluded in the case of a statutory offence, it will afford an excuse for what would otherwise be an offence, although the burden of establishing the excuse will in the first place be upon the defendant. The burden on the defendant is evidentiary only, and the prosecution retains the burden of proving guilt by establishing beyond reasonable doubt that the defendant did not honestly believe on reasonable grounds in the existence of facts which, in the circumstances, would take his act outside the operation of the statute [20] . The majority of the Court in Reg. v. Coventry recognized that the defence of honest and reasonable mistake was available to a charge under the equivalent of s. 52A in South Australia. In that case the majority said [21] :
No doubt the language of the section does not exclude a defence of mistake of fact on reasonable grounds or of involuntariness (for example, interference by another person with the driving of the car), and perhaps there may be other exceptional excuses, based on special facts, to which a state of mind may not be immaterial. But, speaking generally, the expression "driving at a speed, or in a manner, which is dangerous to the public" describes the actual behaviour of the driver and does not require any given state of mind as an essential element of the offence.
1. See He Kaw Teh v. The Queen (1985), 157 C.L.R. 523, at p. 590.
2. (1941) 67 C.L.R. 536, at p. 540.
3. He Kaw Teh v. The Queen (1985), 157 C.L.R., at pp. 534-535, 573-575, 582 and 592-594. See also Gibbon v. Fitzmaurice (1986), 23 A. Crim. R. 12, at p. 19; Chard v. Wallis (1988), 12 N.S.W.L.R. 453, at pp. 455-456; and Caralis v. Smyth (1988), 34 A. Crim. R. 193, at pp. 197-200.
4. (1938) 59 C.L.R., at p. 638.
In England the courts have not taken up the defence of honest and reasonable mistake and see themselves as having to decide between an offence requiring mens rea to be proved as an ingredient and absolute liability which excludes guilty intent entirely. Nevertheless, the Court of Appeal has rejected the suggestion of Lord Goddard C.J. that the offence of dangerous driving is an absolute offence. They did so in Reg. v. Gosney [22] . That was a case in which the appellant drove in the wrong direction upon one carriageway of a dual highway. The appellant wished to prove that there was no indication that the right-hand turn she made into the carriageway was prohibited and that there was nothing to indicate to a competent and careful driver in all the circumstances that she was about to drive or was driving in the wrong direction. She was stopped from leading this evidence at first instance, but the Court of Appeal held that she was entitled to do so, saying that "fault" on the part of the driver was an element of the offence of driving in a dangerous manner [23] . To our eyes what the appellant was attempting to do in Gosney was to establish an honest and reasonable mistake, a defence which, in this country, makes it unnecessary to introduce fault as an element of that offence. Driving in a manner dangerous to the public is at once both the offence and, if it is relevant, the fault, but it will be a defence to establish an honest and reasonable mistake as to facts which if true would exculpate the driver. Perhaps the most obvious example is where a driver is unaware of the defective condition of his vehicle and believes it upon reasonable grounds to be in good working order. And the same issue is raised when, in a case like the present where the dangerous manner of the driving is said to consist in the likelihood of going to sleep, a driver claims that he had no warning of the onset of sleep.
1. (1971) 55 Cr. App. R. 502.
2. (1971) 55 Cr. App. R., at p. 508; see also Reg. v. Spurge (1961), 45 Cr. App. R. 191.
It follows from what has been said above that it was necessary for the prosecution in the present case to establish that the applicant was affected by tiredness to an extent that, in the circumstances, his driving was objectively dangerous. It was open to the jury to draw an inference to that effect from a finding that the applicant went to sleep at the wheel. It was, however, also open to the jury to find that the applicant honestly and reasonably believed that, in all the circumstances, it was safe to drive. Apart from any inference that might be drawn from the fact that the applicant had fallen asleep, there was little in the evidence to support a finding that the applicant had felt drowsy or that he had reason to believe that he was tired. He had had four hours' sleep shortly before setting out on the trip and a further period of up to three hours while the deceased woman drove the car. He had not been driving for an excessive period before the accident. There was no evidence before the jury that he had consumed any alcohol or drugs. He was thinking of stopping at the next town, but that could be explained by his statement that he intended to have breakfast there. The fact that he slept for some hours after the accident could, in the light of the other evidence including evidence that he was emotionally upset and affected by grief, scarcely found an inference that he had had insufficient sleep beforehand. In these circumstances, the inference that the applicant believed that, in all the circumstances, it was safe to drive might have been drawn by the jury from the very fact of his driving. The absence of any warning of the onset of sleep, if the jury found that there had been none, laid a foundation for that being an honest and reasonable belief. Lack of warning as to the onset of sleep is only one of a number of circumstances that may bear on the question whether a driver honestly and reasonably believed that it was safe for him to drive. Ordinarily, the circumstances which bear on whether the driving was dangerous will also bear on this question.
If, in a case based on tiredness, there is material suggesting that the driver honestly believed on reasonable grounds that it was safe for him to drive, the jury must be instructed with respect to that issue. In particular, they must be told that if they conclude that the driving was a danger to the public, they must also consider whether the driver might honestly have believed on reasonable grounds that it was safe for him to drive. And, of course, they must be instructed in appropriate terms that the onus of negativing that defence rests with the prosecution. That did not happen in this case, presumably because neither counsel nor the trial judge appreciated the real nature of the issue raised.
In the present case, where there was evidence that the applicant fell asleep at the wheel and there was no real evidence that he had any warning of the onset of sleep, it was also essential for the trial judge to identify the period of driving during which it was alleged that the driving was dangerous. Further, it was essential that the jury be informed that if the applicant fell asleep, his actions while he was asleep were not voluntary and could not amount to driving in a dangerous manner. The nearest the learned trial judge came to identifying the relevant period of driving in his charge to the jury was in the following passage:
The issue is, was his manner of driving when his car left the road dangerous to the public? The Crown say to you that it seems clear he became tired, he closed his eyes and the car left the road.
That passage is entirely equivocal and, in any event, does not raise any question of voluntariness.
The applicant's counsel raised with the trial judge the fact that he failed to allude to the "involuntary nature of the onset of the sleeping episode". The trial judge suggested that counsel had not alluded to that matter either. After a rejoinder by counsel that he did so in so many words although he did not use the word "involuntary", the matter was allowed to rest. There was no redirection. Thus objection was taken (although hardly pressed) to the omission in the charge. In these circumstances there was a defect in the charge in an important respect and that defect amounted to a miscarriage of justice.
Special leave to appeal should be granted. The appeal must be allowed and the conviction quashed. We have given careful consideration to the question whether a new trial should be ordered. It is now more than three and a half years since the accident occurred. The applicant has already been subjected to the expense, strain and inconvenience of a trial. The case against him was not a compelling one. There was no evidence that the applicant was affected by alcohol or drugs. There was evidence to the effect that he had had adequate sleep before commencing to drive and that he had had no prior warning, or otherwise ought to have known, that he was about to fall asleep. The sentence imposed, upon the applicant's conviction, was one of periodic detention which, if it had been served, would by now have expired. In all these circumstances, we have reached the conclusion that it would be inappropriate to order a retrial.
McHugh J.
I would allow this appeal on the grounds that the learned trial judge misdirected the jury and that the misdirections amounted to a miscarriage of justice. The facts and the terms of s. 52A of the Crimes Act 1900 N.S.W. are set out in the majority judgment.
Having regard to the concessions which the Crown made in this Court, I think that the learned trial judge erred in his charge to the jury in that: 1. he did not direct the jury that, for the purpose of s. 52A, the vehicle was not "being driven" by the applicant during any period, however short, in which the applicant was asleep; 2. he did not direct the jury that the offence was committed only if the vehicle was being driven in a manner dangerous to the public contemporaneously with the impact; 3. he did not isolate for the jury the particular features of the driving of the applicant which, as a matter of law, could be in breach of s. 52A and did not relate those features "to the criteria to be applied and the distinctions to be observed in determining whether any particular manner of driving can have the quality, intrinsic or occasional, o being dangerous to the public" [24] ; and 4. he did not instruct the jury that the applicant could only be convicted of the charge if he knew or ought to have known that there was a real risk of his falling asleep while driving.
1. McBride v. The Queen (1966), 115 C.L.R. 44, at p. 50.
"Being driven"
On the hearing of the appeal in this Court, Mr. Howie Q.C., for the Crown, accepted that, on a charge under s. 52A, there must be a voluntary act of driving. In his written submissions, Mr. Howie also conceded that a "driver who is asleep is not then driving in a manner dangerous to the public". But, basing himself on the decision of the Court of Criminal Appeal of South Australia in Reg. v. Kroon [25] , he contended that a "driver who falls asleep may have been driving in a manner dangerous to the public if he knew or ought to have known that there was a significant risk of [his] falling asleep".
1. (1990) 52 A. Crim. R. 15, at p. 18.
The concession by the Crown that a person who is "asleep" cannot drive in a manner dangerous to the public is debatable. For the purpose of s. 52A and other laws regulating the driving of vehicles, I think that it is at least arguable that, upon the proper construction of such legislation, a vehicle is "being driven" by a person if he or she falls asleep at the wheel of the car "for a second", as the applicant alleged he did on this occasion. No doubt it would be inconsistent with the ordinary usage of the word "driving" to contend that a person is driving while slumped unconscious over the steering wheel [26] . Nevertheless, I do not think that it is inconsistent with ordinary usage to say that a person is "driving" a vehicle during a period in which he or she drifts off to sleep momentarily while remaining upright in the driver's seat with his or her hands and feet on the controls [27] . A vehicle is "being driven" by a person when "he is in the driving seat or in control of the steering wheel and also has something to do with the propulsion" [28] . It is a matter of degree whether a person who has "dozed off" has functioned at such a low cognitive level for such a length of time that it can fairly be said that the vehicle was no longer "being driven" by that person. In some cases, the loss of consciousness of the "driver" may be such that it cannot be said that that person was driving the vehicle; but in other cases, the loss of consciousness may be so transient that it can be said that the vehicle was "being driven" by that person.
1. Hill v. Baxter , [1958] 1 Q.B. 277, at p. 283. But see Purvis v. Hogg , [1969] Crim. L.R. 379.
2. Cordwell v. Carley (Unreported; Supreme Court of New South Wales; Common Law Division; 8 August 1985), at p. 19.
3. Reg. v. Roberts (1964), 48 Cr. App. R. 296, at p. 299; Reg. v. MacDonagh (1974), 59 Cr. App. R. 55, at p. 57. See McQuaid v. Anderton , [1981] 1 W.L.R. 154, at pp. 155-156; [1980] 3 All E.R. 540, at pp. 541-542; Hampson v. Martin , [1981] 2 N.S.W.L.R. 782, at pp. 796-797.
The policy of s. 52A is to punish drivers for their actual behaviour "at the time of impact". The section "does not require any given state of mind as an essential element of the offence" [29] . Consequently, a person continues to drive for the purpose of the section even though that person has lost control of the vehicle because his or her mind has wandered to a subject remote from driving or has lost control because of excessive speed or some other external matter concerned with the control and management of the vehicle. The policy of the section, therefore, gives no support for drawing any distinction between the driver who is inattentive or who, though attentive, is unable to control the vehicle and the driver who is unable to control the vehicle because he or she has "dozed off".
1. R. v. Coventry (1938), 59 C.L.R. 633, at p. 638.
I do not think that anything in the foregoing discussion is inconsistent with the basic principle of the criminal law that an act or omission of a person cannot be made the subject of a criminal charge unless the act or omission was voluntary [30] . The issue under s. 52A is not whether that general principle applies to the statute — clearly it does; the issue is whether upon the proper construction of that section the vehicle was "being driven" by the accused "at the time of impact".
1. Ryan v. The Queen (1967), 121 C.L.R. 205, at p. 213; Reg. v. O'Connor (1980), 146 C.L.R. 64, at pp. 76-77, 80.
Falling asleep
The approach of the Crown on this appeal, however, requires that this case be examined on the basis that the acts and omissions of a person, during any period in which he or she is asleep, cannot form the subject of a charge under s. 52A of the Crimes Act. Counsel for the applicant also accepted that the law on the subject was correctly stated by the Court of Criminal Appeal of South Australia in Kroon . In that case King C.J. said [31] :
Every act of falling asleep at the wheel is preceded by a period during which the driver is driving while awake and therefore, assuming the absence of involuntariness arising from other causes, responsible for his actions. If a driver who knows or ought to know that there is a significant risk of falling asleep at the wheel, continues to drive the vehicle, he is plainly driving without due care and may be driving in a manner dangerous to the public. If the driver does fall asleep and death or bodily injury results, the driving prior to the falling asleep is sufficiently contemporaneous with the death or bodily injury (McBride, per Barwick C.J.) [32] to be regarded as the cause of the death or bodily injury.
That being so, the applicant could only be convicted of culpable driving under that section if he drove in a manner dangerous to the public, prior to his falling asleep, and if that manner of driving was, in a practical sense, contemporaneous with the impact between his vehicle and the tree.
1. (1990) 52 A. Crim. R., at p. 18.
2. (1966) 115 C.L.R., at p. 51.
The summing up
The summing up in the present case did not confine the relevant act of driving to the period, if any, when the applicant knew or ought to have known that there was a real risk that he might fall asleep if the vehicle continued in motion. Nor did the summing up draw the jury's attention to the need for the manner of driving to be contemporaneous with the impact causing death. The learned trial judge directed the jury as to the meaning of the words "manner dangerous to the public" in accordance with the judgment of Barwick C.J. in McBride [33] . Significantly, however, although on a number of occasions his Honour made use of the phrase "at the time", he did not add the words "of the impact". At the very least, the summing up was ambiguous on the vital issue of "the contemporaneity, upon which the section insists, of the driving which is in breach of the section and the impact by or through which the person is killed or injured" [34] .
1. (1966) 115 C.L.R., at pp. 49-50.
2. ibid., at p. 47.
Furthermore, his Honour's summing up left it open to the jury to convict the applicant on the basis that the car was being driven in a manner dangerous to the public from the time the car left the road. After stating that he would "review in a broad fashion" the arguments of counsel, his Honour said:
The Crown say that it is for you to assess the Accused's driving of the B.M.W. car when it left the road and hit a tree. It is for you to assess whether it was in all the circumstances in a manner dangerous.
Later his Honour said:
The issue is, was his manner of driving when his car left the road dangerous to the public?
The Crown say to you that it seems clear he became tired, he closed his eyes and the car left the road.
In dealing with the submissions of counsel for the defence, his Honour said:
Counsel for the Accused reminds you that the Accused had no idea that he would fall asleep for the split second as he obviously did
Evaluating the whole of the evidence the Defence counsel says that there was a sudden onset of sleep. It is not as though he acknowledges feeling sleepy prior to the accident and was fighting sleep for many kilometres.
In the Court of Criminal Appeal, Lee C.J. at C.L. correctly commented that the overall effect of his Honour's summing up was "to leave it to the jury to acquit the appellant if they were prepared to accept that the appellant had no warning of impending sleep". Mr. Howie went further. He submitted that the effect of the summing up was that the applicant should be acquitted if he had no warning of impending sleep. However, at no stage did his Honour tell the jury that they were bound to acquit the applicant if they concluded that he had had no warning of impending sleep. To the contrary, after referring to his "selective" summary of the arguments, the learned judge told the jury that it was "for you and you alone to determine what is significant in this trial and for you and you alone to attribute to those matters such importance as you consider they deserve". This direction made express what was already implicit in his Honour's directions: it was a matter for the jury whether they accepted the factual basis of the submission of counsel for the defence and, if they did, whether that entitled the accused to be acquitted. Having regard to the way in which the case for the Crown was left to the jury, it would occasion no surprise if the jury convicted the applicant even though they were not convinced beyond reasonable doubt that the applicant knew that there was a risk that he might fall asleep.
Accordingly, because of the concessions of law which the Crown thought it proper to make in this Court, the summing up contained significant misdirections. It is apparent that at the trial the Crown did not dispute that the vehicle left the road as the result of the applicant's falling asleep. Moreover, it was common ground in this Court that the "driving" of the applicant while asleep was an involuntary act. Yet the directions of the learned judge left it open to the jury to convict the accused in respect of "his manner of driving when his car left the road". Consequently, the summing up left it open to the jury to convict the applicant in respect of an act for which he was not legally responsible. Having regard to the concession which the Crown made in this Court, the only case which the Crown could put against the applicant was that he was guilty of driving in a manner dangerous to the public because he knew or ought to have known that there was a real risk that he would fall asleep. But that case was never put to the jury. To this misdirection must be added his Honour's failure to draw to the jury's attention the need for the contemporaneity of the dangerous driving and impact.
By reason of the summing up, the trial has miscarried. This is so even though counsel for the defence, after raising the issue of voluntariness, did not press for a direction on that issue. Nevertheless, the case for the Crown at the trial was so radically different from the only case which could be put on the concessions of the Crown in this Court that there has been no trial according to law. The conviction must be set aside.
The appropriate order
A matter which has given me concern is whether this Court should order a new trial. It was open to the jury to find that the applicant knew that there was a risk that he might fall asleep. When asked by a police officer whether he was "feeling tired prior to the collision", the applicant replied: "I don't know what happened, I was driving, I was thinking about stopping in the next town. The heater was on." At the trial, the applicant asserted that he was only thinking about stopping in the next town because he wanted to have breakfast. However, no mention of having breakfast was made in his record of interview. The references to the heater being on and stopping in the next town in the context of a question concerning whether he was feeling tired prior to the collision tell powerfully against the applicant. Those references carry the implied admission that the applicant had become tired and was thinking of resting at the next town. Why else would he mention those two matters in answer to a question concerning whether he was feeling tired prior to the collision?
But the sufficiency of evidence to support the charge is not the only factor to be considered. Other factors lead to the conclusion that, despite there being evidence which, if accepted, would make out a charge of culpable driving, a new trial should not be ordered. First, as a general rule, a new trial should not be ordered to enable the Crown to make a new case at a second trial [35] . In the present case, a second trial would allow the Crown to make a case different from that which it put to the jury at the first trial. Secondly, the events which gave rise to the charge occurred nearly four years ago, and it is nearly two years since the applicant was convicted. Thirdly, the applicant was sentenced to six months imprisonment to be served by way of periodic detention. Prior to being granted bail pending his appeal to the Court of Criminal Appeal, the applicant served four weekends in gaol pursuant to the order of the learned trial judge. Fourthly, the Crown has always accepted that the accident which gave rise to the charge of culpable driving arose only from the applicant's falling asleep. The Crown has not suggested that speed or alcohol played any part in the car leaving the road. When all the circumstances are taken into account, the interests of justice do not require that the applicant should be put to the expense, stress and inconvenience of a new trial so that the Crown can put a case which it did not put at the first trial. The general rule that a new trial will not be ordered so that the Crown can put a different case at a second trial must prevail.
1. R. v. Wilkes (1948), 77 C.L.R. 511, at p. 518; King v. The Queen (1986), 161 C.L.R. 423, at p. 433.
I agree with the orders proposed. |
high_court_of_australia:/showbyHandle/1/10251 | decision | commonwealth | high_court_of_australia | text/html | null | Kauter v Hilton [1953] HCA 95 | https://eresources.hcourt.gov.au/showbyHandle/1/10251 | 2024-09-13T22:55:40.647967+10:00 | High Court of Australia
Dixon C.J. Williams and Fullagar JJ.
Kauter v Hilton
[1953] HCA 95
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The Court delivered the following written judgment:—
Dec. 17
Dixon C.J., Williams and Fullagar JJ.
This is an appeal by the defendants, the executors of the will of Michael Francis Hickey deceased, from part of a decree of the Supreme Court of New South Wales in Equity (Roper C.J. in Eq.) in a suit brought by the plaintiff, the present respondent, against the defendants as executors of the deceased. The decree contains a declaration that the deceased was at the time of his death a trustee for the plaintiff of Commonwealth bonds to the face value of £3,500—due on 15th October 1963, and that the defendants held these bonds and all interest accrued thereon since the date of the death of the deceased on trust for the plaintiff and a further declaration that the deceased was at the time of his death a trustee for the plaintiff of the sum of £387 standing to his credit in an account numbered 33899 with the Neutral Bay branch of the Commonwealth Savings Bank. The object of the appeal is to have these declarations set aside.
Michael Francis Hickey, to whom we shall refer hereafter as the testator, died on 27th January 1950. The plaintiff, who is his niece by marriage, became housekeeper to him and his wife in 1929. They were then living in a flat at Neutral Bay. In 1939 Mrs. Hickey went for a trip to England and the flat was vacated and the furniture stored. The testator went to Newcastle but returned to Sydney in June 1939 and took a flat at Cremorne and furnished it after the plaintiff had promised to look after him until he died. He was then about sixty-six years of age and she was about twenty-seven. Mrs. Hickey returned from her trip in September 1939 but did not resume cohabitation with the testator. She sued him for maintenance but the application failed because she had means of her own. The plaintiff stayed on in the flat and looked after the testator doing all the domestic work from 1939 until his death. The testator was a retired builder and had a considerable sum, at least £8,000, invested in shares. The plaintiff gave evidence that early in 1945 the testator, as was his wont, was reading through the share lists in a newspaper and mentioned some shares which were paying good dividends and said they were the shares which he would like to leave her when he died. He said their value would be about £5,000. The plaintiff said not to talk like that, as she might die before him, but he said: "Well, I intend to give you £5,000. So, would you rather have it in shares or in trust account?" The plaintiff said that she did not understand shares and dismissed the subject.
Nothing was done immediately. But, on 21st May 1945, the testator made a will a copy of which he showed to the plaintiff and said he had not included her in the will because he was going to leave her £5,000 in trust accounts "and if the will is disputed nobody can touch your share, you won't have any death duties to pay, all you have to do is to identify yourself at the bank and you will be able to draw your money if you want it". The testator said he was going to sell shares as she did not understand shares and that, as he sold them, he would put the money into the bank in trust for her. The testator gave effect to this intention for he opened a number of trust accounts in various branches of the Commonwealth Savings Bank in his name in trust for the plaintiff into which he paid sums of money. He opened the first of the accounts at the Spit Junction branch on 17th July 1945, and £500 was deposited comprising £47 in cash and £453 withdrawn from another account. After he had opened the account the testator came home and called the plaintiff into his study, told her what he had done and said that it was only the beginning of what he intended to do. He gave her the passbook and told her to put it away. She thanked him and took the passbook and put it in one of the drawers of her wardrobe. On 2nd October 1946 the testator opened another account at the Crows Nest branch of the bank and deposited £500. When he returned he said he had banked another £500 for her and gave her the passbook. On 27th July 1947 the testator asked the plaintiff for her Spit Junction passbook as he was going to bank another £500 there for her. He did this and returned to the flat. He told the plaintiff that he had done so and gave her back the passbook. On 3rd March 1948 he opened a further account at the Chatswood branch of the bank and deposited £500, the deposit consisting of £364 paid on that day and £136 paid on the following day. He told the plaintiff that he had done so and gave her the passbook. On 31st May 1948 he paid a further £500 into that account and a similar sum into the Crows Nest account and for these purposes borrowed the passbooks from the plaintiff and returned them. On 25th May 1948 the testator opened a further account at the Northbridge branch of the bank, deposited the sum of £500, and gave the passbook to the plaintiff. On 26th May 1948 he opened a further account at the Manly branch of the bank, deposited £500 and gave the passbook to the plaintiff. The testator had a personal account in the Neutral Bay branch of the same bank. The £500 deposited to the credit of the trust account at the Crows Nest branch on 2nd October 1946 appears to have been withdrawn from this account and the deposits to the credit of the trust accounts in March and May 1948 also appear to have been withdrawn from this account after it had been credited with the proceeds of the sale of a large part of the testator's shares.
In October 1949, the testator asked the plaintiff if she would be agreeable to putting the moneys in the trust accounts into Government bonds as a loan was then opening. He said that if she did she could not have better security and the bonds would pay three and one-eighth per cent whereas the bank interest was only two and one-quarter per cent on the first £500. A few days before the loan closed this suggestion was further discussed between the testator and the plaintiff and she said she thought it would be a good idea to put the moneys into loans. A few months before this the testator had told the plaintiff that he had decided to change his will and leave her everything, and he still had about £3,000 in shares, and he wanted to know whether she would prefer to have the shares or should he sell them and put the money into bonds and she again said she did not understand shares.
Towards the end of October 1949, shortly before the loan closed, the testator and the plaintiff decided to put the money in the trust accounts into bonds. They went together to the various branches of the Commonwealth Savings Bank where the trust accounts were and drew out the whole of the moneys and accrued interest and also withdrew certain moneys from private accounts of the testator in other branches of the bank and paid the whole of the moneys so withdrawn for safety into the personal account of the testator at the Neutral Bay branch of the bank. This account was then in credit to £6,505 8s. 0d. and of this sum £6,500 was invested in the loan leaving only £5 8s. 0d. to the credit of the account. The bonds (£6,500 face value) were procured by the manager of the Neutral Bay branch for the testator on his application. The application form provided that interest should be credited to the testator's account at this branch. The bank manager gave the testator a safe custody receipt for the bonds.
When the testator and the plaintiff returned to the flat the testator told the plaintiff that he did not mean to buy the bonds in his name. He meant to buy them in her name and he then handed her the receipt and told her to put it away. He said: "They're yours". The next day the testator and the plaintiff went to the Northbridge branch and withdrew the whole of the moneys, totalling £513 7s. 4d. from that account and paid £513 of them into a new trust account No. 33899 opened by the testator in trust for the plaintiff at the Neutral Bay branch of the bank. This was done after the testator had said the money would be handier there for the plaintiff when he died and she would have to have ready cash. The plaintiff pointed out to the testator that he had put all the money in his private account at the Neutral Bay branch of the bank, except £5 8s. 0d., into the loan and that the moneys in the new trust account at Neutral Bay would have to be used to pay the bills and living expenses until he received some moneys from his shares. The testator said that he would refund these moneys when he got the cheques in from his shares. He said it would not make any difference because it would be all hers in any case. The testator wanted to withdraw even the £5 8s. 0d. from his private account and pay it into this trust account but the plaintiff advised him not to do so because it would close the account and he might need it. Just before Christmas 1949, the testator went to the Neutral Bay branch of the bank to see the bank manager and find out if the bonds could be transferred into the name of the plaintiff. The testator on his return told the plaintiff that the manager was not there but the accountant said that it could be done. The testator told the plaintiff that after Christmas he would sell the remaining shares and fix up everything together. But shortly afterwards he became very ill, went into hospital and remained there until he died.
His Honour, in his reasons for judgment, after pointing out that the plaintiff's claim was against the estate of a deceased person and that in such cases the evidence must be scrutinised with care, said that in some respects the plaintiff's claim was sufficiently strong to convince him that effect should be given to it. His Honour said that he accepted the plaintiff's evidence and held that her evidence was sufficient to establish an intention on the part of the testator to declare himself a trustee for the plaintiff of the moneys deposited in the various trust accounts, subject to his reservation of a life interest in them, and thereby to create in each instance a present trust of these moneys. £3,500 of these moneys were withdrawn from the accounts other than the account in the Northbridge branch and invested in bonds and this led his Honour to follow these trust moneys into these bonds and make the first declaration under appeal. The moneys originally deposited at the Northbridge branch were withdrawn and paid into the new trust account at Neutral Bay and it was the moneys standing to the credit of this account at the date of death that are the subject of the second declaration under appeal.
The evidence discloses that the testator withdrew some small sums credited for interest in some of the trust accounts at an early stage and must have obtained temporary possession of the passbooks for this purpose, although the plaintiff does not appear to have been aware that he had done so. This circumstance together possibly with the circumstance that the testator did not deposit the moneys in bank accounts opened in the name of the plaintiff but deposited them in accounts opened in his own name in trust for her so that they remained under his control may have led his Honour to the doubt he said he had "as to whether the deceased intended that the interest upon the money in the account should go to the plaintiff during his lifetime, or as to whether he intended to reserve to himself the right to the interest on the account for the term of his life". His Honour was not prepared to hold that the plaintiff was entitled to the whole of the bonds worth £6,500. He said: "The plaintiff says that the deceased then stated that the bonds were to be for her. He gave her the safe custody receipt which he had received from the bank. He had invested all the money in the bonds in the one way without reference to any trust in favour of the plaintiff, and so far as they are concerned I am not satisfied that he intended to constitute himself in any way a trustee of the bonds, although I think that he may very well have intended to give them to the plaintiff. On the other hand, if he did have that intention I do not think that he did do so, and so far as the bonds are concerned there is only an imperfect gift by the deceased, if he had the appropriate intention, and no trust constituted in respect of which he was a trustee. The result is that to the extent of capital moneys withdrawn from the trust accounts, which went into the bonds, the plaintiff is entitled to succeed; also I think that she is entitled to succeed to the extent to which money is found in the remaining trust account, this is the Neutral Bay account, expressed to be in the name of the deceased as trustee for her at the time of his death".
There is, of course, no equity to perfect an imperfect gift and if the testator did not intend to hold the bonds in trust for the plaintiff but to give them to her the gift would not be perfected without delivery. It may be that the handing of the safe custody receipt to the plaintiff is not sufficient evidence of delivery. On this question we do not express any opinion for there is no cross appeal and the only question before us is whether the two declarations under appeal can be sustained.
In the course of his reasons his Honour said:—"The plaintiff's evidence as to the opening of those accounts would, if accepted, establish, I think, that the deceased intended at the time that they were opened to set up a present trust in favour of the plaintiff. I have some doubt of just what the present trust would have been, but I have no doubt that it was a present trust. The doubt I have is as to whether the deceased intended that the interest upon the money in the account should go to the plaintiff during his lifetime, or as to whether he intended to reserve to himself the right to the interest on the account for the term of his life. In either event, as I say, I think that he intended a present trust on the plaintiff's evidence which I accept. In view of the fact that I have some doubt. I think that I should find against the plaintiff as to the interest and find that the intention really was that the amount of money which was put into the bank, £500 or £1,000 as the case may be, should be hers, subject to his reservation of a life interest in it". Counsel for the appellants seized upon this passage in his Honour's reasons to submit a novel contention. The submission commenced with a reference to the established rule that in order to constitute a trust the intention to do so must be clear and that it must also be clear what property is subject to the trust and reasonably certain who are the beneficiaries. It was then said that because his Honour had a doubt whether the present trust included a trust of the income of the deposits for the plaintiff during the life of the testator the plaintiff had failed to establish any trust at all. This submission is in our opinion quite fallacious. Equity will only enforce a trust to the extent to which the intention to create a trust is clear. But this does not mean that a plaintiff who seeks to prove too wide a trust must fail altogether. The court may hold that a trust has been established less extensive than that claimed and this is a trust which the court should and will enforce. In support of the submission we were referred to certain passages in the judgments in Smith v. Matthews; In the Matter of Matthews' Settlement [1] and Rochefoucauld v. Boustead [2] relating to s. 7 of the Statute of Frauds (29 Car. 2, c. 3) in which it is pointed out that the evidence in writing of a trust of land required by the section is evidence of the whole of the terms of the trust. The plaintiff's claim in the present case does not relate to lands but to personalty but it was submitted that by analogy the plaintiff fails to establish any declaration of trust at all unless the court can be certain as to all its provisions. Section 7, as it is pointed out in the cases, does not require that a trust of land should be created by writing. The trust may be created orally. All that the section requires is that the trust so created should be manifested and proved by writing. If the present plaintiff was seeking to establish a trust of land, the fact that she sought to establish that she had an immediate interest in possession would not prevent the court from finding that there was a trust but that it was only a trust in reversion, subject to some intermediate interest and the evidence in writing required by the section would be of the trust so proved.
1. (1861) 3 De G. F. & J. 139, at pp. 149-153 [45 E.R. 831, at pp. 835-836].
2. (1897) 1 Ch. 196, at pp. 205-206.
The next submission on behalf of the appellant was that the evidence as a whole does not establish that any immediate trust was created in favour of the plaintiff by the opening of the various trust accounts and that at the most it established an intention on the part of the testator, whilst retaining the complete beneficial ownership of these moneys during his lifetime, to leave the plaintiff whatever moneys were left in the accounts at the date of his death. It was submitted that this indicated no more than an intention to make a testamentary gift and that such an intention can only be carried out by a duly executed will. If this is the true result of his Honour's findings we would agree. But in our opinion it is not. We think that the true result is that reached by his Honour, namely, that the testator intended to create a present trust and to clothe the plaintiff with all the rights of a cestui que trust immediately upon the deposit of the moneys in the various trust accounts or at latest when he told her that the moneys had been deposited for her benefit and handed her the passbooks. An immediate trust would still be created in favour of the plaintiff although the testator intended to reserve to himself the right to withdraw any interest which accrued on the accounts during his lifetime. The evidence does not support the suggestion that all that the testator ever intended to do was to leave the plaintiff whatever moneys happened to be in the trust accounts at the date of his death. It is true that the testator withdrew some of the interest from some of the accounts but these withdrawals would at most lend support to his Honour's doubt whether the trust was an immediate trust in possession or a trust of the capital in reversion. The testator never attempted to withdraw any of the capital except with the consent of the plaintiff. He realized shares against his own judgment because she preferred the money to be in Savings Bank accounts rather than invested in shares which she did not understand. He consulted her with respect to the re-investment of the trust funds in bonds so as to derive a higher interest yield. Some part of the moneys on deposit in the trust account at Neutral Bay were used to pay living expenses, but this was done with the consent of the plaintiff, and indeed at her suggestion. All this evidence is consistent and consistent only with an intention on the part of the testator to create an immediate trust of the moneys as they were deposited in the various trust accounts from time to time.
The issue in dispute on the appeal is essentially one of fact and decisions relating to facts having some distant similarity to the present facts are not of much assistance. We were referred to some of those decisions and in particular to that of Williams J. in Teasdale v. Webb [1] . The relevant principles of law are there discussed but the application of these principles to the facts of the present case leads to the opposite conclusion to which his Honour came on the facts then before him. Section 43 of the Commonwealth Bank Act 1911-1932 to which his Honour referred in that case is now s. 145 of the Commonwealth Bank Act 1945-1953. This section authorizes the opening of trust accounts in the Savings Bank and provides that the Savings Bank may pay any amount standing to the credit of the account to the trustee, and that the receipt of the money by the trustee shall be a discharge to the Savings Bank. But the section also provides that the Savings Bank may, if it thinks fit, require the consent of the beneficiary before any payment out is made to the trustee and also that, although any person other than the trustee shall not have any claim in respect of any money so deposited, nothing in the section shall relieve the trustee from any liability to account for or apply the money in accordance with law. The effect of Jolliffe's Case [1] is that the mere opening of an account under the section by one person in trust for another is not necessarily sufficient to make that person a trustee for the other person. All the relevant circumstances must be examined in order to determine whether the depositor really intended to create a trust. Even where it is held that a trust is intended it is still material to ascertain its terms. The fact that the opening of the account was not communicated to the purported beneficiary may lead to an inference that the trust, if any, was not intended to be irrevocable: In re Cozens; Green v. Brisley [2] ; Radcliffe v. Abbey Road and St. John's Wood Permanent Building Society [3] . But where a person not only opens an account but hands the passbook to the purported beneficiary and thereafter consults that beneficiary on the basis that the latter is the beneficial owner of the moneys or of some interest in them, the evidence tends strongly towards establishing that the depositor intended to create an immediate trust in favour of that other person. The fact that the depositor reserved a right to revoke the trust would not prevent an immediate trust arising and if the trust was not revoked by the depositor in his lifetime the beneficiary would be just as much entitled to the money as a beneficiary under an irrevocable trust: Beecher v. Major [4] ; Fadden v. Deputy Federal Commissioner of Taxation [5] .
1. (1940) 57 W.N. (N.S.W.) 151.
2. (1920) 28 C.L.R. 178.
3. (1913) 2 Ch. 478.
4. (1918) 119 L.T. 512.
5. (1865) 2 Dr. & Sm. 431 [62 E.R. 684].
6. (1943) 68 C.L.R. 76, at p. 83.
The mere fact that the donor intends the trust to take effect in possession upon his death does not make the gift testamentary. As it is pointed out in the joint judgment of Dixon J. and Evatt J. in Russell v. Scott [6] : "Law and equity supply many means by which the enjoyment of property may be made to pass on death. Succession post mortem is not the same as testamentary succession. But what can be accomplished only by a will is the voluntary transmission on death of an interest which up to the moment of death belongs absolutely and indefeasibly to the deceased" [7] .
1. (1936) 55 C.L.R. 440.
2. (1936) 55 C.L.R., at p. 454.
The trust proved in the present case is not a trust of the amount which happened to be to the credit of the trust accounts at the death of the testator. If that had been the trust it would have failed in the case of all the accounts, except the Neutral Bay account, irrespective of the question whether such a gift would be of a testamentary nature, because all the moneys had been withdrawn from the other accounts in the lifetime of the testator. The trust that arose on his Honour's finding was an irrevocable trust attaching to the moneys upon their deposit in the trust accounts, although the beneficial enjoyment was postponed until the death of the testator, and it would have been a breach of trust for the testator to have disposed of these moneys apart from the interest without the consent of the plaintiff. The passbooks contain a notice that withdrawals may be made by the depositor personally on production of the passbook and the necessary completed withdrawal form or to the bearer of a completed withdrawal form signed by the depositor and presented with the passbook. The presentation of the passbook is therefore required before any moneys can be withdrawn from an account and the handing of the passbooks to the plaintiff by the testator should have ensured that no moneys were withdrawn from the accounts without her consent.
The appeal should be dismissed with costs. |
high_court_of_australia:/showbyHandle/1/12364 | decision | commonwealth | high_court_of_australia | text/html | null | Maralinga Pty Ltd v Major Enterprises Pty Ltd [1973] HCA 23 | https://eresources.hcourt.gov.au/showbyHandle/1/12364 | 2024-09-13T22:55:40.721192+10:00 | High Court of Australia
Barwick C.J. Menzies and Mason JJ.
Maralinga Pty Ltd v Major Enterprises Pty Ltd
[1973] HCA 23
ORDER
Appeal dismissed with costs. Cross-appeal dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
Aug. 7
Barwick C.J.
The appellant appeals against a decree of the Supreme Court of New South Wales in Equity dismissing its suit for rectification of a contract of sale of land and for specific performance of the contract as rectified. The facts of the matter as found by the Supreme Court (Hope J.) are as follows.
The respondent was the owner of land in Vaucluse Heights, Sydney, having an area of some 15,038 square feet on which was erected a very large dwelling house known as Ormonde Hall. The area of the land was large enough if that dwelling were demolished to be sub-divided into two lots: and the necessary local government approval had been obtained for such a sub-division. The respondent, in whose dealing with the land a Mr. Brady was the principal actor, having already made a number of endeavours to dispose of the land without success, once more placed it in the hands of auctioneers with instructions on this occasion to offer it at auction primarily as one lot with a dwelling house thereon and failing a sale in one lot, to offer it in two lots. In the latter event, of course, the house on the land would have to be demolished. The reserve finally fixed for the sale of the land in one lot was $160,000.
The auctioneer was instructed that the terms on which the land was to be sold in one lot were to include:
(A) The purchaser shall have the option whether or not it required the vendor (respondent) to demolish the buildings and improvements and
(B) the vendor (respondent) requires a cash payment of $75,000 on completion and will take a mortgage for the balance of the purchase price, the mortgage to provide for repayment at the expiration of three years, to be non-reducible in the meanwhile and to carry interest at the rate of eight per cent per annum.
A contract of sale for the land in one lot was prepared prior to the auction in the form approved by the Real Estate Institute and the Law Society of New South Wales. The form contained a special clause, no. 23, as follows:
The property is sold subject to the demolition of all buildings and improvements to ground level by the Vendor Company at its own expense.
The form provided for payment of the whole of the balance of the price in cash on completion. Having regard to the auctioneer's instructions this form was prepared in error.
The property was described in the order of the sale of the auction as "6 Vaucluse. 20B New South Head Road. Home site with Harbour views. Approx. 15,038 sq. feet. Approved for sub-division in two equal blocks. Finance available at eight per cent."
The announced terms of the auction sale were as follows:
Auction Conditions
Upon a sale by Auction—
(a) The highest bidder shall be the purchaser. In case of any dispute the property shall be put up again at any former bidding and no bidding shall be retracted.
(b) The sale is subject to a reserve price and the right to bid is reserved on behalf of the Vendor.
(c) Upon the fall of the hammer, the Purchaser shall sign the following agreement, the conditions of which, with these conditions, are the conditions of the sale by auction.
Before commencing the auction, the auctioneer called attention to the above conditions which were displayed in enlarged form on the walls of the auction room. When he reached the subject land, which was item six on the day's list, he read its description as in the form of contract, went on to describe the provisions which had been made in the printed form, said that the vendor was to give vacant possession, that the sale was subject to cl. 23 which he read, that there were certain restrictive covenants, that the terms of sale provided by the contract were for the payment of a deposit of ten per cent and the balance in cash on completion. However, he also expressly said that the terms (A) and (B) above, reading them out in full, were part of the conditions on which the land was offered.
The appellant was the highest bidder for the property at $155,000. As this was below the reserve, the auctioneer inquired of Mr. Brady who was present whether the property was on the market at that price. Mr. Brady instructed the auctioneer that it was. Thereupon the property was knocked down at $155,000 to the appellant's representative, Mr. Mutton, who had been bidding on its behalf.
Mr. Mutton then went with a representative of the auctioneer to a nearby room where the already prepared form of contract signed on behalf of the respondent by Mr. Brady, was proffered to him for signature. He had already seen the form and indeed had discussed it with a Mr. Walsh who was associated with the appellant. Mr. Mutton raised with the auctioneer's representative a question as to whether cl. 23 was apt to give the appellant the option of taking the land with the dwelling thereon rather than requiring the dwelling to be demolished, and suggested a verbal change to make that matter clear. The auctioneer's representative carried the question and the proposed change in verbiage to Mr. Brady, but he refused to make any change in the language of cl. 23 and required the form to be signed as it was drawn. Without reading the proposed variation of the clause he said "If they are not happy with it, they can tear up the contract".
On being told by the auctioneer's representative that "They won't be in any alteration. Sign it as it is or the deal is off", Mr. Mutton signed the form on behalf of the appellant and paid the deposit. No question was raised at this time as to the availability to, or requirement by, the appellant of finance in respect of any part of the balance of the price.
The appellant's intention in buying the property was to enable Mr. Walsh and his family to live in Ormonde Hall. Also it was the appellant intention to rely upon the terms as to payment of the price (B above) which had been announced by the auctioneer. In fact the appellant would only be able to complete the transaction if the respondent required only $75,000 in cash on completion.
I need not trouble to detail the subsequent endeavours made on behalf of the appellant to have the terms on which the property was offered for and bought at auction carried out. Suffice it to say that the Supreme Court in the appellant's suit for rectification found that " when the property was knocked down to Mr. Mutton, an oral contract came into being which included terms that the purchaser could pay the balance of the purchase money in cash on completion or, at his election, could pay $75,000 in cash and give the vendor a mortgage for the balance on the terms which the auctioneer had announced, and that the purchaser could elect to have the buildings and improvements remain on the property". The Supreme Court further found that "A written contract, or a written memorandum, to have the same effect as this oral contract, would have to contain provisions giving the purchaser these options".
The Supreme Court was satisfied that notwithstanding the terms of the document he signed " Mr. Mutton did believe that the terms as to finance stated by the auctioneer as being offered by the vendor were part of the contract between the parties, that is, as part of the contract for the purchase of the property, the plaintiffs had a right to require finance to be provided by the defendant on the terms and up to the limit stated by the auctioneer". The Supreme Court was also satisfied that " Mr. Mutton believed that the purchaser was entitled under cl. 23 in the form in which it appeared in the executed contract to elect to have the improvements remain upon the property, and that although he thought there was an ambiguity about the clause which he would have preferred to remove, he was confirmed in his view as to what he regarded was its proper construction by the auctioneer's statement, and by what Mr. Walsh had told him had been said by the vendor on the subject".
The Supreme Court thought that the written contract was susceptible of rectification so as to express the appellant's option to take the land in its improved state and not require the demolition of Ormonde Hall but that there had been no mutual mistake as to the provision of the contract requiring cash on completion: Mr. Mutton had signed the document deliberately knowing that it called for the payment on completion of the balance of the price: any mistake was on his part alone. Accordingly, the Supreme Court refused rectification, there being no request for performance of the contract rectified only as to the option affecting the demolition of the dwelling on the land.
I do not trouble to discuss the question of rectification of the contract in order to clarify cl. 23. I can see no basis, however, on which the respondent could insist against the appellant's wishes on demolition of the buildings on the land, cl. 23 remaining in the terms in which it appears in the contract. The land being sold in one lot, the vendor could have no interest whatever to insist on demolition. Of course, cl. 23 would have a different significance in a sale in two lots, or in two separate lots. But as the property was described for sale at the auction and was sold in one lot, it is my opinion that quite clearly the purchaser can insist on taking the land as it is with the building thereon and the vendor could not in that event attempt to demolish it.
I turn now to the substantial matter of whether the written document should be rectified. It is quite clear on the findings of the Supreme Court that we have these cardinal facts. The parties made an oral agreement which was binding upon them though for want of writing might not be enforceable. No attempt was made before the Supreme Court to use the auctioneer's record of the sale as a memorandum. The Supreme Court has found what that agreement quite clearly was: it expressly included the two terms which it is now sought to insert into the writing. The parties in making the oral agreement intended that it should be recorded in writing. If it was the common intention of the parties in signing the writing that it was to record their oral agreement, the appellant's case for rectification has, in my opinion, been made out. The appellant's case for rectification is for the reformation of a writing which purports, though erroneously, to record an already concluded agreement. Indeed, for long this was thought to be the only class of case in which rectification was available: see McKenzie v. Coulson [1] ; W. Higgins Ltd. v. Mayor, Aldermen and Burgesses of Northampton [2] ; Australian Gypsum Ltd. v. Hume Steel Ltd. [3] ; Shipley Urban District Council v. Bradford Corporation [4] ; Crane v. Hegeman-Harris Co. Inc. [5] ; Slee v. Warke [6] .
1. (1869) L.R. 8 Eq. 368, at p. 375.
2. [1927] 1 Ch. 128.
3. (1930) 45 C.L.R. 54.
4. [1936] Ch. 375.
5. [1939] 1 All E.R. 662; [1939] 4 All E.R. 68.
6. (1949) 86 C.L.R. 271, at p. 280.
The remaining question in this case therefore, in my opinion, is whether it was the common intention of the parties in signing the agreement to record the oral agreement which they had already concluded or whether, on the other hand, they intended to make a new and different contract by the writing which they signed.
It is abundantly clear from the judgment of the Supreme Court that when the written contract was proffered for signature to the appellant it was not proffered as some offer in a new negotiation for the sale of the land or in order to make some agreement other than the oral agreement resulting from the auction; that is to say, there could have been no intention on the part of Mr. Brady by the writing to make an agreement at variance with the oral agreement which had already been made by and through the auction. It was the form of contract referred to by the auctioneer. Mr. Brady had signed it before he had seen or heard from Mr. Mutton. We do not know by any evidence what Mr. Brady had in mind for he gave no evidence. But he could not have truthfully said that he signed the form of contract with any other intention than as a record of the contract made by and at the auction. He may have thought that in its terms he saw some possibility of advantage for the respondent at the expense of the appellant in the form of record which the form of contract took. But this, like some of the possibilities spoken of by the learned primary judge, is no more than speculation, not founded on evidence. It does not constitute any solid ground on which to form a conclusion of fact.
It may be, of course, that Mr. Brady may not have had the same recollection or belief as to what all the terms of that agreement were as the Supreme Court found them to be. In this connexion it must be borne in mind that the agreement was not directly made between the representatives of the parties personally. Mr. Brady had given instructions to the auctioneers. The auctioneer was instrumental in announcing the terms of the auction so as to communicate them to Mr. Mutton. After having received the highest bid he obtained from Mr. Brady express authority to accept it; thus the agreement was made on behalf of the parties by a combination of these events, the appellant's highest bid and the fall of the hammer. Further, the auctioneer had both announced the two specific options and referred as well to the signature of the form of contract. But whatever view he may have had of the terms of the oral contract Mr. Brady none the less, in my opinion, signed the form of contract as a record of the agreement made in and by the auction.
It is quite clear from the findings of the Supreme Court that in signing the form of contract Mr. Mutton was not intending to vary the auction contract. He thought apparently that there was no need to include the term as to finance in the writing in order that there should be a record of the earlier agreement. In this he was clearly mistaken. But again it might be said that the auctioneer had not seen anything amiss in terms of sale which included the two options and yet required the signature of the prepared form of contract. Having the belief which the Supreme Court attributed to him, quite clearly Mr. Mutton did not intend when signing the contract to enter into a new and different contract from that resulting from the auction. Of course, he signed the writing intentionally and with knowledge of its contents. But that fact does not deny that with the belief he had, he signed it mistakenly as a record of the agreement which had in fact been made.
I would conclude, therefore, that the common intention of the parties in signing the form was to record the oral agreement made by and at the auction and that there was no intention on the part of either by the writing to make an agreement in any respect at variance with that oral agreement.
The case therefore falls, in my opinion, into that class of claim for rectification where there has been a concluded oral agreement and the whole purpose of the writing has been merely to record what has already been agreed. The Supreme Court thought there was no common mistake as to the provision of the contract calling for the payment in cash on completion of the balance of the price. There was, in its view, merely a unilateral mistake on the part of Mr. Mutton in that he thought that the condition of the auction as to the acceptance of $75,000 with the balance secured by mortgage was not inconsistent with the writing and continued to form part of the entire contract between the parties. But the form of contract did not record the bargain which had been made between the parties. The parties' mutual mistake is in thinking contrary to the fact that the writing was recording what they had agreed. It is nothing to the point that they or one of them was foolish so to think. It is enough, in my opinion, that the document was signed for no other purpose than to record an already concluded agreement of which the terms are definitely known by the findings of the Supreme Court. Of course, if a document, as being itself the formation of the agreement between the parties, is signed with a clear knowledge of its contents there will be no basis for rectification. The writing will precisely represent the intention of the parties. If this occurs where there has been a prior concluded agreement, upon a proper analysis they will have made a new and different agreement from that which they originally intended to record. The likelihood of such an intention in all the circumstances ought to be a considerable factor in deciding whether in fact they did so intend.
The question in such a case is whether the executed writing has carried out the mutual intention of the parties. Deliberate execution of the writing in such a case with knowledge of its provisions, even if there is a lack of understanding as to the effect of the expressions used in the writing, may conclude the matter. But this is not such a case, though I am inclined to think that the Supreme Court treated it as if it were. In my opinion, there is a clear case for rectification of the writing to make it accord with the oral agreement which had in fact been made. It should be so rectified and as so rectified ought specifically to be performed.
Menzies J.
I have read the judgment prepared by Mason J. and I agree with it.
In my opinion, there can be rectification of a written contract on the ground of mutual mistake only if it be established that, through common error, the document signed by the parties did not express their mutual intention. Here there was no such error. Both parties knew that the document (a) contained cl. 23 which would operate according to its terms and (b) did provide for payment of the balance of the purchase price upon completion. Mr. Mutton, for the purchaser, thought, mistakenly perhaps, that (1) in addition to the document, there was a collateral agreement relating to terms for payment of the balance giving effect to what the auctioneer had said, and (2) cl. 23 gave the purchaser the option which the auctioneer stated the purchaser would have. As to (1) a belief that the sale at auction was being effectuated by two contracts, the document and a collateral contract, itself negatives a mistake that the document gave full effect to the sale. As to (2) any mistake as to what cl. 23 meant was his own private error of law.
It was not proved that Mr. Brady was under any mistake at all. It seems likely that he knew very well the terms of the document because he abruptly refused a request to alter the wording of cl. 23 and the purchaser was given the option to sign or tear up the contract. However that may be, there was just no evidence that he mistakenly thought that the written agreement accorded with the terms of the sale at auction.
It may be that this is a hard case, but I have no doubt that the law as established does not provide for the relief which the appellant claimed.
In my opinion, the appeal should be dismissed.
Mason J.
The respondent submitted for sale at auction a residential property at Vaucluse, Sydney. It was knocked down to the appellant for $155,000. Before the sale it had been made known to the appellant that the contract would incorporate the conditions contained in the standard form of contract approved by the Law Society and the Real Estate Institute of New South Wales. At the auction the auctioneer stated that a deposit of ten per cent of the price was to be paid on the signing of the contract and that the sale was subject to special condition 23 which he read out. It was in the following terms:
The property is sold subject to the demolition of all buildings and improvements to ground level by the Vendor Company at its own expense.
He went on to say that the purchaser would have the option of requiring the vendor to demolish the very large house which was on the land or allowing it to remain. He also stated that the respondent was offering finance, that it required a cash payment of $75,000 and would allow the balance of the purchase price to remain on first mortgage over three years at eight per cent fixed interest. The draft contract, of which the appellant was aware, provided for the payment of the balance of the purchase price on completion and did not contain a provision for any part of the price to remain on mortgage for three years.
At the conclusion of the sale Mr. Mutton, a director of the appellant, who was employed as a clerk by the appellant's solicitors and advised the appellant in connexion with the sale, when asked to sign the contract on behalf of the appellant, sought to obtain an alteration in special condition 23 so that it would more clearly reflect the notion that the purchaser had an option to require the vendor to demolish the building on the site, as the appellant wished to purchase the property as a residence for Mr. Walsh, its principal shareholder. On the instructions of Mr. Brady, the managing director of the respondent, this request was met with a curt refusal, "Sign it as it is or the deal is off". Why the respondent took this attitude is not revealed by the evidence, for Mr. Brady did not enter the witness box. There was some suggestion that the purchase price was lower than anticipated and perhaps Mr. Brady hoped to force some additional concession from the appellant or to have the opportunity of a further sale. Be that as it may, faced with Mr. Brady's ultimatum, Mr. Mutton signed the contract in the form in which it had been presented.
The appellant sued for rectification and specific performance of the contract as rectified. The appellant sought to have the contract rectified in two respects: first, so that special condition 23 should be so expressed as to confer an option on the purchaser to require the vendor to demolish or not; secondly, so that in lieu of payment of cash on completion provision was made for a mortgage back to the vendor in the sum of $64,500 for three years at eight per cent per annum.
The appellant's suit for rectification and specific performance of the contract was dismissed by the Supreme Court of New South Wales in its Equity Division. Hope J. held that, although the appellant would have been entitled to relief by way of rectification of special condition 23 had it stood alone, it was not entitled to rectification so as to include the provision for finance by way of mortgage back, and it had wrongly insisted on performance of the contract on the footing that it should be rectified in both respects.
The primary judge found that Mr. Mutton when he signed the contract knew that it contained special condition 23 and provision for payment of cash on completion and that it did not contain the two provisions which the appellant now seeks to have included in the contract. However, his Honour also found that at the time Mr. Mutton believed that special condition 23, although not clearly worded, would be interpreted as conferring an option on the purchaser. It was for this reason that Mr. Mutton signed the contract without insisting on the amendment which he had proposed. The primary judge also found that Mr. Mutton believed that the auctioneer's statement that $64,500 would be available on mortgage back to the vendor for three years at eight per cent fixed interest per annum was enforceable as a warranty forming part of the contract or collateral to it. Although the statement conflicted with an express term of the written contract calling for the payment of cash on completion, Mr. Mutton evidently attributed no significance to that circumstance and, accordingly, did not request an amendment to the contract to cover the point.
The appellant's case is that it is entitled to rectification and specific performance on the ground that at the conclusion of the auction the parties had arrived at an oral, albeit unenforceable, contract, incorporating the terms which it now seeks to have included in it. The written instrument does not accord with the antecedent agreement and should be re-formed so as to give accurate expression to it, so the argument runs.
The first step in the argument is the proposition that the written instrument was intended by the parties merely to record the terms of the bargain reached when the property was knocked down to the appellant. The primary judge did not make a finding on this issue of fact, perhaps because the evidence did not lend itself to such a finding, but he came to conclusions which are relevant to it. His Honour found that Mr. Mutton in signing the contract believed that he was executing a written instrument which, when taken together with the warranty as to finance which he considered to be enforceable, gave effect to the terms of the auction sale. But his Honour made it equally clear that Mr. Mutton knew that the contract contained an inconsistent provision.
The intentions of the respondent with respect to the written instrument are not as clear, because those acting for the respondent did not give evidence. The primary judge said, with reference to Mr. Brady:
In insisting upon the execution of the contract in the form which had been prepared, he was requiring the purchaser to sign a contract which he knew to be different in its effect to the basis on which the property had been knocked down to the purchaser, and I think that his firm decision as to the contract was the reason why he refused even to read Mr. Mutton's draft clause which Mr. Pillinger brought to show him.
Although Mr. Brady did not give evidence, I am not persuaded that his Honour's conclusion was incorrect.
In these circumstances the statement that the written instrument was signed merely to record the terms of the oral bargain is in my view neither sufficient nor accurate. Both parties knew that the written instrument contained a provision for payment of cash on completion and that it differed from the terms of the antecedent bargain; yet they signed it. So in this respect the written instrument was not executed as the result of a mistaken belief as to what it contained. Mr. Mutton was mistaken as to its effect but not as to its contents.
The conditions according to which relief by way of rectification will be granted have been variously stated. In Fowler v. Fowler [1] , Lord Chelmsford L.C. said that the person seeking rectification must establish clearly "that the alleged intention to which he desires" [the instrument] "to be made conformable continued concurrently in the minds of all parties down to the time of its execution, and also must be able to shew exactly and precisely the form to which the deed ought to be brought". On other occasions statements have been made which emphasize that it is for the plaintiff to show that by the writing sought to be rectified the parties intended to record the terms of an antecedent oral bargain and that by common mistake there is a disconformity between the oral bargain and the writing (United States of America v. Motor Trucks Ltd. per Earl of Birkenhead [2] ).
1. (1859) 4 De G. & J. 250, at p. 265 [45 E.R. 97, at p. 103].
2. [1924] A.C. 196, at p. 200.
The difference in expression is not of importance. It is explained partly by the difference in the character of written instruments sought to be rectified and partly by the more recent desire to emphasize that the remedy is designed to relieve against the mistaken expression of the true agreement of the parties.
As Buckley L.J. said in Lovell & Christmas Ltd. v. Wall [3] :
For rectification it is not enough to set about to find what one or even both of the parties to the contract intended. What you have to find out is what intention was communicated by one side to the other, and with what common intention and common agreement they made their bargain.
1. (1911) 104 L.T. 85, at p. 93.
What is of importance is that the purpose of the remedy is to make the instrument conform to the true agreement of the parties where the writing by common mistake fails to express that agreement accurately. And there has been a firm insistence on the requirement that the mistake as to the writing must be common to the parties and not merely unilateral, except in cases of a special class to which I shall later refer.
It is now settled that the existence of an antecedent agreement is not essential to the grant of relief by way of rectification. It may be granted in cases in which the instrument sought to be rectified constitutes the only agreement between the parties, but does not reflect their common intention (Shipley Urban District Council v. Bradford Corporation [1] ; Slee v. Warke [2] ). But this circumstance does not affect what I have already said.
1. [1936] Ch. 375.
2. (1949) 86 C.L.R. 271.
The strength of the appellant's case is that at the conclusion of the auction there was a valid albeit unenforceable agreement between the parties and the written instrument does not conform to it. Moreover, at all times up to the conclusion of the auction the parties intended that a written contract would be executed to record the terms of the auction sale.
Even so, in order to succeed the appellant must show that the parties intended by the writing to give effect to the whole of the antecedent agreement and that by common mistake it failed to do so. In Craddock Bros v. Hunt [3] , speaking of the jurisdiction to grant relief when the written instrument is preceded by a verbal agreement, Warrington L.J. said:
The conditions to its exercise are that there must be an antecedent contract and the common intention of embodying or giving effect to the whole of that contract by the writing, and there must be clear evidence that the document by common mistake failed to embody such contract and either contained provisions not agreed upon or omitted something that was agreed upon, or otherwise departed from its terms.
1. [1923] 2 Ch. 136, at p. 159.
It may be asked why should a plaintiff be required to establish more than disconformity between the antecedent agreement and the written instrument. Why should he be called upon to show that the writing was intended to give effect to the whole of the oral contract and that by common mistake the written instrument failed to do so? The answer lies in the circumstance that the court must be satisfied that the instrument does not reflect the true agreement of the parties. It cannot be so satisfied unless the writing was intended to record the earlier agreement and by the mistake of the parties it fails to do so. If the plaintiff fails to establish these elements he does not displace the hypothesis arising from execution of the written instrument, namely, that it is the true agreement of the parties.
Mr. Mutton did not intend to give effect to the entire antecedent agreement by the writing. He was content to allow the auctioneer's statement as to finance to remain apart from the written contract. Furthermore, the appellant and the respondent, knowing through Mr. Mutton and Mr. Brady respectively that the contract contained a provision requiring payment of cash on completion, executed the contract with that knowledge.
Accordingly, the appellant has not shown that in this respect the instrument was intended to record the antecedent oral agreement or that the instrument by common mistake failed to conform to that agreement. The parties assented to a provision calling for payment of cash on completion which differed from that agreement. They were not mistaken as to the contents of the written instrument. Although Mr. Mutton was mistaken in the reason which led him to accept the contract in its written form, the unilateral mistake which he made as to its legal effect was not a mistake of the kind that grounds rectification.
An alternative argument was advanced by the appellant based on a series of authorities which are said to decide that if one party to a transaction knows that the instrument contains a mistake in his favour but does nothing to correct it, he will be precluded from asserting that the mistake is unilateral and not common: see Whiteley v. Delaney [1] ; Monaghan County Council v. Vaughan [2] ; George Cohen, Sons & Co. Ltd. v. Docks and Inland Waterways Executive [3] . In my opinion this principle has no application to this case as there was no relevant mistake on the part of the appellant as to the contents of the written contract.
1. [1914] A.C. 132.
2. [1948] I.R. 306.
3. (1950) 84 Ll.L.R. 97.
In the result I am of opinion that the primary judge was correct in concluding that the appellant was not entitled to rectification by inserting in the contract a provision for finance conforming to the auctioneer's statement. There is little point in considering the appellant's case in so far as it relates to special condition 23 as the appellant has always insisted on performance of the contract on the footing that it contained, or should contain, the provision for finance, but for my part I do not consider that the appellant established a case for rectification of the special condition.
Accordingly, I would dismiss the appeal. I would also dismiss the cross-appeal against his Honour's declaration that the contract was not validly rescinded, the respondent's counsel having indicated that he did not wish to argue it. |
high_court_of_australia:/showbyHandle/1/10094 | decision | commonwealth | high_court_of_australia | text/html | null | McVicar v Commissioner for Railways (NSW) [1951] HCA 50 | https://eresources.hcourt.gov.au/showbyHandle/1/10094 | 2024-09-13T22:55:44.926020+10:00 | High Court of Australia
Dixon, Williams, Webb, Fullagar and Kitto JJ.
McVicar v Commissioner for Railways (NSW)
[1951] HCA 50
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
Oct. 3
Dixon, Williams, Fullagar and Kitto JJ.
This is an appeal from an order of the Supreme Court of New South Wales dismissing an application by a plaintiff to set aside a verdict for the defendant and to order a new trial. The verdict was directed by the judge who presided at the trial. The action is for wrongful dismissal. The defendant, the respondent in the appeal, is the Commissioner for Railways and the plaintiff, the appellant, was an officer of the railway service.
Section 70 (1) of the Government Railways Act 1912-1950 requires the Commissioner to appoint or employ such officers to assist in the execution of the Act as he thinks necessary, and provides that every officer so appointed shall hold office during pleasure only. Section 78 provides that the Commissioner may remove any officer. The appellant was removed from office because he would not comply with an instruction or requirement that he should become a financial member of an industrial union of employees recognized by the State Industrial Court or by the Commonwealth Arbitration Court. His action is founded upon the view that it was not competent to the Commissioner to terminate his service for such a reason and that in any event the Commissioner did not act on his own discretion but under the direction of the government without exercising any judgment of his own.
The facts are brief. The appellant was a guard, class 1, in the railway service. He was a member of the Railway Operating Employees' Union, a union registered under the Trade Unions Act 1881-1936 N.S.W., but not under the Industrial Arbitration Act 1940-1950 N.S.W. or the Commonwealth Conciliation and Arbitration Act 1903-1950. He was eligible for membership of the Australian Railways Union or of the National Railwaymen of Australia, unions registered under one or other or both of these Acts.
In 1941 the Commissioner issued a notice or notices that all railway employees must become members of an industrial union recognized by the State Industrial Court or the Commonwealth Arbitration Court and that before a specified date they must satisfy an authorized officer that they had done so. Further, each officer must remain a financial member of such union. On 5th December 1947, a notice to the staff was issued by the Commissioner which recited the earlier notice and said that representations had been made by a number of unions which complained that the instruction had not been carried out. The notice then renewed the direction and stated that failing compliance an officer would be stood down from duty. The notice ended with an intimation that membership of the Railway Operating Employees' Union did not amount to a compliance with the instructions because it was not recognized by the State Industrial Court or the Commonwealth Arbitration Court. Apparently a statement concerning membership was contained in a card filled in by employees and returned to the staff superintendent. The card completed by the appellant showed that he was a member of the Railway Operating Employees' Union only. By a memorandum from the staff superintendent he was informed that membership of that union did not comply with the instructions and that within seven days he must produce evidence that he had become a financial member of a bona-fide union and that if he did not do so he would be removed from the service. To this he replied by a letter of remonstrance expressing his determination, even at the cost of his years of service, to maintain his membership of the one union and to refuse to comply with the requirement that he should join another. A minute was then made, under a delegation from the Commissioner, to the effect that the appellant was removed from the service, and he was so informed. On the following day he nevertheless attended for duty but instructions had been already received by his particular depot to the effect that he had been removed from the service and he was accordingly told that he was out of the service and could not be put on duty.
The appellant's declaration alleged a contract on the part of the respondent Commissioner not to dismiss the appellant unjustly, capriciously, or without good and sufficient cause. The contract, however, is based upon the statute, which in any case must control the terms of service. Section 70 (1), which provides that the appointment of officers shall be at pleasure, says nothing about the Commissioner not dismissing unjustly or capriciously or without good and sufficient cause nor does s. 78, which provides that the Commissioner may remove any officer. But the appellant says that the Commissioner is a statutory corporation sole who cannot act outside his powers or pursue any of them for objects beyond the purposes for which he was incorporated. The appellant contends that the purpose of constraining him to join a union of a particular description is outside the scope of the Commissioner's statutory power or capacity, that it forms an ultra vires object so that the purported removal of him from office is void and cannot be considered the act of the Commissioner. Upon this footing the case for the appellant is that the refusal to allow him to perform his duties and receive his remuneration as an officer of the railway service was without justification and amounted to a wrongful dismissal: see Williamson v. Commonwealth [1] ; Lucy v. Commonwealth [2] . Section 70 (1) and s. 78 govern the tenure of an officer of the railway service. Whether the terms of his employment be treated as statutory or as contractual or partly the one and partly the other, these sections state what as between him and the Commissioner is the officer's right to continue in the employment of the Commissioner. From the mere inspection of the provisions it would appear to be only too clear that against the Commissioner the officer has no such right. His employment is determinable at the Commissioner's pleasure. As the action from which the appeal arises is an action of wrongful dismissal, that is to say, an action to enforce, by the recovery of damages, a right to the continuance of his employment, it is hard to see why the fact that the employment is determinable at pleasure does not afford the respondent Commissioner an absolute answer to the action. Nor is it easy to see in principle what help the appellant can obtain from the doctrine of ultra vires. The act complained of is the dismissal of the appellant from his employment. How can that be ultra vires? It is the very thing that s. 78 authorizes the Commissioner to do. Section 70 (1) confers upon the Commissioner the right to exercise the power at his pleasure. How can the reasons or motives place beyond power the doing of the very act itself which is expressly authorized? In principle the answer must be, only if the power to do the act is dependent on the reasons or motives. On a reading of ss. 70 (1) and 78 it is indeed difficult to find in them any indication of an intention that the right or power to dismiss should depend upon the reasons or motives for its exercise and thus open up an inquiry into what lay behind the removal of an officer. The context of the provisions gives no support for the suggestion that such an intention should be implied. The railway service is a government service and it is evident that the purpose of ss. 70 (1) and 78 was to invest the railway Commissioner with the same power of dismissing servants at pleasure as belongs to the Crown. There can be no inquiry into the grounds upon which a servant of the Crown who holds at pleasure is removed from office.
1. (1907) 5 C.L.R. 174.
2. (1923) 33 C.L.R. 229.
The appellant, however, relies upon what was said in Price v. Rhondda Urban Council [1] ; Short v. Poole Corporation [2] ; and Fennell v. East Ham Corporation [3] . In none of these cases does the actual decision support the appellant's position. What he relies upon is the manner in which the law was stated in the course of the reasons which the learned judges who decided them gave for arriving at conclusions adverse to the plaintiffs in those cases.
1. (1923) 2 Ch. 372.
2. (1926) Ch. 66.
3. (1926) Ch. 641.
In Short's Case [2] , which was decided by the Court of Appeal, the defendant corporation was the local education authority for the purposes of elementary education, so constituted by s. 3 of the Education Act 1921 of the United Kingdom. The Act required it to maintain and keep efficient all public elementary schools within their area: s. 17. Section 148 (1) of the Act provided that a local education authority might appoint necessary officers including teachers to hold office during the pleasure of the authority and might remove any of those officers. The defendant corporation had adopted a report from a committee to the effect that it was inadvisable to retain married women as teachers in the public elementary schools unless in any particular case some sufficient reason existed. The grounds of this report were, first that the committee considered that the duty of a married woman is to look after domestic concerns, and that it was impossible for her to do this and at the same time to act as a teacher satisfactorily, and, secondly, that it was unfair to the large number of unmarried teachers who were then seeking situations that positions should be occupied by married women whose husbands were presumably capable of maintaining them. The defendant corporation proceeded to put into effect the policy they had adopted. The plaintiff was a female teacher who had married. She had received a notice terminating her engagement at the expiration of a month. She brought the action and sought a declaration that the notice was invalid and inoperative and an injunction restraining the defendant corporation from acting on the notice or attempting to enforce it. In her statement of claim she alleged that in attempting to dismiss her the corporation was acting in pursuance of motives alien and irrelevant to the discharge of their duties as an education authority. The Court of Appeal, reversing the decision of Romer J., held that the reasons and purposes of the corporation were not irrelevant to or outside its functions. But their Lordships accepted a view of the law which may appear to make the termination of the employment wrongful if the reasons or ulterior purposes by which the corporation was animated were irrelevant to its functions. A clear statement of the principles which the Court of Appeal was prepared to accept is contained in the reasons given by Warrington L.J. and it will be enough to set out what his Lordship said. The passage is as follows:—"In the case of an individual employer under a contract with an employee, such as existed in the present case, the motives of the employer in giving the notice would be wholly immaterial, and provided the notice in itself complied with the terms of the contract the employment would be duly determined by it. Is the position of a public body, such as the defendants in the present case, in any, and, if so, in what respect different from that of an individual? In my opinion it is different only in this, that being established by statute for certain limited purposes, no act purporting to be that of the public body can have any operation as such, if the individuals purporting to exercise the functions of the public body have, in performing the act in question, transcended the limits of the authority conferred upon it. If they have done so, and this fact is proved affirmatively by the person who complains of their action and seeks to have it declared invalid and inoperative, then, and then only, has the Court, in my opinion, jurisdiction to interfere. Thus no public body can be regarded as having statutory authority to act in bad faith or from corrupt motives, and any action purporting to be that of the body, but proved to be committed in bad faith or from corrupt motives, would certainly be held to be inoperative. It may be also possible to prove that an act of the public body, though performed in good faith and without the taint of corruption, was so clearly founded on alien and irrelevant grounds as to be outside the authority conferred upon the body, and therefore inoperative. It is difficult to suggest any act which would be held ultra vires under this head, though performed bona fide. To look for one example germane to the present case, I suppose that if the defendants were to dismiss a teacher because she had red hair, or for some equally frivolous and foolish reason, the Court would declare the attempted dismissal to be void. My view then is that the only case in which the Court can interfere with an act of a public body which is, on the face of it, regular and within its powers, is when it is proved to be in fact ultra vires, and that the references in the judgments in the several cases cited in argument to bad faith, corruption, alien and irrelevant motives, collateral and indirect objects, and so forth, are merely intended when properly understood as examples of matters which, if proved to exist, might establish the ultra vires character of the act in question" [1] . Now it may at once be said with reference to this passage that it is of course undeniable that if the act purporting to dismiss the employee is ultra vires of the corporation, then it is not the act of the corporation and must be inoperative. Ex hypothesi it could not in itself be a dismissal, wrongful or otherwise, because it is not the act of the corporation; but it might be followed by a de facto exclusion from the duties and emoluments of the office, which would amount to a dismissal. The point of difficulty, however, lies in the use of the motives or reasons actuating the dismissal of employees holding at pleasure in order to remove the dismissal from the power of the corporation and place it in the category of an ultra vires act. Considered from the point of view of the rights of the employee, whether statutory or contractual, it is only by an implication limiting the grounds on which the pleasure governing the termination of the employment must depend that the employee can have any title to complain that his removal from office is wrongful. Considered from the point of view of statutory powers of a public corporation, two steps are necessary before the dismissal can be treated as ultra vires. One is to treat the right or authority to terminate an employment at pleasure as a corporate power as distinguished from a right arising out of the terms of employment. The next step is to find in the context in which the power is given a sufficient indication that the power depends upon the grounds or reasons upon which its exercise is based.
1. (1926) Ch. 66.
2. (1926) Ch., at pp. 90, 91.
In the case of a local education authority deriving its powers with reference to a "provided school" from the Education Act 1921, the Court of Appeal appears to have been prepared to treat the right or authority to dismiss a teacher as a question of corporate power and to treat such corporate power as depending upon, that is to say, limited to, grounds or reasons susceptible of definition. The subject matter of the statute had a character and indeed a history of its own, and in the context their Lordships did not doubt the validity of the legal foundation upon which the plaintiff attempted to build her case. But it by no means follows that we should discover in the Government Railways Act 1912-1950 N.S.W. the same foundation for the present appellant to build his case upon. Moreover, it must be remembered that the Court of Appeal had before them not an action for wrongful dismissal, but a suit directly challenging the validity of the course taken by the corporation as a policy or plan of action and seeking a declaration of right and an injunction, on the ground that the policy or plan was irrelevant to the corporate purposes of the body and ultra vires. It is true that the injunction sought was to restrain the enforcement of the notice to the plaintiff, but that notice was the outcome of the plan or policy impugned. The validity of the course proposed as within the powers of the corporation, and therefore as its act, was the question under consideration, not the question whether a de facto dismissal of the plaintiff would be actionable although the plaintiff held only at pleasure.
Fennell v. East Ham Corporation [1] is a decision of Lawrence J. in an action heard before, but decided after, Short's Case [2] had been decided by the Court of Appeal. Again, the relief sought consisted in declarations of right and injunctions based on ultra vires. There were three plaintiffs, married women complaining that a local education authority had decided upon a policy of terminating the engagement of married teachers and had given them notice of dismissal accordingly. They were treated as entitled under their engagements to a month's notice and such a notice was given. They claimed a declaration that the notices terminating their engagements were invalid and inoperative and that their contracts for service were subsisting, and an injunction restraining the defendants from enforcing the notices. Lawrence J. held the reasons or purposes actuating the corporation were not irrelevant and outside its powers and dismissed the action. But his Lordship, in so deciding, applied the general principle enunciated in Short's Case [2] and, in addition, made the following comment upon the decision in that case:—"In my opinion, this decision, by which, of course, this Court is bound, disposes of the following three points taken by Mr. Upjohn on behalf of the defendants—namely, first, that this action is not maintainable, on the ground that it is, in substance, one for the specific performance of a contract of service; secondly, that the Court will not, where one party to a contract is exercising his contractual rights, inquire into the motives for the exercise of those rights, and, thirdly, that the plaintiffs are not competent parties to set up an alleged abuse by the defendants of their statutory powers, but that, in such a case, the action ought to be brought by the Attorney-General on behalf of the public concerned" [1] . No doubt, as to the second at least of these propositions, Lawrence J. meant, not that it was wrong, but that it was inapplicable. The case stands in exactly the same position as the decision of the Court of Appeal in Short's Case [2] .
1. (1926) Ch. 641.
2. (1926) Ch. 66.
3. (1926) Ch. 66.
4. (1926) Ch., at p. 652.
5. (1926) Ch. 66.
In Richardson v. Abertillery Urban District Council [3] an action was brought by a teacher for an injunction restraining his dismissal by a local education authority in pursuance of a financial policy which he said was ultra vires. Eve J. said:—"What was asked would, in fact, be granting an injunction as a step to specific performance of a contract of service, which the court never did. But it was said that this was not a contract between a servant and an individual employer but between a servant and a public body, and that the law was not the same in the case of such a contract of employment. To what extent did it differ?" [4] . His Lordship then quoted part of the passage, already set out, from the judgment of Warrington L.J. in Short's Case [2] and, without further comment, proceeded to hold that the facts did not bring the case within it. It is perhaps not fanciful to discern in the approach of Eve J. to the case a disinclination to regard very seriously the possibility of an actual dismissal of an officer holding at pleasure amounting to an ultra vires act, still less to a breach of contract. It is to be noticed that it was upon a dictum of Eve J. that Romer J. relied for his decision in Short's Case [2] , which the Court of Appeal reversed. That dictum occurs in Price v. Rhondda Urban Council [5] . But the dictum is no more than a statement that it was unnecessary to deal with arguments that an education authority in engaging and dismissing teachers acted in a fiduciary capacity because in his Lordship's opinion "it is sufficient to point out that this body, being a statutory body entrusted with statutory powers, can only exercise those powers for the purpose and with the object of giving effect to the statutory duties imposed upon it" [5] . His Lordship proceeded to say that it must be assumed that the body acted in good faith unless the contrary were proved and he decided that the body acted honestly within its powers. This dictum, however, appears to have sown the seeds of the supposed doctrine which the present appellant asserts as establishing his case.
1. (1928) 138 L.T. 688.
2. (1928) 138 L.T., at p. 690.
3. (1926) Ch. 66.
4. (1926) Ch. 66.
5. (1923) 2 Ch., at p. 389.
6. (1923) 2 Ch., at p. 389.
One matter to which it seems desirable to draw attention is that the New South Wales Railways Commissioner is a corporation sole. See s. 4 of Act No. 31 of 1932. He is not a public body. A corporation sole has two capacities, that of the natural person and that of the corporation. But it may well be doubted whether the cases in question apply to a public administrative officer whose office happens to be incorporated. Doctrines of ultra vires are less readily applied in such a case than to a corporate public body. The Supreme Court decided this case on the ground that the facts did not bring it within the application of any of the propositions enunciated in Short's Case [1] , even supposing that they applied to the Commissioner for Railways in removing an officer and governed his liability for wrongful dismissal. To dispose of the appeal it would be enough to say that this view seems wholly correct. But a decision limited to this ground might appear to imply that the Commissioner's right to dismiss is subject to limitations sufficiently defined to afford a standard of relevancy and that tried by that standard the reasons which induced the respondent Commissioner to dismiss the appellant are relevant. The truth is, however, that it is not possible to find any definite limitations upon the Commissioner's right to dismiss. An officer of the railway service is removable at pleasure and he cannot recover damages if the Commissioner, acting honestly, dismisses him, for the simple reason that he holds at pleasure and is not entitled to the continuance of his employment beyond the duration of the Commissioner's pleasure.
1. (1926) Ch. 66.
It was said, however, that the dismissal was not really the act of the Commissioner, who acted only automatically on the instructions of the government. This argument is difficult to understand, for if the Commissioner accepted the instructions of the government that would make it his act and a sufficient termination of the employment. But the facts do not establish that the Commissioner in dismissing the appellant was surrendering his own judgment to the extent of becoming a mere automation.
Finally the appellant contends that under s. 104 of the Government Railways Act 1912-1950 the Commissioner was precluded from using his right to dismiss an officer for the purpose of forcing him to join a union. Section 104 provides that the Commissioner shall not have power to compel officers to forgo any civil rights to which any Act of Parliament entitles them. The appellant claims that he has a civil right to belong to the Railways Operating Employees' Union to the exclusion of any other union and a civil right to the benefits arising out of his employment under the Government Railways Act. A short answer to the latter claim is that no such rights can be paramount over s. 70 (1) and s. 78, to which the rights and incidents of the employment are subject. Section 104 protects only rights to which an Act of Parliament entitles the officer. It is difficult to see how the civil right claimed, to remain a member of the one union and to refuse to join another, can be said to be a right to which a statute entitles the appellant. He says that the Trade Union Act 1881-1936 confers the right. An inspection of the Act will show that it does not do so. Nor does the Industrial Arbitration Act 1940-1950. No such right can be discovered in the Government Railways Act 1912-1950.
Briefly the result of the foregoing is that the appellant's employment in the railway service gives him no right which enables him to complain in a court of law that he has been dismissed because he would not join a union other than that of which he is a member.
The appeal should be dismissed with costs.
Webb J.
The appellant was dismissed for not joining a union registered under either the New South Wales or the Commonwealth Industrial Arbitration Acts. He was a member of a trade union registered under another New South Wales statute. He had over thirty years' service and had become a guard class I. No fault was found with his work. It was unlikely that the Commissioner would have taken the initiative in removing such a man from the service; and he did not do so. The dismissal resulted from a general direction given by the Cabinet. In calling the attention of railways officers to this direction the Commissioner did not indicate either his approval or his disapproval of it. The direction was first brought to the notice of railway officers in September 1941. The appellant disregarded it, but was not dismissed. It was again brought to their notice by the Commissioner in December 1947. The appellant still disregarded it, and was dismissed in September 1948. Had there been nothing more than this in evidence it might have been difficult, if not impossible, for the jury to conclude that the dismissal of the appellant was simply the result of outside pressure, and was not for the purposes of the Government Railways Act, or otherwise in the interests of the service. The mere communication of Cabinet's direction to railway officers in 1941 and 1947 would not, I think, have been necessarily inconsistent with the Commissioner's adoption of the direction as a proper measure for the efficient working of the railways. However, in March 1948, that is between the date of the second publication of the direction and the date of the appellant's dismissal, the Chief Railway Superintendent, through whom the Commissioner subsequently acted in removing the appellant from the service, informed the secretary of the appellant's union that, in this matter of requiring officers to join certain unions, pressure was being brought to bear on him; that he was being pushed; and that he was trying to pacify those fellows who were pushing him. It was not contended, or suggested, that this evidence was inadmissible. If the jury believed it then, assuming an action for wrongful dismissal to lie, they could, I think, have properly found, more particularly in view of the attitude of the Cabinet, that the appellant's dismissal was really dictated by persons outside the railway service, and that he was dismissed to placate those persons and not in the interests of the service, or otherwise in pursuance of the Government Railways Act. The question whether statements of the Chief Railway Superintendent as to outside pressure were made on behalf of and bound the Commissioner, having regard to the occasion on which and to the circumstances under which they were made was, I think, one of mixed law and fact for the jury to decide after a proper direction. It is true that the Chief Railway Superintendent referred to pressure on himself, but it is, I think, beyond question that on the particular occasion he was acting on behalf of the Commissioner; he was putting the Commissioner's case as well as hearing that of McVicar and other employees in the same situation.
Then the question arises whether an action for wrongful dismissal could properly be brought. In Ryder v. Foley [1] Griffith C.J. said:—"I do not know any instance in which a person who holds office during pleasure could bring an action for wrongful dismissal. The foundation of the wrongful dismissal is the wrongful refusal to retain him in the service, but the service is terminable at pleasure. How can the exercise of that pleasure be wrongful?"
1. (1906) 4 C.L.R. 422, at p. 436.
However, because a railway officer holds office during pleasure (s. 70 (1) of the Government Railways Act N.S.W.) and may be removed by the Commissioner (s. 78), it does not follow that he may validly be dismissed for any reason whatever. The Commissioner is not obliged to give his reasons for dismissing an officer; but if he gives reasons they are, I think, examinable to see whether the dismissal was within power. If it was not within power, then the dismissed officer may apply for a declaration that the dismissal was invalid, and for an injunction restraining the Commissioner from acting on it. Short v. Poole Corporation [2] .
1. (1926) Ch. 66.
In R. v. Bishop of London [1] an Act of Parliament provided that no person should be received as a lecturer in a certain chapel unless first approved and licensed by the archbishop or bishop. Lord Ellenborough C.J. said: "If indeed it had appeared that the bishop had exercised his jurisdiction partially or erroneously; if he had assigned a reason for his refusal to license which had no application, and was manifestly bad, the Court would interfere."
1. (1811) 13 East 419, at pp. 422, 423 [104 E.R. 433, at p. 435].
In R. v. Bailiffs of Ipswich [2] the Corporation of Ipswich had dismissed Mr. Sergeant Whittaker from being their recorder. They gave as their reason that he had been guilty of a misdemeanour. It was contended on his behalf that his office was a freehold. Holt C.J. said: "that if he had been an officer ad libitum, the corporation ought to have returned that, and relied upon it, and it would have been a good return; but they could not take advantage of that, when they had returned a cause, if the cause were not sufficient; for it appeared that they had not gone upon their power, and determined their will, but put him out for a misdemeanour".
1. (1706) Ld. Raym. 1232, at p. 1240 [ 92 E.R. 313, at p. 318].
In Hayman v. Governors of Rugby School [3] Malins V.C., referring to this passage, said:—"It is plain, therefore, that Lord Chief Justice Holt considered that if he had merely returned that he held office at their pleasure, and that they had exercised their pleasure by dismissing him, the matter could have been no further inquired into, but as they had dismissed him for a misdemeanour, it was competent for the Court to inquire into the sufficiency of the reasons that induced them to dismiss him."
1. (1874) L.R. 18 Eq. 28, at p. 69.
Earlier in his judgment, Malins V.C. said:—"I think the clear result of the numerous authorities cited on both sides in the argument of this case is that all arbitrary powers, such as the power of dismissal by exercising their pleasure, which is given to this governing body, may be exercised without assigning any reason, provided they are fairly and honestly exercised, which they will always be presumed to have been until the contrary is shown, and that the burthen of shewing the contrary lies upon those who object to the manner in which the power has been exercised. No reasons need be given, but if they are given, the Court will look at their sufficiency" [4] .
1. (1874) L.R. 18 Eq., at pp. 68, 69.
It would seem, then, that where a corporation exercises a power to dismiss at pleasure the validity of the dismissal depends on the dismissal being within the powers of the corporation. Such a question of power could not occur in the case of an individual employer. Dismissal by an individual employer, though it may be a breach of the contract with the employee and wrongful, is still effective; but a dismissal by a corporation, having no power to dismiss for the reason given by the corporation, is not effective. But is the position different if the dismissal is followed up, as the evidence might suggest was the case here, by excluding the employee from the department and preventing him from doing the work by which he could earn his salary? In Williamson v. The Commonwealth [1] Higgins J. said: "It has been urged for the defendant that, if the dismissal was illegal, it was only a dismissal or pretended dismissal by the Governor-General in Council, and not by the defendant (see par. 2 statement of claim and defence). But this is, in my opinion, a curious misconception of the basis on which the Courts grant relief in cases of wrongful dismissal. I need not examine the logical puzzles which the position might suggest—a man dismissed by one who had no power to dismiss is not dismissed, &c. Nor is it necessary to enter into an elaborate examination of the legal and constitutional position of the Governor-General, and the responsibility of the Commonwealth for his acts. In my opinion, the plaintiff has proved the statements in par. 2, that the defendant—the Commonwealth—has refused and still refuses to allow him any longer to discharge his duties. If there were nothing else, the letter of the Acting Deputy Postmaster-General of 5th July shows that the Department adopted and acted on the Governor-General's order of dismissal, excluded the plaintiff from the Department, and prevented him from doing the work by which he could earn his salary."
1. (1907) 5 C.L.R. 174, at p. 182.
However, there was no power to dismiss at pleasure in the last-mentioned case [2] , or in Lucy v. The Commonwealth [3] .
1. (1907) 5 C.L.R. 174.
2. (1923) 33 C.L.R. 229.
I think that, in the present state of the authorities, it would be too venturesome to hold that the "logical puzzle" that arises in cases like this should be solved in favour of an action for wrongful dismissal.
I would dismiss the appeal. |
high_court_of_australia:/showbyHandle/1/11264 | decision | commonwealth | high_court_of_australia | text/html | null | Chief Collector of Taxes (Papua & New Guinea) v Bayliss [1974] HCA 37 | https://eresources.hcourt.gov.au/showbyHandle/1/11264 | 2024-09-13T22:55:47.985175+10:00 | High Court of Australia
Gibbs, Stephen and Mason JJ.
Chief Collector of Taxes (Papua & New Guinea) v Bayliss
[1974] HCA 37
ORDER
Objection to competency upheld with costs. Leave to appeal refused with costs.
Gibbs J.
This is an appeal from a judgment of the Federal Court of Bankruptcy dismissing a petition brought by the appellant against the respondent for a sequestration order.
There is an objection to the competency of the appeal, but the appellant submits that the appeal lies under s. 39 (2) of the Bankruptcy Act Cth.
By the petition the appellant alleged in par. 2 that the respondent is justly and truly indebted to the appellant in the sum of $10,382.42, being the balance due and owing under a final judgment obtained in the Supreme Court of Victoria by registration under the provisions of the Service and Execution of Process Act 1901-1968 Cth on 20th October 1971 by the Chief Collector of Taxes of the Territory of Papua and New Guinea, being for income tax. In par. 4 it was alleged that the respondent within six months before the presentation of the petition had committed an act of bankruptcy. The Federal Court of Bankruptcy found that no act of bankruptcy had been committed and accordingly dismissed the petition. No finding was made as to the existence or otherwise of the debt alleged in par. 2.
It may be accepted that by par. 2 of his petition the appellant asserted against the respondent a claim to a civil right amounting in value to more than $3,000. However, that claim was not involved directly or indirectly in the judgment from which the appeal was brought. The judgment says nothing as to the appellant's claim to be a creditor of the respondent and does not indirectly reflect on that claim in any way. It did deny to the appellant one remedy for the enforcement of his claim, but that does not mean that the judgment involved the claim itself. (See Tooth & Co. Ltd. v Parramatta City Council [4] ). The appellant was not prejudiced to an extent of $3,000 or more by the dismissal of the petition.
1. (1955) 97 C.L.R., at pp. 496-497.
Moreover, it cannot be said that the refusal of a sequestration order in itself involved directly or indirectly a claim to or respecting property amounting to $3,000, because there is no material showing the value of the estate of the respondent. It is unnecessary to express any opinion as to what the position would have been had there been evidence showing that the estate of the respondent amounted to more than $3,000.
For these reasons, it seems to me that the present appeal is not one from a judgment or order of the court involving directly or indirectly a claim, demand or question, to or respecting any property or any civil right amounting to or of the value of $3,000 and that the appeal is incompetent.
The objection to competency, in my opinion, ought to be upheld.
Stephen J.
I agree.
Mason J.
I also agree. |
high_court_of_australia:/showbyHandle/1/10848 | decision | commonwealth | high_court_of_australia | text/html | null | Shepherd v Commissioner of Taxation (Cth) [1965] HCA 70 | https://eresources.hcourt.gov.au/showbyHandle/1/10848 | 2024-09-13T22:55:52.643797+10:00 | High Court of Australia
Barwick C.J. Kitto and Owen JJ.
Shepherd v Commissioner of Taxation (Cth)
[1965] HCA 70
ORDER
Questions asked in the reference answered as follows:
1. Whether the taxpayer by the Deed referred to in paragraph 5 hereof effectively assigned to the persons named therein in the proportions therein set forth, all his right title and interest in and to an amount being ninety per centum of the royalties which in fact accrued during the period of three years from the 23rd day of July, 1957, under the agreement made on the 12th day of March, 1954 referred to in paragraph 2 hereof.
Answer "Yes".
2. Whether the sum of £6,031 or some and what part thereof, referred to in paragraph 9 hereof formed part of the taxpayer's assessable income for the year ended 30th June, 1958.
Answer "No".
Costs of the reference to be paid by the respondent.
Cur. adv. vult.
The following written judgments were delivered:
Dec. 17
Barwick C.J.
Reference by a Taxation Board of Review pursuant to s. 196 of the Income Tax and Social Services Contribution Assessment Act 1936-1957 (the Act) of questions of law arising in a reference by the Commissioner of Taxation of an objection by a taxpayer to an assessment made by the Commissioner under the Act.
The taxpayer is the grantee of letters patent in respect of improved castors. He granted a licence to a manufacturer in Victoria to manufacture the castors upon terms inter alia that the licensee covenanted to pay him monthly during the continuance of the licence a royalty of five per cent of the gross sale price of castors manufactured by or on behalf of the licensee which had been sold during the preceding month.
On 23rd July 1957, whilst both the letters patent and the licence to manufacture were in force, the taxpayer executed a deed poll in the following terms: I George Frederick Shepherd of 11 Manor St. Brighton in the State of Victoria Engineer Do Hereby Assign absolutely and unconditionally to the persons hereinafter named and described and in the proportions hereinafter specified all my right title and interest in and to an amount equal to ninety per centum of the income which may accrue during a period of three years from the date of this assignment from royalties payable by Mark Cowen of 370 Orrong Road Caulfield in the said State manufacturer under a Deed made on the twelfth day of March 1954 between myself the said George Frederick Shepherd and the said Mark Cowen in respect of a license granted by me to the said Mark Cowen to make use exercise and vend castors under and in accordance with the Inventions protected by Letters Patent of the Commonwealth of Australia No. 122566 in respect of an Invention entitled "Improved Castor" and Letters Patent of the Commonwealth of Australia No. 136548 in respect of an Invention entitled "Improvements Relating to Castors" and Letters Patent of the Dominion of New Zealand No. 99930 for an Invention entitled "Improvements relating to Castors".
The names and descriptions of the persons to whom my right title and interest in such income is assigned and the proportions in which the amount of ninety per centum of such income is assigned are:
1. Mary Louisa Shepherd of 11 Manor Street Brighton in the State of Victoria Married Woman—twenty five per centum
2. Kathleen Campbell of 11 Manor Street Brighton aforesaid Spinster—twenty per centum
3. George Eric Campbell of 8 Ross Street Surrey Hills in the State of Victoria Clerk—fifteen per centum
4. Cecil Hamilton Campbell of 9 Norbert Street Balwyn in the State of Victoria Schoolmaster—fifteen per centum
5. Charles Geoffrey Campbell of Consolidated School Lockington in the State of Victoria Schoolmaster—fifteen per centum.
Thereafter the taxpayer informed the licensee of the "arrangements", meaning the provisions of the deed poll. He directed the licensee that each royalty payment due under the licence should be divided into six parts and to pay the persons named in the deed poll the appropriate proportion of the royalties set opposite their names therein. The taxpayer arranged at the same time that the licensee should pay the royalties quarterly rather than monthly as provided by the licence.
The payments by the licensee to the recipients of these respective percentages of the amounts of royalty payable under the licence apparently commenced in September 1957 and continued thereafter. Such payments were effected by not negotiable cheques drawn in favour of the named persons for the appropriate amount sent to the taxpayer and by him forwarded to the persons concerned.
The total amount which became payable under the licence for royalties during the financial year commencing on 1st July 1958 was £7,030; £999 thereof being paid to the taxpayer and the balance to the persons named in the deed poll in the manner described.
The Commissioner assessed the taxpayer in respect of the income year 1958-1959 upon the full sum of £7,030 as income derived by him. The taxpayer objected to that assessment claiming that £6,031, being the total of the amounts paid to the donees by the licensee, was not income derived by him during the year of income.
The questions upon which the Taxation Board of Review seeks answers are: "1. Whether the taxpayer by the deed referred to in par. 5 hereof effectively assigned to the persons named therein in the proportions therein set forth, all his right title and interest in and to an amount being ninety per centum of the royalties which in fact accrued during the period of three years from 23rd July 1957 under the agreement made on 12th March 1954 referred to in par. 2 hereof. 2. Whether the sum of £6,031 or some and what part thereof, referred to in par. 9 hereof formed part of the taxpayer's assessable income for the year ended 30th June 1958."
The Commissioner's principal contention is that the gift was a gift of part of the taxpayer's income to be derived from royalties. The income was thus first derived by the taxpayer and then, pursuant either to a voluntary promise so to do, or to a voluntary assignment of the royalties themselves, portions of his income were handed over to the donees. The taxpayer on the other hand contends for an immediate gift of parts of his right to the royalties.
The answers to the questions asked by the Taxation Board of Review turn, in my opinion, exclusively upon the construction of the deed poll. The licensee was under promise to pay royalties to the taxpayer. That promise in its entirety would have been assignable at law pursuant to the provisions of s. 134 of the Property Law Act 1958 Vict.. But part of it could not be so assigned, nor could the royalties as after acquired property be assigned at law. Thus, whether the deed poll be construed as an attempted assignment of part of the promise to pay royalties or an attempted assignment of part of the royalties themselves when received, it will in either case be ineffective at law. In my opinion, the deed poll is not capable of being regarded as or as containing a covenant by the taxpayer to pay money in the future to the named persons, the amount to be paid being quantified in relation to the amount of royalties received by the taxpayer. The function of the expression "an amount equal to" in the operative words of the deed poll is not, in my opinion, to make the purported assignment a covenant to pay money but, as I shall mention later, its purpose, in my opinion, is to work out the fraction of the right to royalties which in total is being assigned to the donees. Indeed, I see in the employment of the words "an amount equal to" an indication that it is the right to the royalties rather than the royalties as after acquired property which is the subject matter of the assignment. There is therefore no need to consider whether the principle that a person with whom or for whose benefit a covenant is made in a deed poll may recover at law upon the covenant though neither a party to nor a signatory of it would be applicable to this deed if on its proper construction it contained a covenant to pay money to the named persons.
In my opinion, the situation of the deed poll is that it is ineffective at law to confer on any of the named persons any legal right whether to any part of the promise to pay royalties or of the royalties themselves when received.
However, a part or parts of a chose in action can be assigned in equity. In my opinion, if the assignment of a part of the chose in action consisting of the promise to pay royalties is complete, it is effective to vest the appropriate part of the right equitably in the assignee, whether or not the assignment is for consideration or by way of gift. It is only if the donee needs the assistance of equity to complete the gift, as distinct from enforcing the right given, that he can be met with the defence that equity will not assist a volunteer. Here, if there was an immediate gift of a proportion of the right to the royalties, the donees need seek no assistance. If the deed upon its true construction evidences an intention presently to assign part of the right, the assignment would be complete within the doctrines of equity. If, on the other hand, the deed purports to assign the stated proportion of the royalties as after-acquired property the assignment would be ineffective in equity for want of consideration. The question therefore, in my opinion, is a narrow one, namely, whether upon its true construction the deed purports to assign part of the right to the royalties or of the royalties themselves as after-acquired property.
Nothing, it seems to me, turns on the fact that the taxpayer himself obtained or transmitted the cheques to the donees. Such a course is quite consistent with either construction of the deed poll, i.e. either construing it as an immediate gift of a part of the chose in action or as a gift of the royalties themselves as and when received.
The task in construing the deed is to find the meaning intended by the taxpayer as expressed. No form of words is required for an equitable assignment but it is necessary to find the expression of an intention to assign. The deed does purport in terms presently to assign its subject matter and to do so absolutely and unconditionally. In describing what he considered he had done by the operative words of the deed, the taxpayer in the second paragraph of the deed, speaks of the persons "to whom my right title and interest is assigned". The difficulty in the case arises in the description of the subject matter of the gift. That description begins with the words "all my right title and interest in and to" which words are appropriate to the assignment of a chose in action as distinct from its ultimate produce. But the words that follow create the problem, "an amount equal to ninety per centum of the income which may arise during a period of three years from the date of this assignment".
Had the taxpayer been dealing with his entire right to royalties, probably the description of the subject matter of the intended gift would not have been difficult. But because the deed was to deal with only part of that right and that only for a limited period of years, the draftsman, it seems to me, has been led into the use of the awkward words which I have quoted. I think it not inappropriate when seeking the intended meaning of the words to notice the consequences of not finding in the language of the deed, as a whole, an intention to make a present gift of part of the right to royalties arising under the licence to manufacture. For if the deed poll is not an equitable assignment of part of that right it must be, in my opinion, an attempted equitable assignment of the royalties as after-acquired property. Equity would treat such an assignment as or as evidencing a promise to hand over the royalties when received: but the promise being voluntary would not be enforced by it. The directions given by the taxpayer to the licensee subsequent to the execution of the deed poll would then be no more than revocable mandates. As such, of course, they would not support the taxpayer's objections.
No doubt to speak of the subject matter of the gift as an amount of income to accrue from royalties would seem to support the conclusion that what is to be given is the property in the form of money produced by the promise to pay royalties. But the full description of the subject matter of the assignment is of "the right" to such amounts—an unlikely expression to describe the money itself. In my opinion, it indicates that the taxpayer was not intending to promise that he would pay money measured by the amount of royalties accrued or that he was intending to assign the royalties themselves. Its use rather suggests, to my mind, that he was intending to place the persons he wished to benefit in the position of being able themselves to assert a right to receive the appropriate amounts from the licensee.
As I have mentioned, the dominant consideration is the intention of the taxpayer as expressed in the deed. The expressed indications of an intent presently to assign portions of his right to royalties are strong enough, in my view, to overbear any contrary indication which might possibly be derived from the words which I have just discussed. These clumsy expressions are used, in my opinion, as I have said, in an endeavour to attain the two desiderata of a gift of part only of the right and only for a limited period of years. They are not in any case really so inappropriate to a present gift of a part of the right to royalties that they should be allowed to dominate the construction and to displace the evident intention expressed in the earlier part of the deed.
I have come to the conclusion that upon the true construction of the deed poll the taxpayer did thereby equitably assign to the named donees the stated proportions of his right during the ensuing three years to royalties from the licensee under the licence to manufacture the patented article.
It was also submitted by the Commissioner that the subject matter of the intended assignment was a mere spes or possibility which could not be voluntarily assigned. This argument concedes the intention to assign, but attacks its subject matter as insusceptible of assignment by way of gift. If there is no such intention to assign evidenced, the Commissioner would succeed on other grounds, as I have mentioned.
The basis of this submission is that in the event there may not be any amount payable for royalties because no sales of castors may be made. But this misconceives the matter. That a promise may not be fruitful does not make it incapable of assignment. Reference was made on behalf of the Commissioner in this connexion to Norman v. Federal Commissioner of Taxation [1] . But that case did not decide anything to the contrary of what I have just said. So far as the case dealt with the attempted assignment of the promise to pay interest, it must, in my respectful opinion, depend upon the view that the promise to pay interest in that case inhered in the existence of a principal sum upon which the interest was to be calculated and payable. Consequently, there was there no promise to pay interest, if no principal remained due. The case, in my opinion, has no relevance to the problem raised by the language of this deed poll as applied to the facts of this case.
1. (1963) 109 C.L.R. 9.
Accordingly, in my opinion, the questions asked by the reference by the Taxation Board of Review should be answered: 1. Yes. 2. No.
Kitto J.
The appellant, being the grantee of letters patent in respect of certain inventions for castors, granted to one Mark Cowen in 1954 a licence to use the inventions upon terms which included the payment to the appellant every month of a royalty of five per centum of the gross sale price of castors manufactured thereunder during the preceding month. In the year ended 30th June 1958, royalties amounting to £7,030 became payable by Cowen. He made quarterly instead of monthly payments, each payment being made by sending to the appellant, in accordance with a request made by him, six cheques, one drawn in favour of the appellant himself and one in favour of each of five other persons. The appellant distributed the cheques amongst the named payees, and they were duly honoured. In all, the appellant received during the year £999 from cheques drawn in favour of himself, and the other payees received amongst them £6,031. The Commissioner assessed the appellant to income tax on the footing that his assessable income including the £6,031 as well as the £999. It is clear that if there had been no more relevant facts in the case than I have stated the assessment would have been justified, for the making of the payments to the five persons other than the appellant, even if not to be considered as payments by the appellant out of income derived by him, would have constituted the derivation of income by him: s. 19 of the Income Tax and Social Services Contribution Assessment Act 1936-1957 Cth.
The appellant contends however that by a deed poll which he executed on 23rd July 1957 he assigned to the five other persons, by way of gift, ninety per centum of the benefit of Cowen's covenant to pay the royalties which should accrue to him in the ensuing three years; and he says that accordingly the receipt by each of those persons of the amounts paid to him or her by the cheques drawn in his or her favour after 23rd July 1957 was a derivation by that person of income from property which was vested in him or her, and not a receipt of money which the appellant should be considered to have derived as his income. The abovementioned sum of £6,031 is taken to have been the total of the amounts received by the five persons between the date of the deed poll and the end of the relevant year of income.
The terms of the deed poll have been set out and I shall not repeat them. The deed exhibits in its operative words, and underlines twice later, the intention of effecting an immediate alienation of property presently existing, presently belonging to the assignor, and consisting of a right, title and interest in respect of royalties to become payable by Cowen under the licence agreement. The suggestion has been offered that nevertheless the operation of the deed on its true construction is not that of an assignment but is that of a covenant to pay an amount to be calculated by applying ninety per centum to the total of the royalties in the three-year period. If this were in truth its operation the consequence would necessarily be that the royalties themselves would have been the income of the appellant; but the suggested construction does not appear to me to give the deed its true effect. The force of the contention lies in the presence of the words "an amount equal to", which may be thought to show that the intention was to make over a sum of money measured by reference to the royalty income but not necessarily forming part of it, and thus to create though somewhat clumsily, a mere money obligation. But the subject of the right which the appellant had in respect of the three-year period under his agreement with Cowen was correctly described by the use of the indefinite article; it was "an amount" and not the royalty income itself. Consequently an assignment of ninety per centum of the right in respect of the period, or (what comes to the same thing) an assignment of the right to an amount equal to ninety per centum of the royalty income of the period, might be expressed, without inaccuracy, as an assignment of the right to be paid an amount out of that income equal to ninety per centum thereof. That, it seems to me, is what the collocation of words means. To construe what purports to be an assignment of property as a covenant to make payments seems to me a step which only compelling circumstances or a compelling context could justify, and I do not think that it can be right to take that step in the present case. It would mean doing no little violence to the language of the instrument, and the probabilities seem to me to be against it. After all, a person whose intention it was to undertake a future pecuniary obligation, equal to a percentage of his royalty income in a future period but to be met out of his resources generally, would not be very likely to choose the language of assignment to express that intention, or even, I should have thought, to choose a deed poll rather than a deed inter partes as the appropriate instrument for the purpose.
On behalf of the Commissioner the contention was made that if the deed be construed as intending an assignment it should be held to have been ineffectual on the ground that in respect of the royalties to become payable by Cowen the appellant had no more than a mere expectancy or possibility such as cannot be assigned either at law or in equity: In re Ellenborough [1] . In support of this contention reliance was placed upon the decision which this Court gave in Norman v. Federal Commissioner of Taxation [2] in relation to a purported voluntary assignment of what was described in the relevant deed as the assignor's right, title and interest in and to the interest payable by a firm in respect of a sum of £3,000 being portion of a larger sum that had been deposited by the assignor with the firm and was still outstanding at the date of the assignment. That case, however, stands in clear contrast with the case that is before us. The deposit had been made under an agreement which provided that the firm might repay the money or any part of it at any time without notice, but that the taxpayer should not be entitled to require payment except upon eighteen months' notice. As it turned out, the money was not repaid before the end of the relevant year of income, so that interest in accordance with the agreement became payable and was paid in respect of that year. The interest was held to be the assignor's income, on the ground that the attempt to assign the right to receive it was void as being an attempt to assign, without valuable consideration, property not presently in existence. To understand the ground of decision it is necessary to remember that in respect of the future year the loan agreement recorded the terms which should apply to the relationship of borrower and lender so long as such a relationship should exist, but it left the borrower free to decide whether such a relationship should exist in the relevant year. It gave the lender no right in any possible event to insist upon there being a loan in existence in that year. In the present case the situation at the date of the assignment was exactly the opposite. There existed at that time a contractual relationship between the appellant and Cowen which by its terms must continue throughout the ensuing three years, whether Cowen should wish it to continue or not. The appellant, therefore, had a vested right in respect of those three years. It might indeed become divested, for the licence agreement provided for cesser of Cowen's liability to pay royalties if the letters patent should not be maintained or should be declared void; but the right existed, though it was thus subject to defeasance by events not within the control of Cowen. It is true also that what the appellant's right under the licence agreement would yield in royalties in those years—indeed, whether it would yield any royalties at all in those years—no doubt depended upon contingencies partly within the control of Cowen. It was for him to decide how many castors, if any, he would manufacture in accordance with the appellant's inventions and try to sell. Market conditions would then determine how successful his efforts to sell would be. But whatever he might do or desire to do, the existence of the appellant's contractual right would be unaffected, though the quantum of its product might be. The tree, though not the fruit, existed at the date of the assignment as a proprietary right of the appellant of which he was competent to dispose; and he assigned ninety per centum of the tree. The case is of the general class of which Brice v. Bannister [1] is an example, and may be usefully compared with Bergmann v. Macmillan [2] and Hughes v. Pump House Hotel Company Ltd. [3] .
1. [1903] 1 Ch. 697.
2. (1963) 109 C.L.R. 9.
3. (1878) 3 Q.B.D. 569.
4. (1881) 17 Ch. D. 423.
5. [1902] 2 K.B. 190.
The intention being to assign a part only of a chose in action—only ninety per centum of it and for a limited period—the assignment had of necessity to be equitable: In re Steel Wing Co. Ltd. [4] . So far as the formal means employed is concerned there can be no doubt as to its sufficiency, for all that is required for an equitable assignment is a manifestation by the assignor of an intention to transfer the chose in action to the assignees in a manner binding upon himself, as distinguished from an intention merely to give a revocable mandate while retaining ownership of the chose in action: Milroy v. Lord [1] . Construed in the sense I have indicated, the deed in the present case manifests unequivocably the intention to make an assignment. To construe it as intending a revocable mandate would be impossible. But we have been invited to hold that an equitable assignment of existing property is ineffectual unless for valuable consideration. The general question was discussed by Windeyer J. in his dissenting judgment in Norman v. Federal Commissioner of Taxation [2] , where the proposition now contended for was rejected. I agree in the views which his Honour expressed in this portion of his judgment, as, apparently, did Dixon C.J. in that case. We are not here considering a purported equitable assignment of a legal chose in action capable of assignment at law. The consideration which is necessary to attract the jurisdiction of equity to perfect an imperfect assignment is not necessary where the only possible assignment is equitable and the assignor has done all that could be done by him to perfect an equitable assignment.
1. [1921] 1 Ch. 349.
2. (1862) 4 De G. F. & J. 264, at p. 274 [45 E.R. 1185, at p. 1189].
3. (1963) 109 C.L.R. 9, at pp. 30-34.
In the result, I am of opinion that when the distributions of royalty moneys were made amongst the five persons nominated as assignees the moneys each received were the fruits of an undivided share of a contractual right which share had become beneficially his or her own property. Accordingly I would hold that the royalty moneys which were paid to the five persons, up to ninety per centum of the whole, were not assessable income of the appellant.
I would answer the questions asked in the case stated: (1) Yes; (2) No.
Owen J.
The appellant taxpayer was at all material times the grantee of certain letters patent relating to furniture castors. By deed dated 12th March 1954 he granted to one Mark Cowen an exclusive licence to manufacture and sell the castors in return for a royalty of five per cent on the amount of the gross sales made by the licensee. In November 1954 the appellant and the licensee agreed that the latter might grant to a company called Shepherd Castors Pty. Ltd. a sub-licence to manufacture and sell the castors upon the terms contained in the deed of 12th March 1954 and that the Company should pay whatever royalties became due direct to the appellant. Thereafter the Company manufactured and sold the castors and from time to time paid to the appellant the royalties for which the licence provided. On 23rd July 1957 the appellant executed a deed in the following terms: I George Frederick Shepherd of 11 Manor St. Brighton in the State of Victoria Engineer Do Hereby Assign absolutely and unconditionally to the persons hereinafter named and described and in the proportions hereinafter specified all my right title and interest in and to an amount equal to ninety per centum of the income which may accrue during a period of three years from the date of this assignment from royalties payable by Mark Cowen of 370 Orrong Road Caulfield in the said State manufacturer under a Deed made on the twelfth day of March 1954 between myself the said George Frederick Shepherd and the said Mark Cowen in respect of a license granted by me to the said Mark Cowen to make use exercise and vend castors under and in accordance with the Inventions protected by Letters Patent of the Commonwealth of Australia No. 122566 in respect of an Invention entitled "Improved Castor" and Letters Patent of the Commonwealth of Australia No. 136548 in respect of an Invention entitled "Improvements Relating to Castors" and Letters Patent of the Dominion of New Zealand No. 99930 for an Invention entitled "Improvements relating to Castors".
The names and descriptions of the persons to whom my right title and interest in such income is assigned and the proportions in which the amount of ninety per centum of such income is assigned are: " ". There followed the names and addresses of five persons, a percentage being set against each name. The deed was made without consideration.
During the year ended 30th June 1958 the total royalties which became payable amounted to £7,030. Of this amount the Company paid to the taxpayer £999 and to each of the other persons named in the deed it paid amounts totalling £6,031. These are the figures set out in the stated case but it is not clear to me how they were arrived at since ninety per cent of £7,030 is £6,327 and ten per cent of £7,030 is £703. However that may be, the fact is that in his return of income for the year the appellant showed the receipt of £999 but did not include the balance of £6,031. The Commissioner of Taxation took the view that this last amount was properly to be regarded as part of the income derived by the appellant and assessed him to tax accordingly.
The first task is to construe the deed. Did the appellant, by it, make an equitable assignment of a presently existing contractual right to be paid portion of moneys which might become due to him in the future by way of royalty or did he merely covenant that, in the event of royalties accruing to him in the future, he would pay to the named persons varying amounts to be ascertained by reference to the amount of those royalties? The opening words of the provision point to the conclusion that what was being assigned was a then existing right but the difficulty that seems to me to lie in the way of the construction for which the appellant contends is that what was expressed to be assigned was not the appellant's right, title and interest in and to ninety per cent of the royalties that might thereafter become payable under the licence. It was his "right title and interest in and to an amount equal to ninety per centum of the income which may accrue from royalties payable by Mark Cowen" and "the income which may accrue" is plainly a reference to income which may accrue to the covenantor. Notwithstanding the opening words of the covenant I think it is one by which the appellant undertook to pay to each of the persons named an amount to be measured by reference to the amount of royalties if and when they accrued to him under the licence. For the appellant reliance was also placed upon the fact that the later provision of the deed, which named the persons to whom the payments were to be made and defined the amount to be paid to each of them, speaks of the persons "to whom my right title and interest in such income is assigned and the proportions in which the amount of ninety per centum of such income is assigned" and the words "such income" refer back to "the income which may accrue from royalties". It was submitted that this shows that by the earlier clause it was intended to assign the appellant's contractual right to receive royalties if and when they became payable or at least to assign so much of that contractual right as would have entitled him to receive ninety per centum of such royalties. It is true that the two clauses do not run well together. One or the other must be moulded to some extent to fit the other but the first is the operative provision and the purpose of the later clause is merely to identify the persons who are intended to be benefited and specify the extent to which each is to benefit.
In the result, therefore, I am of opinion that what the appellant covenanted to do was to pay to the persons named amounts to be ascertained by reference to so much of his future income as might consist of royalties and that he did not assign a contractual right to receive any part of that income.
In these circumstances I would answer the questions (1) "No", (2) "Yes", and it is unnecessary for me to consider the further submissions made by counsel for the Commissioner. |
high_court_of_australia:/showbyHandle/1/11559 | decision | commonwealth | high_court_of_australia | text/html | null | Fountain v Alexander [1982] HCA 16 | https://eresources.hcourt.gov.au/showbyHandle/1/11559 | 2024-09-13T22:55:53.446520+10:00 | High Court of Australia
Gibbs C.J. Stephen, Mason, Murphy, Aickin, Wilson and Brennan JJ.
Fountain v Alexander
[1982] HCA 16
ORDER
Order that the question asked by the case stated be answered as follows: Question: Has the Supreme Court of New South Wales jurisdiction to make the order sought in proceedings No. 1483 of 1981? Answer: No. Order that the Commonwealth pay the costs of the plaintiffs and of the defendants. Further order, by consent, that the order of Helsham C.J. in Eq. be confirmed and that it shall henceforth take effect as though it were an order of the Family Court.
Cur. adv. vult.
The following written judgments were delivered:—
April 23
Gibbs C.J.
These proceedings, which have been removed into this Court by order made under s. 40(1) of the Judiciary Act, were commenced in the Supreme Court of New South Wales by Alan Edward Fountain and Anitra Fountain, the plaintiffs, who are husband and wife. The defendants in the proceedings are Patricia Margaret Alexander (formerly Jackson) and Bruce William Jackson, who were formerly husband and wife, but whose marriage has been dissolved. The proceedings relate to Gary George Jackson, a child of the marriage between Patricia Margaret Alexander and Bruce William Jackson. The relief claimed in the proceedings by the plaintiffs is as follows:
1. An order that the child Gary George Jackson born 31st March, 1967, and presently in the care and control of the plaintiffs be declared a ward of this Honourable Court.
2. An order pending further order of the Court that the said child be placed in the care and control of the plaintiffs on such terms and conditions as the Court deems fit.
3. Such other or further order as the Court might consider necessary or expedient.
4. Costs.
The question for decision is whether the Supreme Court has jurisdiction to make the orders sought.
The child Gary was born on 31 March 1967. On 22 October 1971 the Supreme Court of New South Wales, exercising jurisdiction under the Matrimonial Causes Act 1959 Cth, as amended, pronounced a decree nisi (which was later made absolute) for dissolution of the marriage between Patricia Margaret Jackson and Bruce William Jackson, and ordered that Patricia Margaret Jackson have custody of Gary. Before that date, in October 1968, Patricia Margaret Jackson had commenced to live as man and wife with Alan Edward Fountain and she continued to live with him until 1975. On 5 August 1971 Patricia Margaret Jackson gave birth to a child, Toni Terese Fountain, of whom Alan Edward Fountain is the father. When Patricia Margaret Jackson and Alan Edward Fountain separated in 1975, Gary and Toni remained with Mr. Fountain. In 1977 Patricia Margaret Jackson married Phillip John Alexander and in 1978 Alan Edward Fountain married Anitra Fountain. From August 1978 to the date of the proceedings the two children have from time to time lived with their mother and her present husband and also from time to time with Mr. and Mrs. Fountain. Proceedings concerning the custody of the child Toni were also commenced in the Supreme Court and have been amalgamated with the present proceedings in that Court but no question arises as to the jurisdiction of the Supreme Court to hear the proceedings with regard to Toni.
The question whether the Supreme Court has jurisdiction depends in the first place upon the proper construction of the Family Law Act 1975 Cth, as amended ("the Act"). By s. 8(1)(a) of that Act, proceedings by way of matrimonial cause shall not be instituted except under that Act. By s. 31(1)(a) the Family Court has jurisdiction in matrimonial causes instituted or continued under the Act. Section 39(1) provides as follows:
Subject to this Part, a person may institute a matrimonial cause under this Act —
(a) in the Family Court; or
(b) in the Supreme Court of a State or Territory.
By s. 39(5)(a), again "Subject to this Part", the Supreme Court of each State is invested with federal jurisdiction, and jurisdiction is conferred on the Family Court and the Supreme Court of each Territory, to hear and determine matrimonial causes instituted under the Act. However, by s. 40(3) (which like s. 39 is in Pt V of the Act), power is given to the Governor-General, by proclamation, to fix a date as the date on and after which proceedings under the Act may not be instituted in or transferred to the Supreme Court of a State or Territory specified in the proclamation, and such a proclamation may be expressed only to apply to proceedings of specified classes. By a proclamation dated 27 May 1976, 1 June 1976 was fixed as the date on and after which (subject to exceptions not relevant to the present case) proceedings of a kind referred to in pars (a), (b), (c), (d), (e) or (f) of the definition of matrimonial cause in s. 4(1) of the Act may not be instituted in or transferred to the Supreme Court of (inter alia) the State of New South Wales. By s. 40(4) it is provided:
The Supreme Court of a State or Territory shall not hear and determine proceedings under this Act instituted in or transferred to that Court otherwise than in accordance with any Proclamation in force under sub-section (3), but nothing in this section invalidates a decree made by such a Supreme Court.
The effect of these provisions is that the Supreme Court of New South Wales is deprived of jurisdiction to hear and determine the present proceedings if they are proceedings of a kind referred to in pars (a), (b), (c), (d), (e) or (f) of the definition of matrimonial cause in s. 4(1) of the Act, although if the Supreme Court did make a decree it would not be invalidated.
By s. 4(1) of the Act, "matrimonial cause" is defined to mean:
(a) proceedings between the parties to a marriage for a decree of—
(i) dissolution of marriage; or
(ii) nullity of marriage;
(b) proceedings for a declaration as to the validity of a marriage or of the dissolution or annulment of a marriage by decree or otherwise;
(c) proceedings between the parties to a marriage with respect to—
(i) the maintenance of one of the parties to the marriage; or
(ii) the custody, guardianship or maintenance of, or access to, a child of the marriage;
(ca) proceedings between the parties to a marriage with respect to the property of the parties to the marriage or of either of them, being proceedings in relation to concurrent, pending or completed proceedings for principal relief between those parties;
(cb) proceedings by or on behalf of a child of a marriage against one or both of the parties to the marriage with respect to the maintenance of the child;
(d) proceedings between the parties to a marriage for the approval by a court of a maintenance agreement or for the revocation of such an approval or for the registration of a maintenance agreement;
(e) proceedings between the parties to a marriage for an order or injunction in circumstances arising out of the marital relationship; or
(f) any other proceedings (including proceedings with respect to the enforcement of a decree or the service of process) in relation to concurrent, pending or completed proceedings of a kind referred to in any of paragraphs (a) to (e), including proceedings of such a kind pending at, or completed before, the commencement of this Act;
By s. 3(2) of the Act, notwithstanding the repeal of the Matrimonial Causes Act 1959 Cth, as amended ("the repealed Act"), a decree of the Supreme Court, made before the commencement of the Act in the exercise of jurisdiction invested or conferred by the repealed Act, and in force immediately before the commencement of the Act, shall have, or continue to have, effect throughout Australia, and except in certain immaterial cases the Act applies to and in relation to such a decree as if it had been made under the Act. Section 61(1) provides as follows:
Subject to any order of a court for the time being in force, each of the parties to a marriage is a guardian of any child of the marriage who has not attained the age of 18 years and those parties have the joint custody of the child.
By s. 4(2) a reference in the Act to a party to a marriage includes a reference to a person who was a party to a marriage that has been dissolved. By s. 64(1) a court exercising jurisdiction under the Act is given power to make orders with respect to the custody or guardianship of, or access to, a child of a marriage, and by s. 64(7) may discharge or vary such an order. If an order for custody was made under the repealed Act, and remains in force, there is power to vary it under s. 64(7); by s. 3(2), the Act applies to such an order as if it had been made under the Act, and since, if it had been made under the Act, it must have been made under s. 64, s. 64(7) is applicable to it.
The first question that now arises is whether the Family Court has jurisdiction to vary an order for custody that has been made in respect of a child of the marriage when the application is made by a stranger to the marriage and the respondents to the application are the parties to the marriage (albeit a marriage that has been dissolved). This depends on whether the proceedings constitute a "matrimonial cause" within s. 4(1). On behalf of Patricia Margaret Alexander it was argued that such proceedings fall within par. (c) of the definition, and are proceedings between the parties to a marriage with respect to the custody of a child of the marriage. This somewhat surprising argument took as its starting point the proposition that the word "between" can be used to express a relationship between more than two things. That is of course correct, and it may rightly be said that the present proceedings are between the two plaintiffs on the one hand and the two defendants on the other. It would however be a misuse of language to say that the proceedings are between the two defendants. Since there can only be two parties to a marriage, the word "between" in the phrase "proceedings between the parties to a marriage" is used in reference to a relationship between those two parties, but it is a relationship that divides rather than unites them, and it is reciprocal, in that each opposes the other. In other words, the phrase refers to proceedings in which one party to the marriage is contending against the other. If the parties to the marriage join together in a common interest in proceedings against other persons the proceedings are between the parties to the marriage on the one hand and the other persons on the other, but are not between the parties to the marriage.
However, the present proceedings do in my opinion fall within par. (f) of the defintion of "matrimonial cause". Paragraph (f) does not require that the proceedings to which it refers should be proceedings between the parties to a marriage. This has already been pointed out in Yule v. Junek [1] , by Mason J., and in Dowal v. Murray [2] , by Stephen J., and a comparison between par. (f), on the one hand, and pars (a), (c), (ca), (d) and (e) on the other makes it plain that this view is correct. All that is necessary is that the proceedings should be in relation to, inter alia, completed proceedings of a kind referred to in par. (c), i.e., proceedings between a husband and a wife with respect to the custody of a child of the marriage. If, in proceedings between the spouses, an order for custody has been made in favour of the wife, further proceedings brought by a stranger to the marriage against the wife to obtain custody of the child are in my opinion related to the earlier proceedings. The connexion lies in the fact that the second proceedings seek to undo the effect of the order made in the first. Orders which give the same rights of custody in respect of the same child to different persons obviously cannot stand together, and an order which gave some rights of custody to a stranger to the marriage would, if valid, necessarily defeat or diminish the rights given by an unqualified order for custody made in favour of the wife.
1. (1978) 139 C.L.R. 1, at p. 11.
2. (1978) 143 C.L.R. 410, at p. 425.
It was argued that par. (f), construed in this way, would go beyond power, for, it was said, the Parliament cannot validly confer on the Family Court jurisdiction to entertain an application for the custody of a child of a marriage, when the application is made by a person who is not one of the parties to the marriage. This argument cannot now be accepted. It was in my opinion established by Dowal v. Murray that the marriage power (conferred by par. (xxi) of s. 51 of the Constitution) is not restricted to the definition of, or the making provision for the enforcement of, the rights of the parties to the marriage inter se. That view of the decision was, I consider, taken by the majority of the Court in Reg. v. Lambert; Ex parte Plummer [3] . However, any doubt on the question was resolved by the decision in Vitzdamm-Jones v. Vitzdamm-Jones [4] . The decision reported under that title concerned two matters, and it was the second, St. Clair v. Nicholson, in which the present question arose. There an application for the guardianship and custody of the child of a marriage was made by the stepfather of the child. The defendants were the maternal grandparents who had the physical custody of the child and the father of the child who, however, did not himself seek custody. The other party to the marriage, the mother, had, during her lifetime, been given custody by an order of a court, but she had died before the proceedings commenced. It was held (by a majority) that s. 61(4) of the Act was a valid provision, that if the proceedings had been instituted in the Family Court under s. 61(4) that Court would have had jurisdiction, and that accordingly the Supreme Court had no jurisdiction. Of course, s. 61(4) could have no application in the present case where the party in whose favour the custody order was made is still alive, but the reason for upholding the validity of that subsection applies equally to par. (f) of the definition of "matrimonial cause". In my reasons for judgment (which met with the concurrence of Stephen J. (subject to a reservation now immaterial) and Mason J.) I said [5] :
The Parliament can, in my opinion, validly provide for the adjudication of conflicting claims by a party to a marriage and a third party to the custody of a child of the marriage, for in so doing it is still regulating a right that arose out of the marital relationship.
Paragraph (f) does not include proceedings for the custody of a child of a marriage brought by one stranger to the marriage against another and not affecting any right given to a party to the marriage by an existing custody order, for in such a case the proceedings would not relate to proceedings of the kind referred to in par. (c).
1. (1980) 146 C.L.R. 447, at pp. 455-458, 466, 472.
2. (1981) 148 C.L.R. 383.
3. (1981) 148 C.L.R., at p. 414.
I accordingly hold that the effect of par. (f) of the definition of "matrimonial cause", read in conjunction with the other sections of the Family Law Act to which I have already referred, is that an application for the guardianship or custody of a child of a marriage, made by a stranger to the marriage against a party to the marriage who has, in proceedings under the Act or under the repealed Act, been granted the custody of the child, may be instituted only in the Family Court, and that so construed the provisions are valid.
In the present case the plaintiffs seek orders for wardship, and for the care and control of the child. The latter claim is clearly a claim for a limited form of custody, i.e. for what might be described as actual custody, as distinguished from legal custody which (in the absence of special order) carries with it a bundle of powers, including the power to control the child's education, choice of religion and property as well as the personal power of physical control: see Hewer v. Bryant [6] , and Todd v. Davison [7] . In Wedd v. Wedd [8] , Mayo J. recognized that care and control is only one aspect of custody when he said [9] :
Custody essentially concerns control, and the preservation and care of the child's person, physically, mentally and morally; responsibility for a child in regard to his needs, food, clothing, instruction and the like.
Of course the amount of care that will be necessary, and the degree of control that it will be possible to exert, will depend on the age of the child. In Australia, as in England, the courts sometimes make an order giving joint custody of a child to both parents and placing the child in the care and control of one of them. That does not mean that an order for care and control is different from an order for custody, but means that the rights and powers appertaining to custody are divided, so that one parent has actual custody, while the wider rights and powers remain exercisable by the parents jointly. Clearly the Family Court has jurisdiction to make an order as to the care and control of the child Gary in the present circumstances, and it follows that the Supreme Court lacks jurisdiction to do so.
1. [1970] 1 Q.B. 357, at p. 373.
2. [1972] A.C. 392, at pp. 403-405.
3. [1948] S.A.S.R. 104.
4. [1948] S.A.S.R., at p. 107.
The claim that the child be made a ward of court raises a wider issue. The Family Court is not given jurisdiction to make orders for wardship. However, it is often said that the effect of an order for wardship is that the court becomes the guardian of the child (Reg. v. Gyngall [10] ) or has the custody of the child (see In re W. (An Infant) [11] ). In some cases an application to have a child made a ward of court may be made simply for the purpose of seeking an order that the applicant be given the care and control of, or access to, the child. When that is the case, if the child is the child of a marriage, and such an order if made will affect a right given to a party to the marriage by an order made in complete proceedings, there will be, for the reasons I have already indicated, a matrimonial cause which will be within the exclusive jurisdiction of the Family Court. The affidavits filed in respect of the application made in the Supreme Court in the present case clearly show that the purpose of the application for wardship was simply to obtain an order for the custody of the child Gary.
1. [1893] 2 Q.B. 232, at p. 239.
2. [1964] Ch. 202, at p. 210.
In these circumstances it is unnecessary to consider whether the Supreme Court would in other circumstances have jurisdiction to make an order for the wardship of a child of a marriage notwithstanding that the order would affect the rights of one of the parties to the marriage under an order for custody made in completed proceedings. Wardship proceedings are essentially protective; their original function was to protect the property of the child, but now an order for wardship may be made for the protection of the person of the child even against action taken or contemplated by its parents: In re D. (A Minor) [12] and In re B. (A Minor) [13] provide recent examples. The power of the Parliament to make laws with respect to marriage does not extend to laws for the protection or welfare of the children of a marriage except in so far as the occasion for their protection or welfare arises out of, or is sufficiently connected with, the marriage relationship. As I have previously said, an enactment is not law with respect to marriage simply because it has some operation with respect to the custody of a child of a marriage (Reg. v. Lambert; Ex parte Plummer [14] ), and it is not such a law because it is intended to provide for the protection or welfare of a child of a marriage. Further, as Reg. v. Lambert; Ex parte Plummer shows, State laws may validly operate in respect of a child of a marriage notwithstanding that they qualify the custodial right of the parents: see per Stephen J. [15] . There seems to be no reason therefore why the wardship jurisdiction of the State courts should not continue to be exercisable in respect of a child of a marriage, although it could not be exercised as a means of making an order for guardianship, custody or access of a child of a marriage in a case in which the Family Court would have jurisdiction to make such an order. The wardship jurisdiction of the State courts, which remains unimparied in its application to children who are not children of a marriage, may well be available, in a vestigial form, to fill gaps in the law under the Act so far as children of a marriage are concerned — A. v. Liverpool City Council [16] provides an analogy; see especially at pp. 376-377. However, it is unnecessary to express a concluded opinion on these questions in the present case. Although it was submitted that the application for a wardship order was made for the protection of the child Gary, it is perfectly clear that the application is in substance nothing other than an application for custody.
1. [1976] Fam. 185.
2. [1981] 1 W.L.R. 1421.
3. (1980) 32 A.C.R., at p. 512.
4. (1980) 32 A.L.R., at p. 515.
5. [1982] A.C. 363.
This case provides yet another example of the confusion and inconvenience that is caused by the fact that jurisdiction in cases relating to the custody of children is divided between State and Federal courts. Not only are the parties left uncertain as to the proper forum, thus causing costs to mount and delays to increase, but there is no one court which can determine the custody of the two children in the present case notwithstanding that they are half-brother and half-sister.
I would answer the question asked as follows: Has the Supreme Court of New South Wales jurisdiction to make the orders sought in proceedings No. 1483 of 1981? Answer — No.
In the circumstances it seems appropriate that the Commonwealth should pay the costs of the plaintiffs and the defendants and the learned Solicitor-General did not oppose this course.
Stephen J.
I have had the advantage of reading the reasons for judgment of Mason J. Apart from the question of the existence of a residual wardship jurisdiction in Supreme Courts, concerning which his Honour expresses certain doubts but about which I express no views, I agree with all that his Honour says, as I do with the answer "No" which he would give to the question asked of the Court.
Mason J.
The facts in the case stated and the question are sufficiently set out in the reasons for judgment of Gibbs C.J.
The Extent of the Jurisdiction conferred by s. 39 of the Family Law Act 1975 Cth in Association with par. (f) of the Definition of "Matrimonial Cause" in s. 4(1).
In Yule v. Junek [17] , I drew attention to the fact that, unlike most of the other paragraphs now in the statutory definition, par. (f) is not confined to proceedings between the parties to a marriage. See also Dowal v. Murray [18] , per Stephen J. One of the other paragraphs, par. (cb), contains a restriction of a different kind, requiring that proceedings be instituted "by or on behalf of a child of a marriage". Although par. (b) contains no restriction, it is perhaps unlikely that anyone but a party to the marriage would seek a declaration as to its validity, its dissolution or annulment — see Dowal [19] , per Aickin J. But no such limiting consideration emerges from the subject matter of par. (f). Indeed, because the paragraph deals with proceedings which have a relationship with any of the proceedings mentioned in the seven preceding paragraphs of the definition, Parliament evidently contemplated that par. (f) should have a broad scope. It has to be read with s. 39 which, by providing that "a person" may institute a matrimonial cause, enables a stranger to commence such proceedings in a court of competent jurisdiction. Certainly the language of par. (f), differing significantly as it does from that of the other paragraphs, except par. (b), requires that construction.
1. (1978) 139 C.L.R. 1, at p. 11.
2. (1978) 143 C.L.R. 410, at p. 425.
3. (1978) 143 C.L.R., at p. 434.
Paragraph (f) is not specific in spelling out the relationship which is required to subsist between the proceedings which it includes, viz. "any other proceedings", and "concurrent, pending or completed proceedings" of a kind mentioned in the earlier paragraphs. But, "in relation to" being an expression of wide and general import, it should not be read down in the absence of some compelling reason for so doing. Certainly neither the content nor the context of the paragraph provide any justification for taking this course. It was suggested that the paragraph looks to subsequent proceedings which involve the working out of an order made in earlier proceedings. No doubt it does. None the less the vital question remains: Is there any solid ground for limiting the relationship? Putting to one side the question of validity shortly to be examined, I can think of none.
Proceedings for the variation of an earlier custody order are an obvious example of proceedings which fall within par. (f). But if such proceedings are caught by the paragraph why should proceedings for a new custody order, one which would displace or replace an earlier order, be excluded? The reach of the paragraph cannot be made to depend on whether the new order sought is expressed to operate by way of variation of the old order, for the paragraph looks to a relationship between proceedings rather than a relationship between orders. This relationship is satisfied when in the first proceedings an order for custody is made and in the second proceedings an order for custody is sought which, if made, will have the effect of displacing or altering the first order by creating different rights to custody.
The view which I have expressed is supported by the opinion of two members of this Court who have already considered this question, albeit in a different context. In Dowal [20] , Jacobs J. suggested that grandparents could make an originating application for custody "by virtue of par. (f) of the definition of "matrimonial cause" and by virtue of s. 39". His Honour stated:
The proceedings would be proceedings in relation to the previously completed proceedings for custody of the child and would be a "matrimonial cause" in respect of which s. 39 confers jurisdiction.
1. (1978) 143 C.L.R., at p. 427.
In the same case Stephen J. [21] expressed the view that a proceeding brought by a surviving parent by s. 61(4) was "in relation to" the earlier custody proceedings which resulted in custody being awarded to the deceased parent. Although his Honour did not refer to s. 39, he plainly had that section in mind as conferring the relevant jurisdiction on the court.
1. (1978) 143 C.L.R., at p. 423.
It is at this point that I reject an argument advanced by the Solicitor-General for Victoria. The argument begins with a proposition that an order for custody is merely an adjudication of custody as between the disputants in the instant litigation, leaving unresolved and awaiting future resolution any question of custody of the relevant child as between other parties or as between one of the contending parties and other parties. The argument ends with the conclusion that an order for custody made in litigation in which the parties are not the same as those participating in the first litigation is not an order that has an appropriate, or indeed any, relationship with the first order for custody and that the same comment applies to the two sets of proceedings.
This conclusion ignores the traditional character of the right to custody, whether flowing from curial order or otherwise. It is a right that is enforceable against the world at large, including strangers to the litigation in which the order for custody is pronounced. I venture to repeat what I said in Reg. v. Lambert; Ex parte Plummer [22] :
It is of the essence of an award of custody, as with the father's right to custody under the old common law, that it may be enforced against strangers to the marriage. Where custody is awarded to one parent, though it is awarded as against the other parent, it is enforceable against others.
An order for custody once made is effective against strangers to the litigation during the currency of the order.
1. (1980) 146 C.L.R. 447, at p. 466.
Validity of s. 39 in its Application to par. (f).
In Reg. v. Demack; Ex parte Plummer [23] speaking of the marriage power, I said:
The exercise of the power cannot be restricted to a definition of, or to making provision for the enforcement of, the custodial rights of the parents inter se.
The correctness of this statement was subsequently affirmed in Dowal, Reg. v. Lambert and Vitzdamm-Jones v. Vitzdamm-Jones [24] .
1. (1977) 137 C.L.R. 40, at p. 53.
2. (1981) 148 C.L.R. 383.
Of course it could not be suggested that Parliament in the exercise of the power can make provision for the custody of a child of a marriage between parties who are strangers to the marriage when the making of that provision has nothing to do with the adjustment or termination of the rights of parties to the marriage. The connexion between the law and the head of power would be altogether too tenuous and insubstantial to sustain the validity of the law.
However, to my mind the outcome is otherwise when all that the law seeks to achieve is an award of custody at the suit of a stranger to the marriage in proceedings against a party to the marriage when the stranger seeks to displace an earlier order for custody made in favour of the respondent in relation to a child of the marriage in proceedings between the parties to the marriage. The order sought in the new proceedings, if made, will operate to terminate or vary rights arising out of marriage, notwithstanding that the occasion for defining those rights may have been the dissolution of the marriage.
In Vitzdamm-Jones [25] , Gibbs J. (with whose judgment on this point Stephen J. and I agreed) said:
it is possible for a third party, rather than a party to the marriage, to be awarded the custody of a child of the marriage, thus defeating or diminishing the right of a party to the marriage which arose from the marital relationship. The Parliament can, in my opinion, validly provide for the adjudication of conflicting claims by a party to a marriage and a third party to the custody of a child of the marriage, for in so doing it is still regulating a right that arose out of the marital relationship.
1. (1981) 148 C.L.R., at p. 414.
Earlier, in Dowal, the Court upheld the validity of s. 61(4) of the Family Law Act. In coming to that conclusion Stephen J. [26] said that the sub-section involved —
an interruption of the ordered regimen for the custody, as between parties to a marriage, of a child of a marriage. The sub-section assumes the existence of a custody order which, so long as it operated, regulated the rights and obligations of the parents and their relationship to a child of the marriage. The regimen thus established having been affected by the death of the custodial parent, it is with the future custodial regimen and with the role of the Court in determining its precise character that s. 61(4) is concerned.
This analysis provides an analogy with the present case. What brings s. 61(4) within the marriage power is its dependence on a disturbance of the operation of a prior grant as between the parties to a marriage of custody to one of the parties of a child of the marriage. The existing custody order, which falls well within the ambit of the marriage power, is no longer appropriate — new rights, duties and obligations must be substituted. The nature of the particular disturbance — the death of the custodian — is not the critical factor on which the validity of s. 61(4) depends. It is enough, as his Honour said, that s. 61(4) defines the relationship between the surviving parent and the child in these circumstances. The connexion between the marriage power and the law now under consideration is no less direct merely because the third party seeks to substitute new rights, duties and obligations for a different reason — because it is claimed that circumstances have changed in that the existing custodian is no longer fulfilling the duties and obligations imposed by the custody order. It is the fact that the application is for an order substituting new rights, duties and obligations for rights, duties and obligations which arose out of the marriage which provides the relevant connexion between the law conferring jurisdiction to hear and determine that application and the marriage power.
1. (1978) 143 C.L.R., at p. 423.
Lest it be overlooked, the passage which I earlier cited from the judgment of Jacobs J. in Dowal [27] explicitly affirms the validity of s. 39 in its application to par. (f). The reasoning of Murphy J. in that case [28] leads to a similar conclusion.
1. (1978) 143 C.L.R., at p. 427.
2. (1978) 143 C.L.R., at pp. 428-429.
My conclusion, therefore, is that s. 39(1) is a valid law of the Commonwealth in its application to par. (f) to the extent that it permits a third party to make application to disturb a prior grant of custody to a party to a marriage of a child of the marriage. I should not have thought that the validity of the jurisdiction which s. 39 confers is dependent on the other party to the marriage being joined in the later proceedings as a party, but it is not necessary to decide that question. No doubt both parties to the marriage are proper parties to the proceedings. Whether they are both necessary parties will depend on the particular circumstances of the case.
The Nature of the Wardship Jurisdiction.
The origin of the wardship jurisdiction was the sovereign's feudal obligation as parens patriae to protect the person and property of his subjects, particularly those unable to look after themselves, such as infants. This obligation was delegated to the Chancellor, and passed to the Chancery Court (see In re D. (A Minor) [29] ; Hope v. Hope [30] ). In New South Wales the jurisdiction is now exercised by the Supreme Court under s. 23 of the Supreme Court Act 1970. The jurisdiction to make a child a ward of court is not dependent upon the child having property the subject of a suit (Meyer v. Meyer [31] ). In exercising the jurisdiction the court has a wide power in relation to the welfare of infants. It has always been recognized that the dominant matter for the consideration of the court is the welfare of the child (In re McGrath (Infants) [32] ). In In re X. (A Minor) [33] , Lord Denning M.R. said:
No limit has ever been set to the jurisdiction. It has been said to extend "as far as necessary for protection and education" The court has power to protect the ward from any interference with his or her welfare, direct or indirect.
1. [1976] Fam. 185, at pp. 192-193.
2. (1854) 4 De G.M. & G. 328, at pp. 344-345 [43 E.R. 534, at pp. 540-541].
3. [1978] 2 N.S.W.L.R. 36, at p. 39.
4. [1893] 1 Ch. 143, at p. 148.
5. [1975] Fam. 47 at p. 57.
In In re D. the Court exercised the jurisdiction by making a child a ward of court for the purpose of preventing the sterilization of the child which was to be carried out with the consent of the child's mother, the Court intervening on the ground that the operation was not in the child's interests. See also In re B. (A Minor) [34] .
1. [1981] 1 W.L.R. 1421.
To What Extent is the Wardship Jurisdiction Excluded by the Family Act?
Section 64(1) provides that:
In proceedings with respect to the custody or guardianship of, or access to, a child of a marriage —
(c) subject to paragraphs (a) and (b), the court may make such order in respect of those matters as it thinks proper, including an order until further order.
The qualifications imposed on the wide discretion to make an order given to the court by the sub-section are: first, as the opening words indicate, that the proceedings must be "with respect to the custody or guardianship of, or access to, a child of a marriage"; secondly, that the welfare of the child shall be the paramount consideration (par. (a)); thirdly, that an order contrary to the wishes of a child who has attained the age of fourteen years shall only be made if, by reason of special circumstances, it is necessary to do so (par. (b)); and finally, that the power to make orders is limited to orders "in respect of those matters", referring to custody, guardianship or access.
The real problem is posed by the circumstance that the section, which arms the court with the relevant power to make orders, speaks only of proceedings with respect to guardianship, custody or access. It makes no mention of wardship jurisdiction or of wardship proceedings. The power to make orders is therefore limited to the making of orders with respect to guardianship, custody and access.
"Custody" has a variety of meanings. Like the chameleon it adapts itself to its surroundings so that little is to be gained by discussing its various connotations, except to note that in its widest meaning it is virtually the equivalent of "guardianship" which has been described as "a bundle of powers" including the power to control education, the choice of religion and the administration of the infant's property. See Hewer v. Bryant [35] . Section 64(1) seems to be speaking of proceedings in which the applicant is seeking an order by which rights, duties and obligations in relation to guardianship, custody or access are to be vested in someone. In most cases it is the applicant who seeks these rights but there is no reason why an applicant should not seek an order vesting such rights in another party, even a stranger to the marriage. An application for such an order answers the statutory description to be found in the opening words of the sub-section.
1. [1970] 1 Q.B. 357, at pp. 372-373.
But an application for an order that a child be made a ward of court does not answer this description. In seeking such an order the applicant seeks to commit the child to the protection of the court and asks the court to make such order as it thinks fit for the child's benefit (In re B. (J.A.) (An Infant) [36] ). A ward remains at all times subject to the control of the court. A person may be granted care and control of the ward, but it is de facto care and control carrying the power to make only day-to-day decisions, e.g. disciplining the child.
1. [1965] 1 Ch. 1112, at p. 1117.
Wardship and custody have been recognized as different though alternative legal regimes. Wardship proceedings cannot be described accurately as proceedings for guardianship or custody. However, I do not exclude the possibility that the Family Court's power to make such order as it thinks fit with respect to the matters mentioned may enable it to make an order prohibiting a child from undergoing an operation in a Re D. situation, if to do so falls within the limits of the marriage power as, for example, when the order would operate to qualify the rights and powers of a custodial parent arising from a custody order made in proceedings between the parties to the marriage. It would be necessary that the proceedings for the order fall within the description contained in s. 64(1). But, in some situations at least, the proceedings may be so described because they seek an order qualifying in one respect the exercise of rights and powers flowing from the earlier order. An order of this kind would not of course constitute an exercise of wardship jurisdiction because it does not involve making a child a ward of court. The fact that the making of the order is dictated by the welfare of the child would constitute no objection to its validity. It is the circumstance that it affects by way of qualification the rights and powers of the custodial parent arising from marriage that brings it within the scope of the constitutional head of power.
Accordingly, my conclusion is that the Act does not confer wardship jurisdiction on the Family Court.
Effect of the Family Law Act on the Wardship Jurisdiction of the Supreme Court.
The Family Law Act makes exclusive the jurisdiction of the Family Court in relation to a "matrimonial cause" as defined by par. (f) of the definition in s. 4(1) — see s. 8(1), especially par. (a). Although s. 39(1) enables a person to institute a matrimonial cause in the Supreme Courts or in the Family Court, a proclamation made pursuant to s. 40(3) fixed 1 June 1976 as the date after which the Supreme Courts except those of Western Australia and the Northern Territory should cease to have jurisdiction under the Act, thereby terminating the grant of jurisdiction effected by s. 39(1) and (5) in association with the statutory definition of "matrimonial cause". The same date was also fixed by a proclamation made pursuant to s. 41(2) as the date on which the jurisdiction of the Supreme Court of Western Australia should cease and that of the Family Court of that State commence.
The consequence of this is that the Supreme Court of New South Wales cannot, in the exercise of its wardship jurisdiction or otherwise, hear and determine any proceeding which is a "matrimonial cause". The Supreme Court cannot entertain an application for custody or guardianship of, or access to, a child of a marriage in respect of which the Family Court is given jurisdiction. Nor, as it seems to me, can the Supreme Court in the exercise of its wardship jurisdiction make any order which would amount to an exercise of any part of the jurisdiction so given to the Family Court. Generally speaking, the Supreme Court cannot make an order giving the care and control of a child of the marriage to one spouse as against the other for that would be to give the successful parents a substantial part, but not all, of the benefits and responsibilities of custody.
My conclusion that the Family Court lacks wardship jurisdiction, taken together with the circumstance that custody and wardship are different though alternative regimes, might tend to suggest that there remains with the Supreme Court a wardship jurisdiction capable of being exercised in relation to the child of a marriage so long as that exercise does not trench upon the Family Court's exclusive jurisdiction in relation to matrimonial causes. But reflection on the possible operation and limits of that jurisdiction immediately brings serious problems to mind. If the Supreme Court were to make an order of the kind made in Re D. would that order not affect the rights of a custodial parent flowing from an order made, or which might be made, by the Family Court. And, as I have said, it may be that the Family Court has power to make an order having a similar effect in relation to a limited object. Consequently I doubt whether the Supreme Court has a residual jurisdiction capable of being exercised in the relevant area. However, this question is better left for future exploration should the occasion arise.
When we turn to the circumstances of this case and to the evidence on which the application to the Supreme Court is based, it becomes very clear that the application for an order for care and control is in substance seeking something which amounts to a substantial part of the benefits and responsibilities of custody. This, as I have said, is inherent in the nature of the order sought, and it is supported by the character of the evidence adduced which is typical of evidence often led in support of an application for a change of custody. There is nothing special in the case which calls for an exercise of wardship jurisdiction or indicates that an exercise of that jurisdiction would be more advantageous than an exercise of custody jurisdiction.
I agree with the comments of the Chief Justice urging that action should be taken to overcome the serious problems that beset the Family Court's limited jurisdiction. They are problems that this Court cannot solve; yet they pose formidable obstacles to the prompt and just determination of family law controversies. The number of family law cases which have come before this Court involving arid jurisdictional questions only is much too high for our comfort or for that of litigants generally.
I would answer the question asked: No.
Murphy J.
Needham J. of the Supreme Court of New South Wales was correct to question the attempt to invoke the jurisdiction of that Court to deal with an application for care and control of the child, Gary George Jackson. The application must have been made by oversight. It follows from Vitzdamm-Jones v. Vitzdamm-Jones; St. Clair v. Nicholson [37] that the Supreme Court of New South Wales has no jurisdiction to deal with any application for care and control (or any other aspect of custody) of the child. The Family Law Act 1975 Cth invests the Family Court of Australia (or other court exercising the federal jurisdiction: s. 39) with exclusive jurisdiction to deal with the question.
1. (1981) 148 C.L.R. 383.
The question of jurisdiction to determine the custody, care and control of the child came before this Court on 8 October 1981 when the case was removed from the Supreme Court of New South Wales to the High Court. On that day the Court specially remitted the case to the Supreme Court for the purpose of its making an interim order for custody of the child, pending the hearing and decision by this Court. However the Supreme Court was unable to make any interim order before this matter was heard by this Court on 9 February 1982.
The constitutional powers of the Parliament to make laws with respect to custody and guardianship were questioned in argument. Certain constitutional provisions are relevant in particular areas of custody and guardianship. Among these are the territories power: s. 122; the external affairs power: s. 51(xx), for example, in relation to children taken out of Australia and the implementation of international treaties relating to children to which I referred in Dowal v. Murray [38] ; matters between residents of different states: ss. 75 and 77. However, the main legislative powers are the marriage and divorce powers.
1. (1978) 143 C.L.R. 410.
The marriage power. The marriage power (Constitution, s. 51(xxi)) authorizing Parliament to make laws for the peace order and good government of the Commonwealth with respect to "marriage" is plenary, and extends to laws dealing with the relationships of the family founded by the marriage. "For it is of the essence of marriage, from a legal point of view, that it produces, or provides a pre-requisite for, the legal recognition of family relationships " (Kitto J. in Attorney-General (Vict.) v. The Commonwealth [39] ). The power authorizes laws providing for the custody and guardianship of children related to the marriage, that is, children born of the parties to the marriage or either of them or adopted by the parties to the marriage or either of them or other children who have become part of the family founded by the marriage. The Family Law Act altered the common law (which vested the father with custody and guardianship) by placing every child of a marriage in the joint custody and guardianship of the parents to continue until the child is eighteen: s. 61(1). Parliament can provide for alteration of this joint custody (for example, if the best interests of the child are not served by this statutory custody or guardianship) by a variety of means. It has chosen to permit the Family Court of Australia (or other court exercising federal jurisdiction) to vary the custody or guardianship: s. 61. It can empower the court to entertain an application by anyone for custody, care and control of any child within the scope of the power. The power thus extends to authorizing the Court to do so during the marriage or after its termination (by death or dissolution) on the application of either party, or of the child, or of the Attorney-General or of any other person, and to make variations and impose conditions.
1. (1962) 107 C.L.R. 529, at p. 554.
The divorce and matrimonial causes power, (Constitution, s. 51(xxii)) is in wide terms. The power is to make laws for the peace order and good government of the Commonwealth with respect to "Divorce and matrimonial causes; and in relation thereto, parental rights, and the custody and guardianship of infants".
Parental rights. The legislative power is not limited except that the laws must be with respect to parental rights in relation to divorce or matrimonial causes; particularly it is not limited to parental rights in relation to children born of the marriage which is the subject of the divorce or matrimonial cause. The power being plenary, it extends to authorize laws dealing with other parental rights which are related to the divorce (or matrimonial cause) for example parental rights respecting an ex-nuptial child who had been living with the family founded by the marriage.
Custody and guardianship of infants. When a divorce (or other matrimonial cause) occurs, the usual consequences are disruption to any children living in the matrimonial home. These may include not only the children of a marriage but traditionally in our society may include a child or children of one of the parties from a former marriage (terminated by divorce or death) or an ex-nuptial child or an adopted child or a child who while not adopted has become part of the household. It is understandable therefore that the constitutional power with respect to divorce and other matrimonial causes did not limit the Parliament in making laws for the custody and guardianship of children in relation to divorce or matrimonial causes, to children of the marriage. In the Matrimonial Causes Act 1959, the Parliament acted on the basis that the power to make laws respecting the custody of infants extended to infants other than children of the marriage (see ss. 6 and 85). The power expressly authorizes laws providing for the custody and guardianship of any infant if the custody or guardianship is related to divorce (or any matrimonial cause). The plain purpose of this aspect of the power is to enable Parliament to provide for the custody and guardianship of all infants whose welfare might be affected by any divorce or matrimonial cause. Custody and guardianship of any infant is sufficiently related to a divorce or matrimonial cause if the infant's welfare might be affected by the divorce or matrimonial cause. Thus a law providing for custody or guardianship (pending or following a divorce or matrimonial cause) of any infant whose welfare might be affected by the divorce or matrimonial cause is a law with respect to the subject matter in s. 51(xxii). The power obviously includes laws dealing with the custody and guardianship of those infants who are born of the marriage which is the subject of the divorce or matrimonial cause but is not limited to those children. It extends to an infant born during marriage (who is the child of the wife but not the husband); if it did not it would be seriously defective in failing to deal with a commonplace problem arising out of, and often being the cause of, divorce. Nullity provides another example of infants not born of the marriage to whom the power extends. The power thus authorizes laws dealing with all infants whose welfare might be affected, including a child born outside the marriage to both or one only of the marriage partners or a child adopted by both or one only of the partners, or a child who had been living with them in the family founded by the marriage.
The value of vesting jurisdiction exclusively in the Family Court of Australia (or court under s. 39 of the Family Law Act) is that it avoids the confusion, embarrassment and expense which would occur if different courts had competing jurisdiction. Many of the unfortunate jurisdictional problems would be removed or diminished if the Family Court were vested with all the jurisdiction in family law matters permitted by the Constitution. The Family Court is a specialist jurisdiction staffed by judges with special qualifications and training, assisted by counsellors and other experts in the field (Family Law Act, Pt III Counselling and Reconciliation; ss. 62, 64(5). See also Fifth Annual Report of the Family Law Council 1980-1981, p. 18, par. 112ff: From 1 January to 31 December 1979, 50,000, and from 1 January 1980 to 31 December 1980, 56,000 clients had received assistance from the Family Court counselling services. The Family Law Council made special reference to the invaluable assistance of counselling where the welfare of children is involved. The Parliamentary Joint Select Committee on the Family Law Act in its Report: Family Law in Australia (1980), vol. I, at p. 178 noted the essential nature of counselling services "to assist children in coping with the problems associated with the breakdown of their parents' marriage and conflict between parents, processes recognised as creating stressful and emotionally disturbing forces upon children". The Committee recommended that these services be available through the Family Court of Australia directly to children coming within the terms of the Family Law Act). Before the Family Law Act for want of a better system, custody was generally dealt with by judges who, with little expertise and no counselling facilities, did the best they could, often in between their dealing with trust, corporate and other property cases. As the Parliament has recognised, the welfare of children is for too important to be left to judges whose main work is to deal with business affairs.
The question whether the Supreme Court has jurisdiction should be answered No.
Aickin J.
I have had the advantage of reading the reasons for judgment prepared by the Chief Justice. I respectfully agree that the cases to which he refers require the conclusion that the Supreme Court of New South Wales has no jurisdiction to make the orders sought in the proceedings before it. The question should be answered in the negative.
Wilson J.
The plaintiffs instituted proceedings in the Equity Division of the Supreme Court of New South Wales, seeking orders that a child Gary George Jackson be declared a ward of the Court and that pending further order the child be placed in their care and control. The question now is whether the Supreme Court has jurisdiction to make those orders.
In my view that question falls within a small compass. The answer will depend upon whether the proceedings fall within the definition of a matrimonial cause in the Family Law Act 1975 Cth, as amended ("the Act"). If they do, then not only must they be instituted under the Act, but the Family Court of Australia will have exclusive jurisdiction (ss. 8, 39, 40(3)).
In Carseldine v. Director of the Department of Children's Services [40] , McTiernan J. reviewed the origin and nature of the traditional parens patria jurisdiction over infants exercised by the courts of equity. In form that jurisdiction finds no direct parallel in the Act. The concept of wardship as such is not employed. It is unnecessary to consider whether and to what extent the incidents of wardship cover matters which are beyond the jurisdiction of the Family Court. It is plain that if they do so, then to that extent the jurisdiction and powers of the Supreme Court are unaffected. However, bearing in mind the observation of Kay L.J. in Reg. v. Gyngall [41] (cited by McTiernan J. in Carseldine [42] ) that the equitable jurisdiction is essentially a parental jurisdiction involving the benefit or welfare of the child, there is obviously much common ground between the two jurisdictions where the rights and responsibilities of the parties to a marriage in relation to their children are concerned. In the present case, the proceedings may fairly be described as seeking a declaration of wardship only to ground an order placing the child in the care and control of the plaintiffs. It is true that if the Supreme Court has jurisdiction then the declaration of wardship could be significant in vesting in that Court the power and responsibility of supervising the welfare of the child in the future, but for all practical purposes the relief which is sought falls somewhat short of that which would be involved in an application for his custody. The Act confirms that the description "care and control" connotes rights and powers which are ordinarily embodied within "custody": see for example, s. 70. This analysis demonstrates why it is appropriate to determine the question before this Court by asking whether there is jurisdiction in the Family Court to deal with an application by the plaintiffs with respect to the custody of the child.
1. (1974) 133 C.L.R. 345, at p. 350.
2. [1893] 2 Q.B. 232, at p. 248.
3. (1974) 133 C.L.R., at p. 351.
Gary George Jackson is a child of the marriage of the defendants. He was born on 31 March 1967. The marriage of his parents was dissolved, in accordance with the Matrimonial Causes Act 1959 Cth, as amended, by order of the Supreme Court of New South Wales in 1971. The Court awarded custody of Gary to the wife, now Mrs. Alexander, the first defendant, and ordered that no order be made in respect of access. By virtue of s. 3(2)(c) of the Act, that order continues to have effect throughout Australia and the Act applies to it as if it had been made under the Act. In these circumstances, it is argued inter alia for the defendants, and by the Solicitor-General for the Commonwealth, that the substantive proceedings now in question fall within par. (f) of the definition of matrimonial cause in s. 4 of the Act. They are proceedings in relation to completed proceedings of a kind referred to in par. (c)(ii) (the custody of a child of the marriage). It is immaterial that the earlier proceedings were completed before the commencement of the Act.
There are two aspects of the submission which call for consideration. The first is whether, in accordance with a reading of par. (f) that is consistent with its validity, the new proceedings must be between the parties to the marriage. The second is whether in any event there is a sufficient relation between the application by the plaintiffs for Gary's custody and the proceedings that have been completed.
In Vitzdamm-Jones v. Vitzdamm-Jones [43] , I had occasion to consider whether an application for custody of a child of a marriage by a stranger to the marriage, in circumstances where the party to the marriage having custody had died, could constitute a matrimonial cause within par. (f). I found difficulty in that context in comprehending how a stranger could institute a matrimonial cause, particularly where the application was said to relate to completed custody proceedings between the parties to the marriage where the custodian had subsequently died. I concluded that the change effected to s. 61(4) of the Act by amending Act No. 23 of 1979 could not be supported by the legislative power with respect to marriage. However, a majority of the Court was of a different opinion. The decision established the validity of s. 61(4) of the Act in its amended form, and grounded the jurisdiction of the Family Court on par. (f) and s. 39. Gibbs J. [44] (with whom Stephen and Mason JJ. agreed) said that: " par. (f) does not require that the proceedings should be between the parties to the marriage; to come within that paragraph it is enough that the proceedings should be in relation to (inter alia) completed proceedings of the kind referred to in par. (c)."
1. (1981) 148 C.L.R., at p. 430.
2. (1981) 148 C.L.R., at pp. 409-410.
In Dowal v. Murray [45] an opinion to the effect that jurisdiction in par. (f) proceedings was not dependent on the identity of the parties thereto was expressed obiter by Stephen J. [46] , Jacobs J. [47] , and Murphy J. [48] . In the light of this history, it must now be taken as established that par. (f) validly extends to proceedings instituted by a person not a party to a marriage so long as the proceedings bear the necessary relationship to one of the other proceedings referred to in the paragraph. This conclusion is entirely congruent with the fact that s. 39(1), dealing with jurisdiction in matrimonial causes, provides that "Subject to this Part, a person may institute a matrimonial cause under this Act " (my emphasis).
1. (1978) 143 C.L.R. 410.
2. (1978) 143 C.L.R., at p. 425.
3. (1978) 143 C.L.R., at p. 427.
4. (1978) 143 C.L.R., at p. 431.
The second aspect of the submission which requires consideration likewise derives considerable assistance from the decision in Vitzdamm-Jones. For if it be the fact that a sufficient relation, for the purposes of par. (f), exists between an application by a stranger for the custody of a child of a marriage and completed custody proceedings touching that child where the custodian has subsequently died then a fortiori there must be such a relation in the present case. For here the parties to the marriage are still alive, both are parties to the proceeding, and a custody order in favour of the mother is still in force. The plaintiffs are in effect seeking to vary that order. It is plain that such a variation can only be made by the Family Court. If granted, it necessarily involves a readjustment of the rights of the parties to the marriage in relation to their child. In my opinion, there can be no doubt concerning the relationship between the present and the completed proceedings. To hold otherwise would be to contemplate the co-existence of two orders for custody, one made in the exercise of the federal jurisdiction and the other by the Supreme Court in its equity jurisdiction. If such a distressing situation could and did arise, then the Act provides the machinery whereby the order in favour of the mother could oust any rights to which the latter might otherwise give rise (ss. 64(9); 70(2)). But in my opinion such a situation cannot arise. Section 109 of the Constitution ensures the paramount operation of the law of the Commonwealth, and operates so as to deny at the outset the jurisdiction of the Supreme Court either to entertain a matrimonial cause which is within the jurisdiction of the Family Court, or to make any order which is inconsistent with the custody order which at present stands in favour of the child's mother: Colvin v. Bradley Brothers Pty. Ltd. [49] .
1. (1943) 68 C.L.R. 151, at pp. 158, 161, 163.
Counsel for the plaintiffs attempted to draw an analogy between the orders sought from the Supreme Court of New South Wales in this case and the order made under the Children Services Act, 1965-1979 Q., that was in question in Reg. v. Lambert; Ex parte Plummer [50] . In my opinion, there is no analogy between the two cases. The present case is in substance an application for custody. The Queensland case was concerned with an order made under a general child welfare law dealing with the rights and responsibilities of the State in relation to juvenile delinquency, neglect and other circumstances calling for the care and protection, or control, of children. As I said in that case, the law involved was, in my opinion, "far more than a law with respect to the custody of children" [51] .
1. (1980) 146 C.L.R. 447.
2. (1980) 146 C.L.R., at p. 490.
In my opinion the Family Court has exclusive jurisdiction to hear and determine an application by Mr. and Mrs. Fountain for the custody of Gary George Jackson, and the law of New South Wales to the extent that it confers jurisdiction on the Supreme Court to deal with the care and control of the child is inoperative.
This conclusion does not deny to the Supreme Court the jurisdiction to declare the child to be a ward of Court in an appropriate case. However, since in the present proceedings that relief is sought merely to enable the care and control order to be made it is sufficient to answer the question in the case stated: No.
Brennan J.
The Court of Chancery, exercising its jurisdiction to protect children, acknowledged the necessity of allowing any person to bring suit on the child's behalf. In Starten v. Bartholomew [52] , Lord Langdale M.R. said:
There are great complaints in this suit of the bill being filed by a stranger. I must, however, say, that if it is proper for the protection of the infants to institute a suit, such suit is not, on that ground alone, to be found fault with .
Though the Court recognized the primacy of parental responsibility for the welfare of the child (Reg. v. Gyngall [53] ), it was prepared to exercise its powers against a parent who was delinquent in the performance of his duties. That was established by Lord Thurlow L.C. when he placed the infant son of Mr. Hunter, over the father's objection, in the care of Lord Hawke and Mr. Adams in 1790. When his jurisdiction to do so was challenged, his answer was [54] :
that this Court had arms long enough to reach such a case and to prevent a parent from prejudicing the health or future prospects of the child: And that whenever a case was brought before him, he would act upon this opinion. If the House of Lords thought differently they might control his judgment; but he certainly would not allow the child to be sacrificed to the views of his father.
Lord Thurlow's opinion, according to Lord Eldon L.C. in De Manneville v. De Manneville [55] ,
went upon this; that the Law imposed a duty upon parents; and in general gives them a credit for ability and inclination to execute it. But that presumption, like all others would fail in particular instances; and if an instance occurred, in which the father was unable, or unwilling, to execute that duty, and, farther, was actively proceeding against it, of necessity the State must place somewhere a superintending power over those, who cannot take care of themselves; and have not the benefit of that care, which is presumed to be generally effectual. Lord Thurlow took upon him the jurisdiction on this ground, that he would not suffer the feelings of the parents to have effect against that duty, which upon a tender, just, and legitimate, deliberation the parent owed to the true interests of the child.
1. (1843) 6 Beav. 143, at p. 144 [49 E.R. 779, at p. 780].
2. [1893] 2 Q.B. 232, at pp. 242-243.
3. (1789) 2 Bro. C.C. 499, at p. 518 [29 E.R. 275, at p. 283].
4. (1804) 10 Ves. Jun. 52, at p. 64 [32 E.R. 762, at p. 767].
The Chancery jurisdiction was exercised with respect to nuptial children long before the Divorce Court came to exercise jurisdiction in determining custody disputes between parties to a marriage, but when the Divorce Court entertained those disputes it also ensured that the welfare of the children of the marriage was protected by allowing parties other than the husband and wife to intervene for the benefit of the children: Chetwynd v. Chetwynd [56] , Griffith C.J. said in Brown v. Brown [57] , that it was settled that an application for custody in a suit for judicial separation, nullity or dissolution of marriage under the Matrimonial Causes Act 1899 N.S.W. "need not be made by one of the parties to the suit, but may be made by anyone else in the interest of the child".
1. (1865) 4 Sw. & Tr. 151, at p. 154 [164 E.R. 1474, at p. 1475]; (1865) L.R. 1 P. & D. 39.
2. (1906) 4 C.L.R. 595, at p. 598.
It cannot be doubted that the rights of children are better protected and their welfare better assured if proceedings can be brought not only by the parents but by any other person if the proceedings are brought on the child's behalf or in the child's interest. Both contemporary experience and earlier reports bear sad witness to the frequency of the occasions when parents are delinquent in discharging their duties to their children, particularly when the bitterness of matrimonial disputes finds its expression in proceedings for the children's custody. Yet the interests of nuptial children with respect to their custody and guardianship can be protected by orders made in proceedings under the Family Law Act 1975 Cth only if proceedings with respect to custody and guardianship are "between the parties to a marriage" (par. (c)(ii)) or are proceedings falling within par. (f), that is, proceedings "in relation to" proceedings of a kind referred to in pars. (a) to (e). Proceedings of a kind referred to in pars. (a) to (e) are proceedings between the parties to a marriage except in the cases provided for by par. (b) (declarations as to the validity of a marriage, dissolution or annulment) or by par. (cb) (proceedings by or on behalf of the child with respect to its maintenance).
No doubt the Act owes its present form to what was expressed to be the confines of the marriage power (Constitution, s. 51(xxi)) in the judgments in Russell v. Russell [58] . So long as the Act stands in that form the interests of nuptial children in respect of custody and guardianship are not susceptible of so ample a protection in the Family Court as they were in the Court of Chancery. However, it is neither appropriate nor necessary on this occasion to consider that consequence of the judgments in Russell v. Russell. In the present case there was an earlier proceeding under the Matrimonial Causes Act 1959 Cth, the statutory predecessor of the Family Law Act, between the parties to a marriage with respect to the custody of their son, the child of the marriage. The present proceedings are also in substance concerned with the custody of that child. For the reasons stated by the Chief Justice, I agree that the present proceedings are proceedings in relation to the earlier proceedings and thus fall within par. (f) of the definition of "matrimonial cause". I agree with the Chief Justice also that the marriage power supports a provision for the adjudication of conflicting claims to the custody of a child of a marriage by a party to the marriage and a third party. That is sufficient to determine this case.
1. (1976) 134 C.L.R. 495.
It may be observed that any order for custody of a nuptial child enforces, modifies or defeats the rights which the parents have to the custody of the child and the reciprocal duties owed to the child, rights and duties which arise from the fact that the child is a child of the marriage. The rights of parents over, and the duties of parents owed to, nuptial children were the subject of the common law and the practice of the Court of Chancery and are the subject of statute. These considerations lead me to refrain from expressing a view that the constitutional validity of a provision for the adjudication of questions of custody of a nuptial child is dependent upon a conflict of claims between the parties to the marriage or between a third party and a party to the marriage of which the child is born.
The order sought in the Supreme Court of New South Wales relates to the earlier proceedings in which an order was made that the child's mother, the first defendant, should have custody of him. The application is a matrimonial cause and, as the Chief Justice has shown, the proceedings can be pursued only in the Family Court.
I too would answer the question in the stated case: No. |
high_court_of_australia:/showbyHandle/1/10505 | decision | commonwealth | high_court_of_australia | text/html | null | Burns Philp & Co. Ltd. v Nelson & Robertson Pty. Ltd [1958] HCA 61 | https://eresources.hcourt.gov.au/showbyHandle/1/10505 | 2024-09-13T22:55:59.886947+10:00 | High Court of Australia
Taylor J. Dixon C.J. McTiernan, Williams, Webb and Kitto JJ.
Burns Philp & Co. Ltd. v Nelson & Robertson Pty. Ltd
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
Mar. 29, 1957
Taylor J
. delivered the following written judgment:—
The questions which present themselves for consideration in this matter arise upon demurrers by the plaintiff to a series of allegations contained in a defence in an action to recover salvage. The circumstances of the case, as disclosed by the pleadings, are unusual inasmuch as the plaintiff was the owner, both, of the salved vessel, the S.S. Mangola, and of the two vessels which are alleged to have performed the salvage operations and the action is brought to recover salvage from the owner of a consignment of cargo on the Mangola.
It is unnecessary for present purposes to recount the allegations made in the statement of claim beyond observing that the incident which immediately preceded the operations relied upon to found the plaintiff's claim was the stranding of the Mangola on a coral reef on or near the coast of Kar Kar Island and that those operations were performed more than two years before action brought.
By the defence it is alleged that Kar Kar Island is part of the Territory of New Guinea and that the alleged salvage services were rendered within that Territory, a Territory under the control of the Commonwealth. Further it is alleged that the salvor ships were Australian-trade ships within the meaning of the Navigation Act 1912-1953 Cth. and that, in the circumstances no action lies against the defendant for payment of salvage. As appears from the statement of defence the defendant relies upon s. 317 of the Navigation Act to avoid the plaintiff's claim. To the paragraphs which contain these allegations the plaintiff had demurred and a further defence based upon s. 396 of the Navigation Act met a like fate.
The terms of the relevant sections of the Navigation Act are of some importance and it is desirable to set them out in full: "s. 317. Where any ship is wrecked stranded or in distress at any place on or near the coasts of Australia or any tidal water within Australia, and services are rendered by any person in assisting that ship or saving any wreck, there shall be payable to the salvor, by the owner of the ship or wreck, a reasonable amount of salvage, to be determined in case of dispute in manner hereinafter mentioned s. 396 (1). No action shall be maintainable to enforce any claim or lien against a vessel or her owners in respect of any damage or loss to another vessel, her cargo or freight, or any property on board her, or damage for loss of life or personal injuries suffered by any person on board her, caused by the fault of the former vessel, whether such vessel be wholly or partly in fault, or in respect of any salvage services, unless proceedings therein are commenced within two years from the date when the damage or loss or injury was caused or the salvage services were rendered. (2) No action shall be maintainable under this Act to enforce any contribution in respect of an over-paid proportion of any damages for loss of life or personal injuries unless proceedings therein are commenced within one year from the date of payment. (3) Any Court having jurisdiction to deal with an action to which this section relates may, in accordance with the rules of court extend any period mentioned in this section to such an extent and on such conditions as it thinks fit, and shall, if satisfied that there has not during such period been any reasonable opportunity of arresting the defendant vessel within the jurisdiction of the Court, or within the territorial waters of the country to which the plaintiff's vessel belongs or in which the plaintiff resides or has his principal place of business, extend any such period to an extent sufficient to give such reasonable opportunity. (4) For the purposes of this section, the expression "freight" includes passage money and hire, and reference to damage or loss caused by the fault of a vessel shall be construed as including references to any salvage or other expenses, consequent upon that fault, recoverable at law by way of damages."
The argument of the defendant in support of the first of the matters referred to is that s. 317 provides an exclusive code with respect to salvage rights where salvage operations have been performed "at any place on or near the coast of Australia" and it is said that this expression is appropriate to comprehend the coasts of Territories under the authority of the Commonwealth wherever they may be situated.
"Australia" is defined by the Acts Interpretation Act 1901-1950 as including the whole of the Commonwealth and, it is contended, the latter term embraces Territories under the authority of the Commonwealth.
This defence, it will be noticed, depends for its validity not only upon the correctness of this submission but also upon the contention that s. 317—which, unlike its counterpart in the Merchant Shipping Act 1894 Imp. (s. 546), makes no mention of the salvage of cargo—constitutes a code exclusively defining the circumstances in which salvage will become payable when salvage operations have taken place on or near the coasts of Australia.
The purpose of s. 546 (and s. 565) of the Merchant Shipping Act and earlier relevant legislation, was not, however, to define the circumstances in which a reward should become payable in respect of salvage operations performed "on or near the coasts of the United Kingdom", but to extend the jurisdiction of the Admiralty Court to award salvage for services rendered otherwise than on the high seas.
Broadly speaking, s. 6 of 3 & 4 Vict. c. 65 (1840) extended the jurisdiction of the Court of Admiralty in salvage cases to the body of a county, but only in the case of a "ship or sea-going vessel" whilst the Act of 1846 (9 & 10 Vict. c. 99) extended the jurisdiction to all kinds of property whether on the high seas or within the body of a county.
The immediate predecessor of s. 546 of the Merchant Shipping Act 1894 was s. 458 of the Merchant Shipping Act of 1854 Imp. which provided that whenever any ship or boat was stranded or otherwise in distress on the shore of any sea or tidal water situate within the limits of the United Kingdom, and services were rendered by any person in assisting such ship or boat, or in saving the lives of the persons belonging to such ship or boat, or in saving the cargo or apparel of such ship or boat or any portion thereof, there should be payable by the owners of such ship or boat, cargo, or apparel to the person by whom such services or any of them should be rendered, a reasonable amount of salvage. Section 546 of the Act of 1894 is, otherwise, in substantially similar terms but it relates to vessels "wrecked, stranded or in distress at any place on or near the coasts of the United Kingdom ".
The italicised words in s. 458 of the Act of 1854 had been the subject of judicial consideration prior to the passing of the later Act and in The Leda [1] and The Mac [2] it was held that the section was not confined to those cases where vessels were actually touching the shore itself and the suggestion has been made that the wider limits prescribed by the Act of 1894 were introduced to conform with the decisions previously given (Temperley's Merchant Shipping Acts, 5th ed. (1954), p. 364). But it will be observed that the later expression was appropriate to describe some part of the high seas adjacent to the coasts of the United Kingdom (cf. the observations of Lindley L.J. in The Mecca [1] ). When s. 317 of the Navigation Act came to be enacted similar words—"on or near the coasts of Australia"—were chosen but the section itself was expressly restricted to ships wrecked, stranded or in distress at any such place.
1. (1856) Swab. 40 [ 166 E.R. 1007].
2. (1882) 7 P.D. 126.
3. (1895) P. 95, at pp. 107, 108.
Assuming then, as it was for the purposes of the argument on this aspect of the case, that a Court of Admiralty would, apart from s. 317, have had jurisdiction to entertain a claim for salvage in the circumstances disclosed in the pleadings, I can see nothing in the terms of that section to destroy that right. It is completely silent concerning salvage of cargo and its obvious purpose was not to substitute new rights for existing rights but merely to enable claims to be entertained for salvage where services had been performed otherwise than on the high seas.
I should add that as at present advised I can see no reason for thinking that the statement of claim seeks to claim for services performed, either wholly or in part, otherwise than on the high seas: see The Mecca [2] .
1. (1895) P. 95.
The argument of the defendant on this point, however, fails in limine for it is impossible to say that the coasts of the Territory of New Guinea are part of the coasts of Australia or of the Commonwealth. That this is so readily appears from a perusal of the Papua and New Guinea Act 1949-1950. The history, since 1920, of the administration of the Territory of New Guinea, first of all, under mandate from the League of Nations and, thereafter, as a Trust Territory and finally in an "administration union" with the Territory of Papua, as recited in the preamble to that Act, is sufficient to dispose of any suggestion that it is part of Australia or part of the Commonwealth. Moreover, the reasons in Ffrost v. Stevenson [3] clearly recognise that it is not.
1. (1937) 58 C.L.R. 528.
Finally, the Navigation Act itself plainly distinguishes between Australia and territories under the authority of the Commonwealth for by s. 6 the expression "Australian-trade ships" includes vessels, inter alia, ships employed in trading between Australia and territories under the authority of the Commonwealth. There is, I should think, no reason why the expression "Australia", as used in s. 317, should be understood to have any wider signification. This is sufficient to dispose of the defence based on s. 317 and the demurrer to the paragraphs of the defence which raise it should be upheld.
The question whether the failure to institute proceedings until after the expiration of two years from the performance of the salvage services alleged is fatal to the plaintiff's claim depends upon the true construction of s. 396 of the Navigation Act.
For the defendant it is asserted that the relevant effect of sub-s. (1) is to provide that no action shall be maintainable to enforce any claim or lien in respect of any salvage services after the expiration of the prescribed period, whilst the plaintiff, on the other hand, contends that the sub-section extends no further than to prescribe a period of limitation in relation to actions to enforce claims and liens against vessels and their owners in respect of the causes of action specified, including salvage.
The immediate source of s. 396 is to be found in s. 8 of the Maritime Conventions Act, 1911, an Imperial Act which expressly extended throughout the British Dominions, except the self-governing Dominions including the Commonwealth of Australia, and which was enacted with a view to carrying into effect the two conventions with respect to maritime collisions and salvage then recently concluded in Brussels.
The first paragraph of art. 7 of the first of these conventions was in the following terms: "Actions for the recovery of damages are barred after an interval of two years from the date of the casualty." It further provided that "the period within which an action must be instituted for enforcing the right to obtain contribution permitted by par. 3 of art. 4 is one year from the date of payment".
By the same article the right was reserved to the high contracting parties to provide, by legislation in their respective countries, that the specified period should be extended in certain cases. Similar limitation provisions were contained in the Salvage Convention.
Article 10 provided that "A salvage action is barred after an interval of two years from the day on which the operations of assistance or salvage terminate" and a similar right was reserved by the third paragraph of that article to provide for the extension of the specified period in cases where it had not been possible to arrest the salved vessel in the territorial waters of the State of the plaintiff's domicile or principal place of business.
In attempting to construe s. 396 the defendant places considerable reliance on the provisions of the Salvage Convention. Sub-section (1) of s. 396, it is said, is at least ambiguous and, since it was passed for the purpose of giving legislative effect to the rules agreed upon it is contended that the meaning which should be adopted is that which will produce this result.
There can be no doubt that the Salvage Convention was concerned with all salvage claims. Article 1 provided that assistance and salvage of sea-going vessels in danger, of any things on board, and of freight and passage money, should be subject to the ensuing provisions of the Convention and, in spite of a tenuous argument founded upon the third paragraph of art. 10, the intention is clear that the limitation provision was intended to be applicable to all claims for salvage.
Then, the argument proceeds, when one comes to consider s. 396 one sees that the legislature has, in one sub-section, proceeded to implement the provisions of each convention, that is to say, to prescribe a period of limitation with respect to claims against ships and their owners in respect of damage done by one ship to another or to its cargo or persons on board and with respect to claims for salvage services. This method of approach, however, is not open, unless, considered by itself, s. 396 (1) is found to be reasonably susceptible of more than one meaning. If it is ambiguous it is, upon long-established authority, permissible to take these extraneous matters into consideration but if its language is appropriate to afford a measure of protection to shipowners only that must be the end of the matter.
The first thing that may be said about s. 396 is that, on its face, it is a section which deals with three categories of claims. These are claims in respect of damage done by one vessel to another or to its cargo or to persons on board, claims for salvage and claims for contribution under s. 261.
In substance these categories are quite distinct and different. Two of the categories are dealt with in sub-s. (1) which prescribes two years as the appropriate period of limitation, whilst the third category is dealt with in sub-s. (2) where the prescribed period is one year only. In passing it may, perhaps, be said that although s. 8 of the Maritime Conventions Act 1911 dealt with all three categories in one paragraph, it was found convenient in drafting s. 396 to deal separately with causes of action for which different periods of limitation were to be prescribed.
In approaching the construction of sub-s. (1) it is, I think, of importance to bear in mind that it deals with distinct categories of claims. That is to say it deals with claims in respect of loss or damage to vessels, their cargo and persons on board, and claims in respect of salvage services. But it does not deal with all claims in respect of damage to vessels, their cargo and persons on board; its operation is restricted to cases where the damage is occasioned, wholly or partly, by the fault of another vessel.
If, in framing the first part of s. 396, the draftsman had omitted the words "against a vessel or her owners" and also the subsequent reference to the "former vessel" and if the reference to "another vessel" had been to "any vessel" this part of the section would have travelled far beyond its obvious purpose. This purpose, which is made clear by the interpolation of the words "against a vessel or its owners" and by the later reference to the "former vessel", was to prescribe a period of limitation with respect to damage occasioned in a particular way, that is to say, damage occasioned by the fault of one vessel to another vessel or to cargo or persons on the latter vessel. This, in effect, is the subject matter with which the first part of s. 396 (1) purports to deal and its operation is so confined by the use of the words referred to.
Such being the obvious primary purpose of those words there is no reason for thinking that they were intended to control the operation of the whole of sub-s. (1) though, of course, if no other construction is reasonably open it is the one which must be adopted. But the reference to "salvage services of any kind" is introduced into the latter part of the sub-section by the repetition of the words "or in respect of" and it does not appear to me to be unnatural to understand the following words as introductory of an entirely new subject matter.
Strictly the repetition of those words was unnecessary unless the section was proceeding to a different subject matter and it is, in my view, permissible to read the sub-section as dealing with any claim or lien in respect of any salvage services and not merely with claims or liens against a vessel or her owners in respect of salvage services. The view that the whole of the sub-section deals only with claims against ships and their owners may be superficially attractive but when it is found that the words which might be thought to produce this result serve an obvious purpose in defining the first category of claims, and no such purpose in relation to the second, that construction should in my opinion be rejected. Or perhaps it is sufficient to say that the contrary view is, at least, equally open.
In those circumstances I would, I think, be entitled to have regard to the provisions of the Maritime Conventions Act and to the conventions to which it is expressly purported to give effect. When that is done there can be little doubt as to the true meaning of the relevant portion of s. 396.
For the reasons given the demurrer to par. 8 of the defence should be overruled and the demurrer to pars. 10, 11 and 12 allowed.
From that decision the plaintiff appealed to the Full High Court from that part of the order of Taylor J. in the exercise of the Admiralty Jurisdiction of the High Court made on 29th March 1957 which ordered that the demurrer to par. 8 of the defence should be overruled, that order being made after a hearing on 18th March 1957 to which the present appellant was plaintiff and the respondent was defendant. The appellant sought in lieu of that part of the order an order that the demurrer to par. 8 of the defence should be allowed and that the respondent should pay all the costs, upon the following amongst other grounds: that his Honour (1) was in error in overruling the demurrer in par. 8 of the defence; (2) was in error in holding that s. 396 (1) of the Navigation Act 1912, as amended, required the proceedings brought by the plaintiff against the defendant to be commenced within two years from the date when the salvage services were rendered; and (3) should have held that the limitation of time imposed by s. 396 (1) of the Navigation Act 1912, as amended, applies only to the enforcement of a claim or lien against a vessel or her owner in respect of the matters set forth in that sub-section.
Cur. adv. vult.
The following written judgments were delivered:—
Mar. 11, 1958
Dixon C.J., McTiernan and Williams JJ.
This appeal is from so much of an order of Taylor J. as overruled a plaintiff's demurrer to a paragraph in the defendant's defence in a suit brought in the Admiralty jurisdiction of this Court for an award for salvage services. The paragraph to which the plaintiff, who of course is the appellant, unsuccessfully demurred pleads that the salvage services in respect of which a salvage award is claimed were rendered more than two years before the suit was commenced. The defendant is an owner of part of the cargo carried by the ship to which the salvage services were rendered. That ship received assistance from two other ships. All three ships were owned by the plaintiff. For that reason the plaintiff's claim as shipowners for salvage services was confined to cargo. Apparently it was a mixed cargo and the defendant was sued as an owner of a certain consignment forming part of it so that there might be a test case. The plaintiff's contention is that the time bar of two years, which depends on s. 396 of the Navigation Act 1912-1953, does not apply to such a suit against a cargo-owner.
To make the matter clearer it may be as well briefly to state the facts as they appear from the pleadings. On 8th February 1953 the s.s. Mangola, a ship owned by the plaintiff, was on a voyage to Madang on the north coast of New Guinea when she grounded on a coral reef off the east coast of Kar Kar Island. She was carrying a general cargo of a value of about £155,000 including the defendant's consignment valued at £1,282. The motor ship Bulolo, which also was owned by the plaintiff, was lying at Madang at the time. She was despatched at once to the assistance of Mangola which she reached on the morning of 9th February. She made a number of attempts to tow Mangola off the reef. A third ship owned by the plaintiff, namely the motor ship Malaita, was on a voyage she was making from Rabaul to Samarai. She was diverted to Kar Kar Island and she reached Mangola late on the night of 11th February. In the conditions existing where Mangola was stranded it was not possible for both ships to combine in the attempt to tow her off and, after rendering assistance in lightening Mangola, Bulolo left the scene on the evening of 13th February. At length, on the morning of 15th February 1953, the efforts of Malaita were successful in freeing Mangola from the reef and on the same day both vessels arrived at Madang, Mangola proceeding under her own steam.
The writ of summons by which this suit was commenced was not issued until 21st February 1956, a year after the expiry of the period of limitation of two years fixed by s. 396 (1) for the cases it covers. The question raised by the demurrer is whether the present is a case which the section does cover. The reason why the plaintiff says that the case is not within the provision is that, according to his contention, the period of limitation is confined to actions to enforce claims or liens against vessels or their owners. As will appear the provision deals with two things, viz. (1) damage or loss to a vessel her cargo or freight or any property aboard her and damages for loss of life or personal injury suffered by a person on board the vessel, and (2) salvage services. It is quite clear on the words of s. 396 (1) that in the case of the first of these two things the time bar is restricted to actions to enforce a claim or lien in respect thereof against another vessel or its owners. But on the text of the sub-section it is anything but clear that in the case of the second, namely salvage services, the time bar does not apply to every action for an award whether with reference to ship cargo or any other maritime property in respect to the saving of which a salvage award may be claimed. Taylor J. decided that on the proper interpretation of the provision the time bar is applicable to a claim for an award for the salvage of cargo and therefore overruled the demurrer to the plea that the action was out of time. It is the correctness of that decision we have to consider on this appeal.
Before turning to the question, however, it may be desirable to say that it is well settled that the owner of a ship rendering salvage services to another ship owned by him, laden with cargo which is thereby saved, is prima facie entitled to obtain a salvage award from the cargo-owners: see The Miranda [1] ; The Cargo ex Laertes [2] . It is or may be otherwise if the shipowner happens to be liable upon his contract of affreightment to the cargo-owners for the loss or injury to the cargo from which it was saved by the salvage services: see The Glenfruin [1] and cf. The Beaverford v. The Kafiristan [2] and The Susan V. Luckenbach v. Admiralty Commissioners [3] .
1. (1872) 3 L.R. Ecc. & Ad. 561.
2. (1887) L.R. 12 P. 187.
3. (1885) 10 P.D. 103.
4. (1938) A.C. 136.
5. (1951) P. 197.
No question arises upon the demurrer which Taylor J. overruled as to the prima facie foundation of the plaintiff's claim for a salvage award with respect to the cargo. The matter to be decided is simply whether upon the true interpretation of s. 396 (1) of the Navigation Act that provision covers the claim and so bars the action. The text of the sub-section is as follows: "No action shall be maintainable to enforce any claim or lien against a vessel or her owners in respect of any damage or loss to another vessel, her cargo or freight, or any property on board her, or damage for loss of life or personal injuries suffered by any person on board her, caused by the fault of the former vessel, whether such vessel be wholly or partly in fault, or in respect of any salvage services, unless proceedings therein are commenced within two years from the date when the damage or loss or injury was caused or the salvage services were rendered."
It will be seen that if the words following the expression "to enforce a claim or lien against a vessel or her owners", namely the words "in respect of any damage or loss to another vessel, her cargo or freight" etc. are to be treated as an alternative balanced, so to speak, with the words "or in respect of any salvage services", the whole section is limited to claims or liens against a vessel or her owners. The consequence of that construction would be to exclude from the operation of the section a claim exclusively with respect to cargo or against cargo-owners. If on the other hand the alternatives which the section intends to create attach, so to speak, to the word "maintainable" so that the provision in relation to salvage services would read "no action shall be maintainable in respect of any salvage services", then the time limit applies equally well to cargo as to any other maritime property for the saving of which a salvage award may be obtained. There is in truth a choice of three points to which you may go back and attach the alternative "or in respect of salvage services", when you notionally omit the intervening first alternative containing what may be called the operative statement with reference to damage or loss caused by the interaction of two vessels. Thus so far as it relates to salvage services the provision may be read: (i) No action shall be maintainable in respect of any salvage services unless the proceedings therein are commenced within two years from the date when the salvage services were rendered; or,—(ii) No action shall be maintainable to enforce any claim or lien in respect of any salvage services unless proceedings therein are commenced within two years from the date when the salvage services were rendered; or,—(iii) No action shall be maintainable to enforce any claim or lien against a vessel or her owners in respect of any salvage services unless proceedings therein are commenced within two years from the date when the salvage services were rendered.
On either the first or second of these three readings an action for a salvage award with respect to cargo, alike with an action for an award with respect to ship and freight, must be brought within two years. On the third reading the time bar cannot apply to an action brought only for an award for salvage services by which cargo was saved. For such an action will be against cargo-owners and not against a vessel or her owners. The appellant says that the grammatical meaning of the sub-section requires that they should be read in the third way. This reliance on grammar is, we think, a mistake. Arrangement or symmetry and grammar are different things. Each of the foregoing divisions of the sub-section is equally grammatical with the others, but the third represents a more symmetrical use of formal arrangement. It balances the two uses of the words "in respect of" one against the other, just as if "either" had been put before the first of them. As a result it is more natural for the mind to treat the repetition of the words "in respect of" as indicating that the alternatives are "in respect of any damage or loss to another vessel" etc. and "in respect of any salvage service". It may indeed be conceded that prima facie, at least to one who attends rather to the arrangement than to more substantial considerations, this is the more natural meaning of the sentence which the sub-section embodies. But closer attention to the text will show that it is not really constructed with methodical care. For it will be noticed that under the first "in respect of" and governed by that expression is the alternative "or damage for loss of life or personal injuries". Apart from the fact that "damage" is an evident mistake for "damages", if the words "in respect of" began each of the alternatives methodical composition might have suggested a repetition of them before the words "damage for loss of life or personal injuries", though of course if the draftsman had used the expression there he might have made it doubtful whether the words "caused by the fault of the former vessel" attached not only to that alternative but to what preceded. But conceding that at a first reading one may find it somewhat more natural to balance the two uses of the expression "in respect of" against one another, that is, in other words, mentally to read "either" before the first of them, yet, we think that as soon as one's consideration turns to the substance of the matter, such a reading is seen to mean a distinction between the salvage of ships and the salvage of cargo for which no reason can be found.
The first part of the sub-section obviously deals with collisions between ships and perhaps other damage done by the interaction of one ship with another where the cause of action is based on fault. There is every reason for describing suits brought on causes of action arising from such relations as proceedings against vessels or their owners. But the law of salvage has a wider application and no reason can be advanced for dividing up salvage claims so that a period of limitation of two years applies only to actions against a ship or her owners, and not to an action against cargo-owners. It is difficult to suppose that it was really intended to exclude claims against cargo-owners for a salvage award from the operation of sub-s. (1) of s. 396.
It is said however that some support can be found in sub-s. (3) for the view that sub-s. (1) is entirely restricted to actions against ships or their owners. Sub-section (3) authorises a Court to extend the time of limitation prescribed by sub-s. (1). It gives a discretion applicable over the whole field covered by sub-s. (1) whatever that field may be. But then a second limb of sub-s. (3) requires the Court to extend the period, if the Court is satisfied that during the period of two years there has been no reasonable opportunity of arresting the vessel within the jurisdiction of the Court or within the territorial waters of the country to which the plaintiff's ship belongs or in which he resides or has his principal place of business. In that case the Court is to enlarge the time to an extent sufficient to give such reasonable opportunity. It would, we think, be illogical to treat this second limb as intended to cover the whole field of sub-s. (1) and on that supposition to read sub-s. (1) as limited to the area in which sub-s. (3) could apply. In truth except for the natural instinct to read the two uses of "in respect of" as representing the introduction of the alternatives, there is nothing to support the view that actions in respect of salvage services are within sub-s. (1) of s. 396 only when they are brought against vessels or their owners.
Certain passages were read to us in which judges or text writers in paraphrasing s. 8 of the Maritime Conventions Act 1911 (1 & 2 Geo. V. c. 57), where s. 396 (1) finds its source, had evidently attached the words "in respect of any salvage services" to the opening words "no action shall be maintainable to enforce any claim or lien against a vessel or her owners". But in every such case the paraphrase had been made for some other purpose and it was apparent that the point with which we have to deal had not presented itself to the mind. The passages do no more than evidence, what in any case is clear enough, viz. the first instinctive balancing by a reader of the two uses of "in respect of". We think that the passages otherwise are of no help in interpreting sub-s. (1) of s. 396. The construction is quite open by which the words "in respect of any salvage services" are attached at an earlier point, namely either to the words "no action shall be maintainable" or "no action shall be maintainable to enforce any claim or lien". It is a construction not only open; it is perfectly grammatical and it gives effect to the almost certain intention of the provision.
It is proper to add that the question of the interpretation of the sub-section which arises is, as it seems to us, an example of ambiguity of language or of the arrangement of language. We think therefore that it is admissible to turn for assistance to the history of s. 396. As we have said its source is in s. 8 of the Maritime Conventions Act 1911, a provision which contains the same equivocation of meaning. That Act begins with a preamble which refers to two Conventions signed in 1910 at Brussels one dealing with collisions between vessels and the other with salvage. The preamble recites that it is desirable that such amendment should be made in the law relating to merchant shipping as will enable effect to be given to the Conventions. This preamble may not be looked at or called in aid to control the meaning of words in themselves clear and unambiguous: per Lord Parker: The Cairnbahn [1] . But the provisions relating to the limitation of actions with respect to salvage services can hardly be said to speak with clearness or certainty. The preamble remits the inquirer to the Conventions. Article 10 of the Convention upon salvage is as follows: "A salvage action is barred after an interval of two years from the day on which the operations of assistance or salvage terminate. The grounds upon which the said period of limitation may be suspended or interrupted are determined by the law of the court where the case is tried. The high contracting parties reserve to themselves the right to provide, by legislation in their respective countries, that the said period shall be extended in cases where it has not been possible to arrest the vessel assisted or salved in the territorial waters of the State in which the plaintiff has his domicile or principal place of business." If this article is compared with s. 8 of the Maritime Conventions Act 1911 Imp. or with s. 396 (1) of the Navigation Act it helps to explain those provisions as a whole. But the only point upon which assistance is needed in this case is covered by the general words "A salvage is barred" etc. These words clearly include all salvage actions. Unless s. 8 was meant to stop short of carrying the article into full effect, it makes it almost certain that there was no intention of excluding actions for a salvage award in respect of cargo from the time bar. It greatly increases the probability that the whole difficulty is the accidental result of an attempt to give effect in one provision to both Conventions so far as they respectively deal with a limitation upon the time within which proceedings must be brought.
1. (1914) P. 25, at p. 30.
For the foregoing reasons we agree in the conclusion of Taylor J.
We think that the appeal should be dismissed with costs.
Webb J.
This is an appeal from a judgment of Taylor J. holding that proceedings in an action by the appellant plaintiff, a shipowner, for reward for salvage services in respect of cargo of the respondent defendant were barred by s. 396 (1) of the Navigation Act 1912-1953 Cth., as they were commenced more than two years after the services were rendered.
Section 396 (1) provides:—"No action shall be maintainable to enforce any claim or lien against a vessel or her owners in respect of any damage or loss to another vessel, her cargo or freight, or any property on board her, or damage for loss of life or personal injuries suffered by any person on board her, caused by the fault of the former vessel, whether such vessel be wholly or partly in fault, or in respect of any salvage services, unless proceedings therein are commenced within two years from the date when the damage or loss or injury was caused or the salvage services were rendered."
This provision is in the same terms as s. 8 of the Maritime Conventions Act 1911 enacted by the Imperial Parliament following the two Conventions of 23rd September 1910, one dealing with damages arising from collisions, or encounters short of collisions, between ships, and the other with claims for salvage services. Article 7 of the first of these two Conventions provided, inter alia, that "actions for recovery of damages are barred after an interval of two years from the date of the casualty"; and art. 10 of the other Convention provided, inter alia, that "a salvage action is barred after an interval of two years from the day on which the operations of assistance or salvage terminate".
For the appellant it is submitted that s. 396 (1) is not ambiguous; that given its grammatical construction and natural meaning it provides for two categories of claims each introduced by the phrase "in respect of"; so that the antecedent common to both categories is the phrase—"against a vessel or her owners"; and that there is no reason to depart from this grammatical construction and natural meaning because of anything elsewhere in the Act. If this is the correct view of s. 396 (1), then the limitation of two years has no application to salvage actions against cargo-owners. For the respondent it is submitted that the first category begins with the phrase "against a vessel or her owners", so that these words are incorporated in and apply exclusively to that category. If that is so, then the limitation of two years applies also to all salvage actions. But it is further submitted for the respondent that if either construction is open, then there is an ambiguity and the provisions of the Maritime Conventions can be called in aid, more particularly s. 10 of the Salvage Convention which shows that the parties thereto intended that the limitation of two years should apply to all salvage actions. The argument for the respondent is that as the terms "another vessel", "former vessel" and "vessel wholly or partly in fault" refer to "vessel" where the term is first used in s. 396 (1) the latter term should be included in the first category, as being indispensable to it; and further that if the term "vessel wholly or partly in fault" were placed after the term "vessel" where it first appears then, to employ counsel's phraseology, the "significance of this description", which I understand to refer to the first category, would not be affected. That is true; but that transposition, whilst leaving the first category unaffected, does destroy the operation of the phrase "against a vessel or its owners" as an antecedent common to both categories. It is for that reason that the transposition is relied upon, either as showing the true meaning of s. 396 (1) or at least as revealing an ambiguity warranting the convention being called in aid. But it does not follow that because the term "vessel" where it first appears in s. 396 (1) is indispensable to the description of the first category it is necessarily exclusive to that category; it can still perform a dual purpose and be at the same time a common antecedent of both categories. Nor are we justified in making a transposition of the words of a section in order to create an ambiguity that does not otherwise exist.
I think that the grammatical construction and natural meaning of s. 396 (1) are as submitted for the appellant and there is nothing to warrant a departure therefrom. In the absence of any ambiguity in the section we are not at liberty to call the Convention in aid: The Cairnbahn [1] per Lord Parker; Ellerman Lines Ltd. v. Murray [2] per Lord Tomlin [3] and Lord Macmillan [4] .
1. (1914) P., at p. 30.
2. (1931) A.C. 126.
3. (1931) A.C., at p. 147.
4. (1931) A.C., at p. 148.
It is interesting to note that English High Court Judges and text-book writers without exception appear to have construed s. 8 of the Maritime Convention Act 1911 as not barring all salvage actions after two years, although it should be stated that their Lordships do not appear to have had the assistance of argument in any of the cases to which we were referred. Apparently both Bar and Bench concerned thought the meaning of s. 8 was so clear as not to permit of argument. See Llandovery Castle [1] per Hill J. The Hesselmoor and The Sergeant per Willmer J.; Kennedy's Law of Civil Salvage, 3rd ed. (1931), p. 189; McLachlan on Merchant Shipping, 7th ed. (1932), pp. 542, 543; Temperley on Merchant Shipping Acts, 5th ed. (1954), pp. 565, 566. Their Lordships and the text-book writers would have known the history of s. 8 and the terms of the Conventions and if it occurred to them that the language of the section was ambiguous they would have called the Convention in aid and taken a different view from that which they applied or adopted in their judgments and text-books.
1. (1920) P. 119, at p. 124.
2. (1951) 1 Ll.L.R. 146.
I would allow the appeal.
Kitto J.
The question in this appeal is whether s. 396 (1) of the Navigation Act 1912-1953 Cth., which prescribes a limitation of time for the commencement of certain actions, applies to an action to enforce a claim against an owner of cargo for salvage services rendered. The sub-section is in these terms:—"No action shall be maintainable to enforce any claim or lien against a vessel or her owners in respect of any damage or loss to another vessel, her cargo or freight, or any property on board her, or damage for loss of life or personal injuries suffered by any person on board her, caused by the fault of the former vessel, whether such vessel be wholly or partly in fault, or in respect of any salvage services, unless proceedings therein are commenced within two years from the date when the damage or loss or injury was caused or the salvage services were rendered."
The appellant's contention is that the expression "against a vessel or her owners" is to be considered as in effect repeated before "in respect of any salvage services". Taylor J., as the judge of first instance, rejected this reading of the provision and held that the time limit applies in the case of any action in respect of salvage services, whether against a vessel or her owners or against a cargo-owner. In my opinion the decision was correct. The contrary view is, as his Honour observed, superficially attractive; for the repetition of "in respect of" suggests at first sight that the sub-section is dealing in both its branches with claims or liens against vessels and their owners. But the attractiveness of this reading disappears upon closer examination. The first class of claims or liens with which the provision deals consists of those which arise from damage or loss caused (wholly or partly) by the fault of one vessel to another vessel or to the other vessel's cargo or freight or any property or person on board her. In providing for such cases, the course adopted by the draftsman has been to mention first the vessel in whose favour the time limit is being provided. That has enabled him to describe the vessel to which, or to property or persons on board which, the damage or loss has accrued as "another vessel", and also to refer to the fault which has caused the damage or loss as the fault of the "former vessel". The phrase "against a vessel or her owners" thus provides a convenient point of reference for later words of description. It need not have been used in order to exclude cases where damage has been caused otherwise than by a collision, e.g. when it has been caused by the fault of dock authorities; for that exclusion would be effected sufficiently by the description of the damage or loss as damage or loss caused by the fault of a vessel. The purpose of the critical phrase in relation to the first limb of the sub-section is therefore twofold: to describe one of the essential characteristics of every collision action, and to provide assistance in point of verbal expression for the descriptions of other characteristics of every such action.
In relation to the second limb of the sub-section, the words "against a vessel or her owners" have neither of these purposes to serve. If they apply to that limb at all they must have the different purpose of excluding from the application of the sub-section one particular kind of salvage actions, namely salvage actions against cargo-owners. This is an odd diversity of purpose to ascribe to a single expression. And odder still is the practical result; for no one has been able to suggest any plausible ground for thinking it likely that the legislature would wish, while protecting vessels and their owners against claims more than two years old, to leave cargo-owners without a similar protection.
The fact is, as the respondent has submitted, that the sub-section deals with two disparate classes of action, and that the reasons which exist for describing an action of the one class as being against a vessel or her owners, and which fully account for the use of the disputed words, do not exist with respect to an action of the other class. There is another reason also for not carrying those words down into the description of the second class of action. Section 396 (1) derives from, and, so far as material, is in terms identical with, s. 8 of the Maritime Conventions Act 1911 Imp.. That Act contained a recital (since repealed) that at a conference held at Brussels in the year 1910 two Conventions, dealing respectively with collisions between vessels and with salvage, were signed on behalf of His Majesty, and that it was desirable that such amendments should be made in the law relating to merchant shipping as would enable effect to be given to the conventions. Sections 1 to 5 were headed "Provisions as to Collisions etc."; ss. 6 and 7 were headed "Provisions as to Salvage"; and the remaining ss. 8 to 10, were headed "General Provisions". Each Convention provided for a time limit of two years, the Collisions Convention by art. 7 and the Salvage Convention by art. 10. The latter was not confined to salvage actions against ships and their owners, and indeed art. 1 provided that the salvage, not only of vessels, but of "any things on board" should be subject to the provisions which followed. When the United Kingdom Act, in the course of giving effect to the Conventions, took up the topic of a time limit upon actions it dealt with the two kinds of action, as has been pointed out, together. Unhappily it did so in terms which were not free from ambiguity; but that circumstance supplies a sufficient justification, and indeed a strong reason, for comparing the section with the relevant articles of the Conventions: The Cairnbahn [1] . The comparison is wholly against construing s. 8 of that Act in the sense for which the appellant contends, for a provision dealing with a time limit internationally agreed upon for all collision actions and all salvage actions could hardly intend to make an exception of salvage actions in respect of cargo; and if so surprising an intention existed it would almost inevitably be expressed directly. The time limit in the United Kingdom Act must therefore surely extend to salvage actions in respect of cargo. If it does, the appellant's argument as a whole must fail; for it would be plainly unsound to give to the Australian provision a meaning different from that of its United Kingdom prototype.
1. (1914) P. 25.
We have been referred to a few passages in judgments and text-books in which the appellant's construction of s. 396 (1) seems to have been taken for granted. But on no previous occasion, apparently, has the problem arisen for consideration, and it ought now, I think, to be decided as res integra.
For the foregoing reasons I am of opinion that the appeal should be dismissed. |
high_court_of_australia:/showbyHandle/1/11811 | decision | commonwealth | high_court_of_australia | text/html | null | Asioty v Canberra Abattoir Pty Ltd [1989] HCA 40 | https://eresources.hcourt.gov.au/showbyHandle/1/11811 | 2024-09-13T22:55:59.939081+10:00 | High Court of Australia
Mason C.J. Brennan, Dawson, Toohey and McHugh JJ.
Asioty v Canberra Abattoir Pty Ltd
[1989] HCA 40
ORDER
Appeal allowed with costs. Set aside the orders of the Full Court of the Federal Court and in lieu thereof order that the appeal to that Court be dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
Sept. 20
Mason C.J.
I agree with the reasons for judgment of Toohey J.
Brennan J.
I agree with the reasons for judgment of Toohey J.
Dawson J.
I agree with the reasons for judgment of Toohey J.
Toohey J.
The appellant suffers from a condition which produces a dermatitis of the hands. One medical view is that it is a constitutional condition called Amyloidosis Cutis, which may have a genetic factor. Another view is that it is "a dermatitis of unknown cause". It will be necessary to say more about this difference of medical opinion later in these reasons. The appellant also has a condition called Lichen Amyloidosis, described by one medical witness as "a disease of unknown origin". This condition, it seems, also causes a dermatitis which affects the appellant's feet.
The appellant was born in Egypt in 1931. For much of his life he has worked as a waiter, at first in Egypt and more recently in Australia. On 10 October 1980 he began work with the respondent as a slaughterman. Not long after he started work, the appellant developed dermatitis of his hands and also, it appears, of his feet. As a result he was off work from time to time. For these periods he was paid workers' compensation; it must have been accepted that the dermatitis constituted an injury in the nature of a disease which was caused or aggravated by the appellant's employment. However, the matter has proceeded on the basis that any compensable injury relates to the dermatitis of the hands only.
On 12 January 1983 the respondent filed an application under the Workmen's Compensation Ordinance 1951 A.C.T., seeking a termination of weekly payments of compensation from 30 June 1982. The appellant countered with an application, seeking a continuance of payments on the basis of total incapacity for work, alternatively on the basis of partial incapacity. On 13 December 1984 the Court of Petty Sessions, acting as arbitrator under the provisions of the Ordinance, made an award to the effect that the appellant was entitled to weekly payments on the basis of partial incapacity. Both parties appealed to the Supreme Court of the Australian Capital Territory. Kelly J. allowed the present appellant's appeal and substituted a finding of total incapacity. The Full Court of the Federal Court allowed the present respondent's appeal to that Court and ordered that payments of compensation cease from 18 August 1983.
The approach taken by the Federal Court appears from a passage which it is necessary to set out in full.
The evidence before the Court of Petty Sessions established that Mr. Asioty was suffering from a disease of the chronic type which was not caused by his work as a slaughterman. It was a constitutional condition called Amyloidosis Cutis. That condition was not subject to any perceptible progress if some external stimulus was applied. Nevertheless the evidence established that the congenital condition was aggravated by Mr. Asioty's work as a slaughterman, in that the work produced additional symptoms or an intensifying of existing symptoms which were temporarily incapacitating. Thus the worsening or itensifying [sic] of existing symptoms may properly be described as an aggravation. It does not follow, in our view, that once those worsened or intensified symptoms had abated the likelihood of a return of the symptoms, or the fact that the condition may be harder to control at some time in the future, amount to an aggravation of the pre-existing condition. An aggravation involves the onset of additional symptoms or the intensifying of existing symptoms.
A return of the symptoms of the disease if Mr. Asioty resumed certain types of work could amount to a further aggravation or recurrence of the pre-existing disease, but the likelihood of a return of the symptoms could not be described as an aggravation or recurrence within the meaning of the definition of "disease". The fact that it may be inadvisable for Mr. Asioty to return to his work as a slaughterman is due to the nature of the congenital disease itself and not to the aggravation which incapacitated him until 18 August 1983 and which was the basis of compensation payments to that date.
The appellant has challenged the approach taken by the Federal Court and seeks restoration of the orders made by Kelly J.
The appellant's entitlement to compensation depends on s. 9(1) of the Ordinance which, at the relevant time, read:
Where —
(a) a workman is suffering from a disease and is thereby incapacitated for work; or
(b)
and the disease is due to the nature of the employment in which the workman was employed, his employer shall be liable to pay compensation as if the disease were a personal injury by accident arising out of or in the course of his employment.
The term "disease" is defined by s. 6(1) to include —
any physical or mental ailment, disorder, defect or morbid condition, whether of sudden or gradual development, and also includes the aggravation, acceleration or recurrence of a pre-existing disease.
It is apparent that the Federal Court accepted that so long as the appellant's work produced additional or intensified symptoms, he was suffering from a disease within s. 9(1) of the Ordinance. But, in that Court's view, once the symptoms had abated the likelihood of their return did not constitute a disease.
There can be no doubt that the dermatitis of the appellant's hands, whether produced by Amyloidosis Cutis or otherwise, constitutes a physical ailment, disorder, defect or morbid condition; it may answer each of those descriptions. It is also clear that the symptoms produced while the appellant was at work constituted an aggravation of that condition, hence that the appellant was then suffering from a disease within the terms of the Ordinance. Once the appellant ceased work and his symptoms abated, compensation continued to be payable only so long as (a) he was still suffering from a disease; (b) the disease was due to the nature of his employment; and (c) he was thereby incapacitated for work.
The phrase "aggravation, acceleration or recurrence of a pre-existing disease" in the Ordinance definition of "disease" is not as extensive as that considered by this Court in Federal Broom Co. Pty. Ltd. v. Semlitch [1] . The Court was there concerned with a definition of injury in the Workers' Compensation Act 1926 N.S.W. which included "the aggravation, acceleration, exacerbation or deterioration of any disease". Windeyer J. commented [2] : "The words have somewhat different meanings: one may be more apt than another to describe the circumstances of a particular case: but their several meanings are not exclusive of one another." The same is no doubt true of the words in the Ordinance with which we are presently concerned.
1. (1964) 110 C.L.R. 626.
2. (1964) 110 C.L.R., at p. 639.
In Darling Island Stevedoring and Lighterage Co. Ltd. v. Hankinson [3] , Barwick C.J. noted that the words in the New South Wales Act "may overlap in their denotation but none the less they connote different consequences of work in the employment upon pre-existing non-employment disease". Some of the cases — Hankinson is one — are concerned with the progress of a disease which itself is progressive in nature. Although, in the present case, one of the medical witnesses, Dr. Robinson, considered the appellant's condition to be Amyloidosis Cutis and slowly progressive, that was not the evidence preferred by the arbitrator. And, despite the conclusions of the Federal Court, which rely very much on Dr. Robinson's evidence, there was no challenge to the arbitrator's rejection of Dr. Robinson's opinion.
1. (1967) 117 C.L.R. 19, at p. 26.
The arbitrator preferred the evidence of Dr. Heeler because, being the "treating doctor for some time", he was in "the best position to make an assessment". Kelly J. also relied on Dr. Heeler's assessment, which was that the condition of the appellant's hands had started off as constitutional but that it was aggravated by something the appellant handled at work. Dr. Heeler was of the further opinion that, if the appellant returned to work as a slaughterman, "I would expect his hands to flare up again". He expected the same consequences if the appellant took up any occupation that "involves having his hands constantly wet or handling potentially irritant chemicals like acids, alkalines, strong solutions, and similar sorts of preparations". Indeed, Dr. Heeler thought that the underlying dermatitis condition was now more chronic, "more liable to a flare up". It is necessary to note one other comment by Dr. Heeler because it finds its place in the passage from the judgment of the Federal Court set out earlier in these reasons. The doctor said: "If you have an underlying constitutional dermatitis, the more you make it flare up, by whatever means, the more recalcitrant it becomes and difficult to treat. It tends to resist treatments which could have got it under control." That observation, I understand to be the source of the reference by the Federal Court to the appellant's condition being "harder to control at some time in the future".
In the same passage the Federal Court said, in regard to Amyloidosis Cutis: "That condition was not subject to any perceptible progress if some external stimulus was applied." This observation seems to have been derived from remarks of Moffitt J. in Federal Broom Co. Pty. Ltd. v. Semlitch [4] . In that case the worker's schizophrenia, a condition which had produced recurring delusions of abdominal pain but resulted in no incapacity for work, deteriorated after an injury at work to the worker's right side. The injury produced abdominal pain, the physical cause of which ceased but, as a result of the worker's psychiatric or psychological condition, her delusions of abdominal pain were accompanied by a belief that she was incapacitated for work. The question for the Court was whether her condition fell within the definition of injury in s. 6 of the Workers' Compensation Act 1926 N.S.W.. By majority the Full Court of the Supreme Court of New South Wales held that it did.
1. [1964] N.S.W.R. 511.
Moffitt J. said [5] :
A disease which is progressive according to its nature may, by reason of external stimuli, have its progress accelerated. Before such acceleration can be found to have caused incapacity there must be more severe or additional symptoms arising from the acceleration which have produced an incapacity which would not otherwise have existed. In this event there is an incapacity caused by an acceleration of the disease. Symptoms in the case of a progressive disease however may be only evidence of the acceleration without producing in themselves any harmful effects, in which event there may be an acceleration of the disease with no present resultant incapacity.
1. [1964] N.S.W.R., at p. 519.
In the case now before this Court, however, the appellant's condition is not to be taken as progressive. The question is not therefore whether external stimuli accelerated its progress. More to the point are later comments of Moffitt J. when dealing with a disease which "once contracted may be of a chronic type not subject to any progress or any perceptible progress" [5] . In such a case, his Honour continued [6] : "The production of incapacitating symptoms, or the intensifying of existing symptoms, to the point of their becoming incapacitating is incapacity arising from a deterioration or aggravation of the disease." While these dicta may be appropriate to determine what constitutes an aggravation of a disease in many cases, they are not conclusive in all situations. In each case the ultimate issue to be resolved must be whether the employee's situation falls within the terms of the Ordinance.
1. [1964] N.S.W.R., at p. 519.
2. [1964] N.S.W.R., at pp. 519-520.
In the course of its reasons in the present case, the Federal Court said:
It was mutually agreed on the hearing of the appeal to this Court that the Supreme Court had correctly identified the issue to be whether the pre-existing disease (the basic dermatitis) was so aggravated as a result of the nature of Mr. Asioty's employment by the company that in its then quiescent state it constituted an aggravation, acceleration or recurrence of the pre-existing disease which causes the incapacity from which Mr. Asioty suffers.
If this statement is to be read as suggesting that the three questions identified earlier in these reasons were not live issues before the Federal Court, I am satisfied, having regard to the course of the hearing in that Court, that the statement does not reflect the entirety of the argument. Instead, the statement tends to elide the three questions.
While it is apparent that an aggravation of the appellant's underlying dermatitis may take the form of immediate incapacitating symptoms, the existence of some more permanent aggravation is not precluded because those symptoms abate on each occasion that the appellant ceases work. The proper conclusion is that the condition of the appellant's hands, with their now enhanced susceptibility to dermatitis, has intensified the disease from which the appellant suffers. This enhanced susceptibility constitutes an aggravation of the disease and, in the circumstances, falls within the language of the Ordinance.
But, in that form, is the disease due to the nature of the appellant's employment with the respondent and is the appellant thereby incapacitated for work? The answer to each of those questions is "yes", for the reasons given by Kelly J. His Honour said:
If — (a) a workman has a chronic, non-incapacitating pre-existing disease; (b) the nature of his employment causes for the first time a temporary incapacitating aggravation of the disease; (c) the aggravation ceases when the workman stops work; (d) the aggravation is renewed when he again starts work in the same employment; and (e) the pre-existing disease rendered more recalcitrant by the episodes of aggravation now prevents the workman from working in a large range of occupations because such work will cause a similar aggravation it seems to me that the nature of the employment has aggravated the pre-existing disease to the point where it is incapacitating.
I have italicised the words "for the first time" and "now" in Kelly J.'s summary because I think it was the failure of the Federal Court to direct attention to what underlies those words that led their Honours into error. To say, as their Honours did, that "the likelihood of a return of the symptoms could not be described as an aggravation or recurrence" is to overlook that it was the appellant's employment with the respondent that caused for the first time an aggravation which was incapacitating and which is still incapacitating because it prevents the appellant from returning to work, at any rate work of a certain kind.
The Federal Court concentrated on the fact that once the appellant ceased work with the respondent his symptoms abated. That is not disputed but, in treating that fact as conclusive, their Honours applied the dicta of Moffitt J. in Federal Broom Co. Pty. Ltd. v. Semlitch [7] too strictly. It is true that Moffitt J. spoke of the aggravation of a disease as consisting of the production or intensifying of its symptoms. And this will often be the case. However, there is no reason why a disease which produces susceptibility to some debilitating condition should not be regarded as aggravated when that susceptibility is heightened by a circumstance such as work of a particular type or in particular conditions. The Ordinance does not require an aggravation of the symptoms of a disease. The Federal Court did not meet the appellant's claim that, by reason of the aggravation caused by his employment with the respondent, he is now unable to return to work because to do so will produce symptoms which have already prevented him from continuing at work.
1. [1964] N.S.W.R. 511.
To reach the conclusion that the appellant is suffering from an aggravation of a disease (and therefore a disease within the terms of the Ordinance), that that disease was caused by the nature of his work with the respondent and that he is thereby incapacitated is not necessarily to hold that the appellant is totally, as distinct from partially, incapacitated for work. That is a matter with which the Federal Court did not deal because, on its approach, there was no relevant incapacity. In addition to the medical evidence, the arbitrator heard from Kenneth Kinnane, an employment counsellor with the Commonwealth Employment Service, that given the need for the appellant to avoid irritant substances, blood, prolonged wet work and high temperatures and any job requiring the wearing of rubber or leather gloves, coupled with his limited knowledge of English, there were no jobs available to the appellant in Canberra. Kelly J. held that, in the light of that evidence, the appellant must be regarded as totally incapacitated for work.
That was a conclusion Kelly J. was entitled to reach on the evidence. It is consistent with the approach taken by this Court in Arnotts Snack Products Pty. Ltd. v. Yacob [8] and there is no reason why this Court should interfere with it.
1. (1985) 155 C.L.R. 171.
The appeal should be allowed. The orders of the Federal Court should be set aside and the orders made by Kelly J. restored. The appellant should have his costs of the appeal to the Federal Court and of the appeal to this Court.
McHugh J.
I agree with the orders proposed by Toohey J. and with his reasons. |
high_court_of_australia:/showbyHandle/1/10506 | decision | commonwealth | high_court_of_australia | text/html | null | Burns Philp & Co Ltd v Nelson & Robertson Pty Ltd [1958] HCA 61 | https://eresources.hcourt.gov.au/showbyHandle/1/10506 | 2024-09-13T22:56:00.019877+10:00 | High Court of Australia
Taylor J. Dixon C.J. McTiernan, Williams, Webb and Kitto JJ.
Burns Philp & Co Ltd v Nelson & Robertson Pty Ltd
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
Mar. 29, 1957
Taylor J
. delivered the following written judgment:—
The questions which present themselves for consideration in this matter arise upon demurrers by the plaintiff to a series of allegations contained in a defence in an action to recover salvage. The circumstances of the case, as disclosed by the pleadings, are unusual inasmuch as the plaintiff was the owner, both, of the salved vessel, the S.S. Mangola, and of the two vessels which are alleged to have performed the salvage operations and the action is brought to recover salvage from the owner of a consignment of cargo on the Mangola.
It is unnecessary for present purposes to recount the allegations made in the statement of claim beyond observing that the incident which immediately preceded the operations relied upon to found the plaintiff's claim was the stranding of the Mangola on a coral reef on or near the coast of Kar Kar Island and that those operations were performed more than two years before action brought.
By the defence it is alleged that Kar Kar Island is part of the Territory of New Guinea and that the alleged salvage services were rendered within that Territory, a Territory under the control of the Commonwealth. Further it is alleged that the salvor ships were Australian-trade ships within the meaning of the Navigation Act 1912-1953 Cth. and that, in the circumstances no action lies against the defendant for payment of salvage. As appears from the statement of defence the defendant relies upon s. 317 of the Navigation Act to avoid the plaintiff's claim. To the paragraphs which contain these allegations the plaintiff had demurred and a further defence based upon s. 396 of the Navigation Act met a like fate.
The terms of the relevant sections of the Navigation Act are of some importance and it is desirable to set them out in full: "s. 317. Where any ship is wrecked stranded or in distress at any place on or near the coasts of Australia or any tidal water within Australia, and services are rendered by any person in assisting that ship or saving any wreck, there shall be payable to the salvor, by the owner of the ship or wreck, a reasonable amount of salvage, to be determined in case of dispute in manner hereinafter mentioned s. 396 (1). No action shall be maintainable to enforce any claim or lien against a vessel or her owners in respect of any damage or loss to another vessel, her cargo or freight, or any property on board her, or damage for loss of life or personal injuries suffered by any person on board her, caused by the fault of the former vessel, whether such vessel be wholly or partly in fault, or in respect of any salvage services, unless proceedings therein are commenced within two years from the date when the damage or loss or injury was caused or the salvage services were rendered. (2) No action shall be maintainable under this Act to enforce any contribution in respect of an over-paid proportion of any damages for loss of life or personal injuries unless proceedings therein are commenced within one year from the date of payment. (3) Any Court having jurisdiction to deal with an action to which this section relates may, in accordance with the rules of court extend any period mentioned in this section to such an extent and on such conditions as it thinks fit, and shall, if satisfied that there has not during such period been any reasonable opportunity of arresting the defendant vessel within the jurisdiction of the Court, or within the territorial waters of the country to which the plaintiff's vessel belongs or in which the plaintiff resides or has his principal place of business, extend any such period to an extent sufficient to give such reasonable opportunity. (4) For the purposes of this section, the expression "freight" includes passage money and hire, and reference to damage or loss caused by the fault of a vessel shall be construed as including references to any salvage or other expenses, consequent upon that fault, recoverable at law by way of damages."
The argument of the defendant in support of the first of the matters referred to is that s. 317 provides an exclusive code with respect to salvage rights where salvage operations have been performed "at any place on or near the coast of Australia" and it is said that this expression is appropriate to comprehend the coasts of Territories under the authority of the Commonwealth wherever they may be situated.
"Australia" is defined by the Acts Interpretation Act 1901-1950 as including the whole of the Commonwealth and, it is contended, the latter term embraces Territories under the authority of the Commonwealth.
This defence, it will be noticed, depends for its validity not only upon the correctness of this submission but also upon the contention that s. 317—which, unlike its counterpart in the Merchant Shipping Act 1894 Imp. (s. 546), makes no mention of the salvage of cargo—constitutes a code exclusively defining the circumstances in which salvage will become payable when salvage operations have taken place on or near the coasts of Australia.
The purpose of s. 546 (and s. 565) of the Merchant Shipping Act and earlier relevant legislation, was not, however, to define the circumstances in which a reward should become payable in respect of salvage operations performed "on or near the coasts of the United Kingdom", but to extend the jurisdiction of the Admiralty Court to award salvage for services rendered otherwise than on the high seas.
Broadly speaking, s. 6 of 3 & 4 Vict. c. 65 (1840) extended the jurisdiction of the Court of Admiralty in salvage cases to the body of a county, but only in the case of a "ship or sea-going vessel" whilst the Act of 1846 (9 & 10 Vict. c. 99) extended the jurisdiction to all kinds of property whether on the high seas or within the body of a county.
The immediate predecessor of s. 546 of the Merchant Shipping Act 1894 was s. 458 of the Merchant Shipping Act of 1854 Imp. which provided that whenever any ship or boat was stranded or otherwise in distress on the shore of any sea or tidal water situate within the limits of the United Kingdom, and services were rendered by any person in assisting such ship or boat, or in saving the lives of the persons belonging to such ship or boat, or in saving the cargo or apparel of such ship or boat or any portion thereof, there should be payable by the owners of such ship or boat, cargo, or apparel to the person by whom such services or any of them should be rendered, a reasonable amount of salvage. Section 546 of the Act of 1894 is, otherwise, in substantially similar terms but it relates to vessels "wrecked, stranded or in distress at any place on or near the coasts of the United Kingdom ".
The italicised words in s. 458 of the Act of 1854 had been the subject of judicial consideration prior to the passing of the later Act and in The Leda [1] and The Mac [2] it was held that the section was not confined to those cases where vessels were actually touching the shore itself and the suggestion has been made that the wider limits prescribed by the Act of 1894 were introduced to conform with the decisions previously given (Temperley's Merchant Shipping Acts, 5th ed. (1954), p. 364). But it will be observed that the later expression was appropriate to describe some part of the high seas adjacent to the coasts of the United Kingdom (cf. the observations of Lindley L.J. in The Mecca [1] ). When s. 317 of the Navigation Act came to be enacted similar words—"on or near the coasts of Australia"—were chosen but the section itself was expressly restricted to ships wrecked, stranded or in distress at any such place.
1. (1856) Swab. 40 [ 166 E.R. 1007].
2. (1882) 7 P.D. 126.
3. (1895) P. 95, at pp. 107, 108.
Assuming then, as it was for the purposes of the argument on this aspect of the case, that a Court of Admiralty would, apart from s. 317, have had jurisdiction to entertain a claim for salvage in the circumstances disclosed in the pleadings, I can see nothing in the terms of that section to destroy that right. It is completely silent concerning salvage of cargo and its obvious purpose was not to substitute new rights for existing rights but merely to enable claims to be entertained for salvage where services had been performed otherwise than on the high seas.
I should add that as at present advised I can see no reason for thinking that the statement of claim seeks to claim for services performed, either wholly or in part, otherwise than on the high seas: see The Mecca [2] .
1. (1895) P. 95.
The argument of the defendant on this point, however, fails in limine for it is impossible to say that the coasts of the Territory of New Guinea are part of the coasts of Australia or of the Commonwealth. That this is so readily appears from a perusal of the Papua and New Guinea Act 1949-1950. The history, since 1920, of the administration of the Territory of New Guinea, first of all, under mandate from the League of Nations and, thereafter, as a Trust Territory and finally in an "administration union" with the Territory of Papua, as recited in the preamble to that Act, is sufficient to dispose of any suggestion that it is part of Australia or part of the Commonwealth. Moreover, the reasons in Ffrost v. Stevenson [3] clearly recognise that it is not.
1. (1937) 58 C.L.R. 528.
Finally, the Navigation Act itself plainly distinguishes between Australia and territories under the authority of the Commonwealth for by s. 6 the expression "Australian-trade ships" includes vessels, inter alia, ships employed in trading between Australia and territories under the authority of the Commonwealth. There is, I should think, no reason why the expression "Australia", as used in s. 317, should be understood to have any wider signification. This is sufficient to dispose of the defence based on s. 317 and the demurrer to the paragraphs of the defence which raise it should be upheld.
The question whether the failure to institute proceedings until after the expiration of two years from the performance of the salvage services alleged is fatal to the plaintiff's claim depends upon the true construction of s. 396 of the Navigation Act.
For the defendant it is asserted that the relevant effect of sub-s. (1) is to provide that no action shall be maintainable to enforce any claim or lien in respect of any salvage services after the expiration of the prescribed period, whilst the plaintiff, on the other hand, contends that the sub-section extends no further than to prescribe a period of limitation in relation to actions to enforce claims and liens against vessels and their owners in respect of the causes of action specified, including salvage.
The immediate source of s. 396 is to be found in s. 8 of the Maritime Conventions Act, 1911, an Imperial Act which expressly extended throughout the British Dominions, except the self-governing Dominions including the Commonwealth of Australia, and which was enacted with a view to carrying into effect the two conventions with respect to maritime collisions and salvage then recently concluded in Brussels.
The first paragraph of art. 7 of the first of these conventions was in the following terms: "Actions for the recovery of damages are barred after an interval of two years from the date of the casualty." It further provided that "the period within which an action must be instituted for enforcing the right to obtain contribution permitted by par. 3 of art. 4 is one year from the date of payment".
By the same article the right was reserved to the high contracting parties to provide, by legislation in their respective countries, that the specified period should be extended in certain cases. Similar limitation provisions were contained in the Salvage Convention.
Article 10 provided that "A salvage action is barred after an interval of two years from the day on which the operations of assistance or salvage terminate" and a similar right was reserved by the third paragraph of that article to provide for the extension of the specified period in cases where it had not been possible to arrest the salved vessel in the territorial waters of the State of the plaintiff's domicile or principal place of business.
In attempting to construe s. 396 the defendant places considerable reliance on the provisions of the Salvage Convention. Sub-section (1) of s. 396, it is said, is at least ambiguous and, since it was passed for the purpose of giving legislative effect to the rules agreed upon it is contended that the meaning which should be adopted is that which will produce this result.
There can be no doubt that the Salvage Convention was concerned with all salvage claims. Article 1 provided that assistance and salvage of sea-going vessels in danger, of any things on board, and of freight and passage money, should be subject to the ensuing provisions of the Convention and, in spite of a tenuous argument founded upon the third paragraph of art. 10, the intention is clear that the limitation provision was intended to be applicable to all claims for salvage.
Then, the argument proceeds, when one comes to consider s. 396 one sees that the legislature has, in one sub-section, proceeded to implement the provisions of each convention, that is to say, to prescribe a period of limitation with respect to claims against ships and their owners in respect of damage done by one ship to another or to its cargo or persons on board and with respect to claims for salvage services. This method of approach, however, is not open, unless, considered by itself, s. 396 (1) is found to be reasonably susceptible of more than one meaning. If it is ambiguous it is, upon long-established authority, permissible to take these extraneous matters into consideration but if its language is appropriate to afford a measure of protection to shipowners only that must be the end of the matter.
The first thing that may be said about s. 396 is that, on its face, it is a section which deals with three categories of claims. These are claims in respect of damage done by one vessel to another or to its cargo or to persons on board, claims for salvage and claims for contribution under s. 261.
In substance these categories are quite distinct and different. Two of the categories are dealt with in sub-s. (1) which prescribes two years as the appropriate period of limitation, whilst the third category is dealt with in sub-s. (2) where the prescribed period is one year only. In passing it may, perhaps, be said that although s. 8 of the Maritime Conventions Act 1911 dealt with all three categories in one paragraph, it was found convenient in drafting s. 396 to deal separately with causes of action for which different periods of limitation were to be prescribed.
In approaching the construction of sub-s. (1) it is, I think, of importance to bear in mind that it deals with distinct categories of claims. That is to say it deals with claims in respect of loss or damage to vessels, their cargo and persons on board, and claims in respect of salvage services. But it does not deal with all claims in respect of damage to vessels, their cargo and persons on board; its operation is restricted to cases where the damage is occasioned, wholly or partly, by the fault of another vessel.
If, in framing the first part of s. 396, the draftsman had omitted the words "against a vessel or her owners" and also the subsequent reference to the "former vessel" and if the reference to "another vessel" had been to "any vessel" this part of the section would have travelled far beyond its obvious purpose. This purpose, which is made clear by the interpolation of the words "against a vessel or its owners" and by the later reference to the "former vessel", was to prescribe a period of limitation with respect to damage occasioned in a particular way, that is to say, damage occasioned by the fault of one vessel to another vessel or to cargo or persons on the latter vessel. This, in effect, is the subject matter with which the first part of s. 396 (1) purports to deal and its operation is so confined by the use of the words referred to.
Such being the obvious primary purpose of those words there is no reason for thinking that they were intended to control the operation of the whole of sub-s. (1) though, of course, if no other construction is reasonably open it is the one which must be adopted. But the reference to "salvage services of any kind" is introduced into the latter part of the sub-section by the repetition of the words "or in respect of" and it does not appear to me to be unnatural to understand the following words as introductory of an entirely new subject matter.
Strictly the repetition of those words was unnecessary unless the section was proceeding to a different subject matter and it is, in my view, permissible to read the sub-section as dealing with any claim or lien in respect of any salvage services and not merely with claims or liens against a vessel or her owners in respect of salvage services. The view that the whole of the sub-section deals only with claims against ships and their owners may be superficially attractive but when it is found that the words which might be thought to produce this result serve an obvious purpose in defining the first category of claims, and no such purpose in relation to the second, that construction should in my opinion be rejected. Or perhaps it is sufficient to say that the contrary view is, at least, equally open.
In those circumstances I would, I think, be entitled to have regard to the provisions of the Maritime Conventions Act and to the conventions to which it is expressly purported to give effect. When that is done there can be little doubt as to the true meaning of the relevant portion of s. 396.
For the reasons given the demurrer to par. 8 of the defence should be overruled and the demurrer to pars. 10, 11 and 12 allowed.
From that decision the plaintiff appealed to the Full High Court from that part of the order of Taylor J. in the exercise of the Admiralty Jurisdiction of the High Court made on 29th March 1957 which ordered that the demurrer to par. 8 of the defence should be overruled, that order being made after a hearing on 18th March 1957 to which the present appellant was plaintiff and the respondent was defendant. The appellant sought in lieu of that part of the order an order that the demurrer to par. 8 of the defence should be allowed and that the respondent should pay all the costs, upon the following amongst other grounds: that his Honour (1) was in error in overruling the demurrer in par. 8 of the defence; (2) was in error in holding that s. 396 (1) of the Navigation Act 1912, as amended, required the proceedings brought by the plaintiff against the defendant to be commenced within two years from the date when the salvage services were rendered; and (3) should have held that the limitation of time imposed by s. 396 (1) of the Navigation Act 1912, as amended, applies only to the enforcement of a claim or lien against a vessel or her owner in respect of the matters set forth in that sub-section.
Cur. adv. vult.
The following written judgments were delivered:—
Mar. 11, 1958
Dixon C.J., McTiernan and Williams JJ.
This appeal is from so much of an order of Taylor J. as overruled a plaintiff's demurrer to a paragraph in the defendant's defence in a suit brought in the Admiralty jurisdiction of this Court for an award for salvage services. The paragraph to which the plaintiff, who of course is the appellant, unsuccessfully demurred pleads that the salvage services in respect of which a salvage award is claimed were rendered more than two years before the suit was commenced. The defendant is an owner of part of the cargo carried by the ship to which the salvage services were rendered. That ship received assistance from two other ships. All three ships were owned by the plaintiff. For that reason the plaintiff's claim as shipowners for salvage services was confined to cargo. Apparently it was a mixed cargo and the defendant was sued as an owner of a certain consignment forming part of it so that there might be a test case. The plaintiff's contention is that the time bar of two years, which depends on s. 396 of the Navigation Act 1912-1953, does not apply to such a suit against a cargo-owner.
To make the matter clearer it may be as well briefly to state the facts as they appear from the pleadings. On 8th February 1953 the s.s. Mangola, a ship owned by the plaintiff, was on a voyage to Madang on the north coast of New Guinea when she grounded on a coral reef off the east coast of Kar Kar Island. She was carrying a general cargo of a value of about £155,000 including the defendant's consignment valued at £1,282. The motor ship Bulolo, which also was owned by the plaintiff, was lying at Madang at the time. She was despatched at once to the assistance of Mangola which she reached on the morning of 9th February. She made a number of attempts to tow Mangola off the reef. A third ship owned by the plaintiff, namely the motor ship Malaita, was on a voyage she was making from Rabaul to Samarai. She was diverted to Kar Kar Island and she reached Mangola late on the night of 11th February. In the conditions existing where Mangola was stranded it was not possible for both ships to combine in the attempt to tow her off and, after rendering assistance in lightening Mangola, Bulolo left the scene on the evening of 13th February. At length, on the morning of 15th February 1953, the efforts of Malaita were successful in freeing Mangola from the reef and on the same day both vessels arrived at Madang, Mangola proceeding under her own steam.
The writ of summons by which this suit was commenced was not issued until 21st February 1956, a year after the expiry of the period of limitation of two years fixed by s. 396 (1) for the cases it covers. The question raised by the demurrer is whether the present is a case which the section does cover. The reason why the plaintiff says that the case is not within the provision is that, according to his contention, the period of limitation is confined to actions to enforce claims or liens against vessels or their owners. As will appear the provision deals with two things, viz. (1) damage or loss to a vessel her cargo or freight or any property aboard her and damages for loss of life or personal injury suffered by a person on board the vessel, and (2) salvage services. It is quite clear on the words of s. 396 (1) that in the case of the first of these two things the time bar is restricted to actions to enforce a claim or lien in respect thereof against another vessel or its owners. But on the text of the sub-section it is anything but clear that in the case of the second, namely salvage services, the time bar does not apply to every action for an award whether with reference to ship cargo or any other maritime property in respect to the saving of which a salvage award may be claimed. Taylor J. decided that on the proper interpretation of the provision the time bar is applicable to a claim for an award for the salvage of cargo and therefore overruled the demurrer to the plea that the action was out of time. It is the correctness of that decision we have to consider on this appeal.
Before turning to the question, however, it may be desirable to say that it is well settled that the owner of a ship rendering salvage services to another ship owned by him, laden with cargo which is thereby saved, is prima facie entitled to obtain a salvage award from the cargo-owners: see The Miranda [1] ; The Cargo ex Laertes [2] . It is or may be otherwise if the shipowner happens to be liable upon his contract of affreightment to the cargo-owners for the loss or injury to the cargo from which it was saved by the salvage services: see The Glenfruin [1] and cf. The Beaverford v. The Kafiristan [2] and The Susan V. Luckenbach v. Admiralty Commissioners [3] .
1. (1872) 3 L.R. Ecc. & Ad. 561.
2. (1887) L.R. 12 P. 187.
3. (1885) 10 P.D. 103.
4. (1938) A.C. 136.
5. (1951) P. 197.
No question arises upon the demurrer which Taylor J. overruled as to the prima facie foundation of the plaintiff's claim for a salvage award with respect to the cargo. The matter to be decided is simply whether upon the true interpretation of s. 396 (1) of the Navigation Act that provision covers the claim and so bars the action. The text of the sub-section is as follows: "No action shall be maintainable to enforce any claim or lien against a vessel or her owners in respect of any damage or loss to another vessel, her cargo or freight, or any property on board her, or damage for loss of life or personal injuries suffered by any person on board her, caused by the fault of the former vessel, whether such vessel be wholly or partly in fault, or in respect of any salvage services, unless proceedings therein are commenced within two years from the date when the damage or loss or injury was caused or the salvage services were rendered."
It will be seen that if the words following the expression "to enforce a claim or lien against a vessel or her owners", namely the words "in respect of any damage or loss to another vessel, her cargo or freight" etc. are to be treated as an alternative balanced, so to speak, with the words "or in respect of any salvage services", the whole section is limited to claims or liens against a vessel or her owners. The consequence of that construction would be to exclude from the operation of the section a claim exclusively with respect to cargo or against cargo-owners. If on the other hand the alternatives which the section intends to create attach, so to speak, to the word "maintainable" so that the provision in relation to salvage services would read "no action shall be maintainable in respect of any salvage services", then the time limit applies equally well to cargo as to any other maritime property for the saving of which a salvage award may be obtained. There is in truth a choice of three points to which you may go back and attach the alternative "or in respect of salvage services", when you notionally omit the intervening first alternative containing what may be called the operative statement with reference to damage or loss caused by the interaction of two vessels. Thus so far as it relates to salvage services the provision may be read: (i) No action shall be maintainable in respect of any salvage services unless the proceedings therein are commenced within two years from the date when the salvage services were rendered; or,—(ii) No action shall be maintainable to enforce any claim or lien in respect of any salvage services unless proceedings therein are commenced within two years from the date when the salvage services were rendered; or,—(iii) No action shall be maintainable to enforce any claim or lien against a vessel or her owners in respect of any salvage services unless proceedings therein are commenced within two years from the date when the salvage services were rendered.
On either the first or second of these three readings an action for a salvage award with respect to cargo, alike with an action for an award with respect to ship and freight, must be brought within two years. On the third reading the time bar cannot apply to an action brought only for an award for salvage services by which cargo was saved. For such an action will be against cargo-owners and not against a vessel or her owners. The appellant says that the grammatical meaning of the sub-section requires that they should be read in the third way. This reliance on grammar is, we think, a mistake. Arrangement or symmetry and grammar are different things. Each of the foregoing divisions of the sub-section is equally grammatical with the others, but the third represents a more symmetrical use of formal arrangement. It balances the two uses of the words "in respect of" one against the other, just as if "either" had been put before the first of them. As a result it is more natural for the mind to treat the repetition of the words "in respect of" as indicating that the alternatives are "in respect of any damage or loss to another vessel" etc. and "in respect of any salvage service". It may indeed be conceded that prima facie, at least to one who attends rather to the arrangement than to more substantial considerations, this is the more natural meaning of the sentence which the sub-section embodies. But closer attention to the text will show that it is not really constructed with methodical care. For it will be noticed that under the first "in respect of" and governed by that expression is the alternative "or damage for loss of life or personal injuries". Apart from the fact that "damage" is an evident mistake for "damages", if the words "in respect of" began each of the alternatives methodical composition might have suggested a repetition of them before the words "damage for loss of life or personal injuries", though of course if the draftsman had used the expression there he might have made it doubtful whether the words "caused by the fault of the former vessel" attached not only to that alternative but to what preceded. But conceding that at a first reading one may find it somewhat more natural to balance the two uses of the expression "in respect of" against one another, that is, in other words, mentally to read "either" before the first of them, yet, we think that as soon as one's consideration turns to the substance of the matter, such a reading is seen to mean a distinction between the salvage of ships and the salvage of cargo for which no reason can be found.
The first part of the sub-section obviously deals with collisions between ships and perhaps other damage done by the interaction of one ship with another where the cause of action is based on fault. There is every reason for describing suits brought on causes of action arising from such relations as proceedings against vessels or their owners. But the law of salvage has a wider application and no reason can be advanced for dividing up salvage claims so that a period of limitation of two years applies only to actions against a ship or her owners, and not to an action against cargo-owners. It is difficult to suppose that it was really intended to exclude claims against cargo-owners for a salvage award from the operation of sub-s. (1) of s. 396.
It is said however that some support can be found in sub-s. (3) for the view that sub-s. (1) is entirely restricted to actions against ships or their owners. Sub-section (3) authorises a Court to extend the time of limitation prescribed by sub-s. (1). It gives a discretion applicable over the whole field covered by sub-s. (1) whatever that field may be. But then a second limb of sub-s. (3) requires the Court to extend the period, if the Court is satisfied that during the period of two years there has been no reasonable opportunity of arresting the vessel within the jurisdiction of the Court or within the territorial waters of the country to which the plaintiff's ship belongs or in which he resides or has his principal place of business. In that case the Court is to enlarge the time to an extent sufficient to give such reasonable opportunity. It would, we think, be illogical to treat this second limb as intended to cover the whole field of sub-s. (1) and on that supposition to read sub-s. (1) as limited to the area in which sub-s. (3) could apply. In truth except for the natural instinct to read the two uses of "in respect of" as representing the introduction of the alternatives, there is nothing to support the view that actions in respect of salvage services are within sub-s. (1) of s. 396 only when they are brought against vessels or their owners.
Certain passages were read to us in which judges or text writers in paraphrasing s. 8 of the Maritime Conventions Act 1911 (1 & 2 Geo. V. c. 57), where s. 396 (1) finds its source, had evidently attached the words "in respect of any salvage services" to the opening words "no action shall be maintainable to enforce any claim or lien against a vessel or her owners". But in every such case the paraphrase had been made for some other purpose and it was apparent that the point with which we have to deal had not presented itself to the mind. The passages do no more than evidence, what in any case is clear enough, viz. the first instinctive balancing by a reader of the two uses of "in respect of". We think that the passages otherwise are of no help in interpreting sub-s. (1) of s. 396. The construction is quite open by which the words "in respect of any salvage services" are attached at an earlier point, namely either to the words "no action shall be maintainable" or "no action shall be maintainable to enforce any claim or lien". It is a construction not only open; it is perfectly grammatical and it gives effect to the almost certain intention of the provision.
It is proper to add that the question of the interpretation of the sub-section which arises is, as it seems to us, an example of ambiguity of language or of the arrangement of language. We think therefore that it is admissible to turn for assistance to the history of s. 396. As we have said its source is in s. 8 of the Maritime Conventions Act 1911, a provision which contains the same equivocation of meaning. That Act begins with a preamble which refers to two Conventions signed in 1910 at Brussels one dealing with collisions between vessels and the other with salvage. The preamble recites that it is desirable that such amendment should be made in the law relating to merchant shipping as will enable effect to be given to the Conventions. This preamble may not be looked at or called in aid to control the meaning of words in themselves clear and unambiguous: per Lord Parker: The Cairnbahn [1] . But the provisions relating to the limitation of actions with respect to salvage services can hardly be said to speak with clearness or certainty. The preamble remits the inquirer to the Conventions. Article 10 of the Convention upon salvage is as follows: "A salvage action is barred after an interval of two years from the day on which the operations of assistance or salvage terminate. The grounds upon which the said period of limitation may be suspended or interrupted are determined by the law of the court where the case is tried. The high contracting parties reserve to themselves the right to provide, by legislation in their respective countries, that the said period shall be extended in cases where it has not been possible to arrest the vessel assisted or salved in the territorial waters of the State in which the plaintiff has his domicile or principal place of business." If this article is compared with s. 8 of the Maritime Conventions Act 1911 Imp. or with s. 396 (1) of the Navigation Act it helps to explain those provisions as a whole. But the only point upon which assistance is needed in this case is covered by the general words "A salvage is barred" etc. These words clearly include all salvage actions. Unless s. 8 was meant to stop short of carrying the article into full effect, it makes it almost certain that there was no intention of excluding actions for a salvage award in respect of cargo from the time bar. It greatly increases the probability that the whole difficulty is the accidental result of an attempt to give effect in one provision to both Conventions so far as they respectively deal with a limitation upon the time within which proceedings must be brought.
1. (1914) P. 25, at p. 30.
For the foregoing reasons we agree in the conclusion of Taylor J.
We think that the appeal should be dismissed with costs.
Webb J.
This is an appeal from a judgment of Taylor J. holding that proceedings in an action by the appellant plaintiff, a shipowner, for reward for salvage services in respect of cargo of the respondent defendant were barred by s. 396 (1) of the Navigation Act 1912-1953 Cth., as they were commenced more than two years after the services were rendered.
Section 396 (1) provides:—"No action shall be maintainable to enforce any claim or lien against a vessel or her owners in respect of any damage or loss to another vessel, her cargo or freight, or any property on board her, or damage for loss of life or personal injuries suffered by any person on board her, caused by the fault of the former vessel, whether such vessel be wholly or partly in fault, or in respect of any salvage services, unless proceedings therein are commenced within two years from the date when the damage or loss or injury was caused or the salvage services were rendered."
This provision is in the same terms as s. 8 of the Maritime Conventions Act 1911 enacted by the Imperial Parliament following the two Conventions of 23rd September 1910, one dealing with damages arising from collisions, or encounters short of collisions, between ships, and the other with claims for salvage services. Article 7 of the first of these two Conventions provided, inter alia, that "actions for recovery of damages are barred after an interval of two years from the date of the casualty"; and art. 10 of the other Convention provided, inter alia, that "a salvage action is barred after an interval of two years from the day on which the operations of assistance or salvage terminate".
For the appellant it is submitted that s. 396 (1) is not ambiguous; that given its grammatical construction and natural meaning it provides for two categories of claims each introduced by the phrase "in respect of"; so that the antecedent common to both categories is the phrase—"against a vessel or her owners"; and that there is no reason to depart from this grammatical construction and natural meaning because of anything elsewhere in the Act. If this is the correct view of s. 396 (1), then the limitation of two years has no application to salvage actions against cargo-owners. For the respondent it is submitted that the first category begins with the phrase "against a vessel or her owners", so that these words are incorporated in and apply exclusively to that category. If that is so, then the limitation of two years applies also to all salvage actions. But it is further submitted for the respondent that if either construction is open, then there is an ambiguity and the provisions of the Maritime Conventions can be called in aid, more particularly s. 10 of the Salvage Convention which shows that the parties thereto intended that the limitation of two years should apply to all salvage actions. The argument for the respondent is that as the terms "another vessel", "former vessel" and "vessel wholly or partly in fault" refer to "vessel" where the term is first used in s. 396 (1) the latter term should be included in the first category, as being indispensable to it; and further that if the term "vessel wholly or partly in fault" were placed after the term "vessel" where it first appears then, to employ counsel's phraseology, the "significance of this description", which I understand to refer to the first category, would not be affected. That is true; but that transposition, whilst leaving the first category unaffected, does destroy the operation of the phrase "against a vessel or its owners" as an antecedent common to both categories. It is for that reason that the transposition is relied upon, either as showing the true meaning of s. 396 (1) or at least as revealing an ambiguity warranting the convention being called in aid. But it does not follow that because the term "vessel" where it first appears in s. 396 (1) is indispensable to the description of the first category it is necessarily exclusive to that category; it can still perform a dual purpose and be at the same time a common antecedent of both categories. Nor are we justified in making a transposition of the words of a section in order to create an ambiguity that does not otherwise exist.
I think that the grammatical construction and natural meaning of s. 396 (1) are as submitted for the appellant and there is nothing to warrant a departure therefrom. In the absence of any ambiguity in the section we are not at liberty to call the Convention in aid: The Cairnbahn [1] per Lord Parker; Ellerman Lines Ltd. v. Murray [2] per Lord Tomlin [3] and Lord Macmillan [4] .
1. (1914) P., at p. 30.
2. (1931) A.C. 126.
3. (1931) A.C., at p. 147.
4. (1931) A.C., at p. 148.
It is interesting to note that English High Court Judges and text-book writers without exception appear to have construed s. 8 of the Maritime Convention Act 1911 as not barring all salvage actions after two years, although it should be stated that their Lordships do not appear to have had the assistance of argument in any of the cases to which we were referred. Apparently both Bar and Bench concerned thought the meaning of s. 8 was so clear as not to permit of argument. See Llandovery Castle [1] per Hill J. The Hesselmoor and The Sergeant [2] per Willmer J.; Kennedy's Law of Civil Salvage, 3rd ed. (1931), p. 189; McLachlan on Merchant Shipping, 7th ed. (1932), pp. 542, 543; Temperley on Merchant Shipping Acts, 5th ed. (1954), pp. 565, 566. Their Lordships and the text-book writers would have known the history of s. 8 and the terms of the Conventions and if it occurred to them that the language of the section was ambiguous they would have called the Convention in aid and taken a different view from that which they applied or adopted in their judgments and text-books.
1. (1920) P. 119, at p. 124.
2. (1951) 1 Ll.L.R. 146.
I would allow the appeal.
Kitto J.
The question in this appeal is whether s. 396 (1) of the Navigation Act 1912-1953 Cth., which prescribes a limitation of time for the commencement of certain actions, applies to an action to enforce a claim against an owner of cargo for salvage services rendered. The sub-section is in these terms:—"No action shall be maintainable to enforce any claim or lien against a vessel or her owners in respect of any damage or loss to another vessel, her cargo or freight, or any property on board her, or damage for loss of life or personal injuries suffered by any person on board her, caused by the fault of the former vessel, whether such vessel be wholly or partly in fault, or in respect of any salvage services, unless proceedings therein are commenced within two years from the date when the damage or loss or injury was caused or the salvage services were rendered."
The appellant's contention is that the expression "against a vessel or her owners" is to be considered as in effect repeated before "in respect of any salvage services". Taylor J., as the judge of first instance, rejected this reading of the provision and held that the time limit applies in the case of any action in respect of salvage services, whether against a vessel or her owners or against a cargo-owner. In my opinion the decision was correct. The contrary view is, as his Honour observed, superficially attractive; for the repetition of "in respect of" suggests at first sight that the sub-section is dealing in both its branches with claims or liens against vessels and their owners. But the attractiveness of this reading disappears upon closer examination. The first class of claims or liens with which the provision deals consists of those which arise from damage or loss caused (wholly or partly) by the fault of one vessel to another vessel or to the other vessel's cargo or freight or any property or person on board her. In providing for such cases, the course adopted by the draftsman has been to mention first the vessel in whose favour the time limit is being provided. That has enabled him to describe the vessel to which, or to property or persons on board which, the damage or loss has accrued as "another vessel", and also to refer to the fault which has caused the damage or loss as the fault of the "former vessel". The phrase "against a vessel or her owners" thus provides a convenient point of reference for later words of description. It need not have been used in order to exclude cases where damage has been caused otherwise than by a collision, e.g. when it has been caused by the fault of dock authorities; for that exclusion would be effected sufficiently by the description of the damage or loss as damage or loss caused by the fault of a vessel. The purpose of the critical phrase in relation to the first limb of the sub-section is therefore twofold: to describe one of the essential characteristics of every collision action, and to provide assistance in point of verbal expression for the descriptions of other characteristics of every such action.
In relation to the second limb of the sub-section, the words "against a vessel or her owners" have neither of these purposes to serve. If they apply to that limb at all they must have the different purpose of excluding from the application of the sub-section one particular kind of salvage actions, namely salvage actions against cargo-owners. This is an odd diversity of purpose to ascribe to a single expression. And odder still is the practical result; for no one has been able to suggest any plausible ground for thinking it likely that the legislature would wish, while protecting vessels and their owners against claims more than two years old, to leave cargo-owners without a similar protection.
The fact is, as the respondent has submitted, that the sub-section deals with two disparate classes of action, and that the reasons which exist for describing an action of the one class as being against a vessel or her owners, and which fully account for the use of the disputed words, do not exist with respect to an action of the other class. There is another reason also for not carrying those words down into the description of the second class of action. Section 396 (1) derives from, and, so far as material, is in terms identical with, s. 8 of the Maritime Conventions Act 1911 Imp.. That Act contained a recital (since repealed) that at a conference held at Brussels in the year 1910 two Conventions, dealing respectively with collisions between vessels and with salvage, were signed on behalf of His Majesty, and that it was desirable that such amendments should be made in the law relating to merchant shipping as would enable effect to be given to the conventions. Sections 1 to 5 were headed "Provisions as to Collisions etc."; ss. 6 and 7 were headed "Provisions as to Salvage"; and the remaining ss. 8 to 10, were headed "General Provisions". Each Convention provided for a time limit of two years, the Collisions Convention by art. 7 and the Salvage Convention by art. 10. The latter was not confined to salvage actions against ships and their owners, and indeed art. 1 provided that the salvage, not only of vessels, but of "any things on board" should be subject to the provisions which followed. When the United Kingdom Act, in the course of giving effect to the Conventions, took up the topic of a time limit upon actions it dealt with the two kinds of action, as has been pointed out, together. Unhappily it did so in terms which were not free from ambiguity; but that circumstance supplies a sufficient justification, and indeed a strong reason, for comparing the section with the relevant articles of the Conventions: The Cairnbahn [1] . The comparison is wholly against construing s. 8 of that Act in the sense for which the appellant contends, for a provision dealing with a time limit internationally agreed upon for all collision actions and all salvage actions could hardly intend to make an exception of salvage actions in respect of cargo; and if so surprising an intention existed it would almost inevitably be expressed directly. The time limit in the United Kingdom Act must therefore surely extend to salvage actions in respect of cargo. If it does, the appellant's argument as a whole must fail; for it would be plainly unsound to give to the Australian provision a meaning different from that of its United Kingdom prototype.
1. (1914) P. 25.
We have been referred to a few passages in judgments and text-books in which the appellant's construction of s. 396 (1) seems to have been taken for granted. But on no previous occasion, apparently, has the problem arisen for consideration, and it ought now, I think, to be decided as res integra.
For the foregoing reasons I am of opinion that the appeal should be dismissed. |
high_court_of_australia:/showbyHandle/1/10160 | decision | commonwealth | high_court_of_australia | text/html | null | Watkins v Watkins [1952] HCA 60 | https://eresources.hcourt.gov.au/showbyHandle/1/10160 | 2024-09-13T22:56:06.425121+10:00 | High Court of Australia
Dixon C.J. McTiernan and Taylor JJ.
Watkins v Watkins
[1952] HCA 60
ORDER
Appeal allowed with costs; discharge the decree of the Supreme Court; in lieu thereof pronounce a decree nisi for the dissolution of marriage; and order the respondent to pay costs of the suit. Order that the appellant do cause an office copy of this order and decree nisi to be lodged with the Prothonotory of the Supreme Court.
Cur. adv. vult.
The Court delivered the following written judgment:—
Nov. 3
Dixon C.J., McTiernan and Taylor JJ.
The appellant, a wife, petitioned for the dissolution of her marriage with the respondent on the ground that since the celebration of the marriage he had without just cause or excuse deserted her and without any such cause or excuse left her continuously so deserted during three years and upwards. It is s. 75 (a) of the Marriage Act 1928 Vict. which provides that the court may dissolve a marriage upon this ground. The respondent entered no appearance to the petition. The cause was tried by Dean J. It was an undefended cause. After hearing the appellant's evidence and the evidence of other witnesses called on her behalf Dean J. dismissed the petition. She appeals as of right to this Court in pursuance of s. 35 (1.) (a) (3) of the Judiciary Act 1903-1950. The appeal is both upon law and fact.
The case is a difficult one because it presents an example of an intentional termination by a husband of the whole state of things which constitutes the matrimonial relationship or consortium without, for a portion of the required period, the outward indicia of the amount of physical separation which would enable strangers to the menage to conclude from observation that the relationship had ceased.
The respondent formed a definite determination at least three years before the filing of the petition to treat his wife as a stranger and to exclude her entirely from his society. To this end he ignored her existence. He did not speak to her. He failed to answer her if she persisted in speaking to him except that occasionally, if she asked a question requiring nothing but a negative or affirmative, his system broke down to the extent of saying yes or no. Otherwise all communications with her were made through third persons notwithstanding that she was present. But, in spite of this effective exclusion of her from the position of a wife, they lived under the same roof, sharing it with relatives; she cooked meals, did the washing, received a small allowance for housekeeping and at the commencement of the required period had her bed in the same room as his although at the other end of the room.
The marriage was celebrated on 25th March 1944. The petitioner and respondent were then both twenty-four years of age. The only child of the marriage was born on 8th May 1945.
Not only did the parties for the period of three years and upwards prior to the petition live in the same house but they were still living in it when the cause was being heard. Dean J. found that the respondent by his conduct had almost destroyed the matrimonial relationship but that sufficient of it remained to preclude his making the decree sought by the appellant.
After the marriage the parties lived at Toowoomba. Their child was born there. The respondent began ill-treating her before the birth of the child. He was annoyed because she was disabled from giving parties in the home for his friends. The respondent's resentment at the cessation of these parties was displayed by ignoring her and refusing to speak to her for hours at a time and by going out at night and leaving her alone in the house. It became a practice of his to drink the family supply of milk and compel her, even although she was ill, to go messages for more milk. Her mother came from Essendon to help her and returned home in 1945.
In July 1945 the appellant went to live in her parents' home at Essendon. She took the child with her. In August the respondent was discharged from the Air Force. Then he joined his wife, who was living in her parents' house at Essendon. In September 1947 the parents moved to another house. The appellant's brother who had been living in the house at Essendon remained there. In April 1950 he married and he and his wife lived in the house. It was not divided into flats. There was one dining room and the four people living in the house dined at the same table. There was one kitchen. The respondent paid one-half of the rent and the appellant's brother the other half. Each of them also paid a half of the bills for light and power.
After the parties came to live at Essendon, the respondent persisted in his ill-treatment of the appellant and it became worse. No evidence of physical violence was given. At Christmas 1947 he made it clear that he intended to end co-habitation and took effective action to carry out his intention. Formerly they slept on twin beds adjoining each other. He moved his bed to the opposite end of the room. Since he did this sexual intercourse has never taken place. The appellant said in evidence that she asked him why he moved his bed and he replied that he did so because he ceased to love her and he did not want to have anything to do with her. The appellant said that her husband repulsed any advances she made to him and that since Christmas 1947 they lived "as complete strangers". He refused to have any converse with her. The respondent endured this state of affairs as long as she could, hoping it might end. At length she moved her bed into another room and slept there for a period of two years before she petitioned. Since Christmas 1947 he has refused to speak to her at meals or at any other time. It became his practice to convey anything he had to say through the appellant's brother or his wife. It was his practice to turn his back on the appellant if she attempted to speak to him. He displayed no affection for the child and took no interest in either of them. He brought his friends to the house. In the appellant's presence he introduced them to her brother and his wife, but he did not introduce them to the appellant. For more than four years he owned a motor car but never took the appellant anywhere. He used the car for his own pleasure and took his friends out in the car. Ordinarily he gave the appellant an allowance of £3 10s. 0d. per week. He gave her no such recognition as might be involved in handing the allowance to her personally. It was left for her. In November 1951 he went on holidays for three weeks but left no message with the appellant that he had gone away. Until a month before the petition she did his washing. She stopped doing it because he threw his soiled linen at her when she complained of the inadequacy of the allowance. The appellant had need of placing the child in her parents' care. Out of the allowance she paid her parents for maintaining the child and other expenses incurred for the child's benefit. Only £1 was left to buy food for the appellant and the respondent. She prepared the meals which he ate in the house. But he very rarely dined there. At times she would ask him if he would be in for a particular meal. He might answer yes or no. He has during the period announced that he would be in. But the evidence is that he never spoke "a full sentence" to her. She incurred debts in getting furniture for the house. In order to obtain more money for such necessaries, she went to work. The appellant instructed a solicitor to demand adequate maintenance. The respondent replied through his solicitors that he would increase the allowance to £5 per week if she complied with certain terms which implied fault on her part. There was no foundation for any such implication. When she spoke to him about the terms of the solicitor's letter he turned his back on her and walked away. The letter conveying the terms was sent in February 1951. The appellant said in evidence that since Christmas 1947 she wanted to leave the house but her parents could not conveniently have her permanently and she has been unable to find other suitable accommodation.
Clearly at Christmas 1947 the respondent caused a complete breach in the matrimonial relationship. It is not easy to see what elements of the relationship remained. The fact that he did not leave the house had no effect in preserving any of those elements. On the contrary, it had the opposite result. He turned the occasions which their living under the same roof and meeting at table might have provided for maintaining the consortium into opportunities to wound the appellant's feelings and to show that his separation from her was complete and permanent. He was attempting to drive her away from him. It was she who did not go. Indeed she could not. She would, of course, have been justified in leaving the house and her departure would have been attributed to his constructive desertion. However, she stayed in the house, suffered and was passive under his ill-treatment. Dean J. described it as "beastly". But his Honour was of the opinion that by taking meals in the appellant's company at the house, by giving her money out of which she provided food for him and by taking advantage of her domestic services, including cooking, the respondent kept enough of the matrimonial relationship on foot. The respondent's treatment of her at table was proof of his rejection and not of his acceptance of her as his wife. The payment of her allowance was made in a manner which indicated, not that he was maintaining a consortium or co-habitation, but rather that so far as he could do it he was persisting in its termination. There was nothing to show that he recognized the cooking of meals and the performance of other domestic duties as services incident to the relations of husband and wife. His Honour did not add the circumstance that the parties slept in the same bedroom until about two years before the petition to the matters which he thought precluded his making a finding of desertion. But for this circumstance we should have but little hesitation in holding upon the evidence that at Christmas 1947 the respondent permanently put an end to the state of co-habitation existing between the parties.
We have hesitated, however, to apply the authorities because in that earliest part of the period in respect of which it was necessary for the petitioner to prove desertion she had not taken her bed to another room. As already stated, the beds were at opposite ends of the same room and we think there can be no real doubt in this particular case that he treated her just as if he was compelled to share a room with a stranger. The circumstance that the parties slept in the same room for part of the relevant period was not necessarily inconsistent with the hypothesis that the matrimonial relationship was completely terminated by the respondent. But it is hardly necessary to say that as an evidentiary circumstance it offers a very strong argument against the conclusion of fact that there was such a termination. In this case the facts do not depend on the evidence of the wife. There is strong evidence of her brother and sister-in-law. We conclude from the evidence that the respondent had resolved at least as far back as Christmas 1947 to treat the appellant as completely beyond his recognition as a wife. Having regard to his conduct, it is not too much to say that he resolved even to treat her as beyond recognition as a human being. He adopted and persisted in an attitude which unequivocally meant that he treated the marriage as at an end and regarded her presence in the house as a misfortune which he was determined to ignore. As far as he was concerned there was a complete withdrawal from co-habitation. Taking the evidence of his conduct, it would be entirely unreal to treat the fact that she slept in a bed at the remote end of the bedroom in which he slept as evidence that he had not put an end to co-habitation. As a state of things he brought it completely to an end and intended to cause her, as far as he could, to separate herself from him in all respects. The simple fact is that she did not remove herself, as presumably he intended, from the bedroom. Upon the evidence, it is not open to doubt that he did not mean any part of the matrimonial relationship to continue.
Both the animus and the factum of desertion are of course necessary. In this case it is the factum that is in question. As we have already said, the case is difficult, but the facts appear to us to be very special and the evidence unusually cogent. We think that the respondent could not have severed the matrimonial relationship more effectively if he had gone elsewhere to live. The mere fact that he stayed in the house did not, in all the circumstances, keep alive the conjugal society of these parties. In spite of the hesitation which we have felt because of some facts of the case tending to give a semblance of the continuance of a common life, we think that the proper inference is that the respondent deserted the appellant more than three years before the petition. The authorities which apply to this case are Drake v. Drake [1] ; Simons v. Simons [2] ; Power v. Power [3] ; Campbell v. Campbell [4] . The facts in this case are especially comparable with those in Power v. Power [3] . It is not contrary to such decisions as Hopes v. Hopes [5] and Walker v. Walker [6] , to find upon the evidence in this case that the respondent separated himself from his wife and ended his marital relations with her.
1. (1896) 22 V.L.R. 391.
2. (1898) 24 V.L.R. 348.
3. (1944) V.L.R. 247.
4. (1951) 51 S.R. (N.S.W.) 158; 68 W.N. 174.
5. (1944) V.L.R. 247.
6. (1949) P. 227.
7. (1952) 2 All E.R. 138.
The appeal should be allowed, the judgment of the Supreme Court set aside and a decree nisi for dissolution made. |
high_court_of_australia:/showbyHandle/1/10757 | decision | commonwealth | high_court_of_australia | text/html | null | ACI Metal Stamping & Spinning Pty Ltd v Boczulik [1964] HCA 26 | https://eresources.hcourt.gov.au/showbyHandle/1/10757 | 2024-09-13T22:56:06.688899+10:00 | High Court of Australia
McTiernan, Kitto, Taylor, Windeyer and Owen JJ.
ACI Metal Stamping & Spinning Pty Ltd v Boczulik
[1964] HCA 26
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
April 30
McTiernan J.
This is an appeal from the order of the Supreme Court of New South Wales dismissing the defendant's motion to set aside the verdict returned by the jury in favour of the plaintiff. The amount of the verdict was £10,000. The judges were not unanimous. Sugerman J. dissented. The majority were Else-Mitchell and Moffitt JJ.
In this appeal Mr. Byers relied on the reasoning of the dissentient judge.
The plaintiff alleged that an injury she suffered outside the place where she worked was caused by breach of the defendant's duty as employer to take due care for her safety. When the injury occurred she was on her way home from work. In fact she had worked overtime and it was then dark. She sustained the injury by stepping into an excavation in the path over which she was walking. The excavation was not guarded nor sufficiently lighted. The employees received no warning about it. But the appellant took no part in the operations in connexion with which it was made. It was not shown that the appellant was occupier of the land over which the path ran. The place where the plaintiff worked was within an area bounded by public streets but the premises occupied by the appellant in which the plaintiff worked did not abut on any of those streets. The path in question was one of several that crossed the area and by some arrangement not disclosed by the evidence these paths were the access by which the appellant's employees reached their working place and returned to the public street. None of these paths was a public street: none was under the appellant's control, as far as the evidence shows. The first question is whether the appellant's duty as employer to take due care of the respondent as servant extended to her when she was injured. In my opinion this question should be answered in the affirmative. I think that the case resembles, to a material extent, Ashdown v. Samuel Williams & Sons Ltd. [1] . In that case Havers J., having referred to the employer's duty in respect of access where the place of work abuts a highway, said: "A different position may arise if—as in the present case—the employer's place of work is entirely surrounded, for all practical purposes, by private land belonging to somebody else. The employer clearly has to provide some means of access to his employees by which they can reach their place of work. In such a case, where there is a right of way which the employee is entitled to use, it seems to me that if the employer intends his employees to use it, he would be under a general duty to take reasonable care that that way was reasonably safe for his employees to use. As regards the precautions which he could take, of course, regard would have to be had to the fact that he had a limited right only on the land, and that the land belonged to somebody else. I hold, in such circumstances, that there would be a duty upon the employer to take reasonable care to ensure that that way was reasonably safe for his employees" [2] . The decision in the case was varied on appeal: the reasoning which I have quoted was not disapproved. In my opinion such reasoning is right and provides the correct solution of the present case. See Charlesworth on Negligence 4th ed. (1962) par. 849, p. 390.
1. [1956] 2 Q.B. 580.
2. [1956] 2 Q.B., at p. 593.
For the appellant (defendant) it was contended that it had observed its duty of care to the respondent in respect of means of access between the plaintiff's place of work and the highway. The defendant relied on evidence that the path on which the plaintiff sustained injury was only one of a number of paths leading to the highway and that any one of the other paths was available to her. In my opinion this contention should fail because there is no evidence that the respondent was aware that the excavation had been dug in the path which she took. It was a regular means of access used by the employees. The evidence proved that no precaution of any kind was taken to save an employee who was walking over that path at night from stepping into the excavation.
Kitto J.
This appeal is against an order of the Full Court of the Supreme Court of New South Wales refusing a motion for a new trial or alternatively the entry of a verdict and judgment for the defendant, in an action in which the respondent as plaintiff had recovered a verdict for damages against the appellant. As happens all too often, the plaintiff's case at the trial proved to be quite different from that which she had pleaded, yet the trial was allowed to proceed to verdict without any amendment having been made. Although the jury was sworn to try the issues joined between the parties, counsel for both parties and the presiding Judge joined in placing substantially different issues before them.
In this case the plaintiff's declaration contained only one count. The count disclosed that the case was one between a servant and her master, and that damages were claimed by the servant for injuries suffered by reason of a failure on the part of the master to take reasonable care for her safety in relation to a hole into which she had fallen. But it alleged that the hole was in certain premises in which the plaintiff was employed by the defendant to work, that the defendant had the care, control and management of those premises and of the hole and of certain operations being performed in connexion with the hole, and that the defendant so negligently conducted itself in the care, control and management of the premises, the hole and the operations that the plaintiff sustained the injuries complained of. At the trial it turned out that the premises in which the defendant employed the plaintiff to work consisted of a certain building and did not include any of the surrounding land, that the hole into which the plaintiff fell was not in the building but was in an adjoining pathway, and that the defendant (so far as appeared) had neither title to nor easement over the pathway and had not the care, control or management thereof. The defendant contended that the duty of care which it owed the plaintiff as its servant entailed no obligation with respect to the hole in the pathway. In order to enable the contention to be fully understood a brief account of the proved facts must be given.
The plaintiff was employed to work in a building called a "cap shop", her main duty being to put rubber inside screw-top caps for bottles. The building was occupied exclusively by the defendant, but it stood in a large tract of land containing many other buildings of which only one other was used by the defendant. The rest were occupied by other companies, and the portions of the land that were not built upon were devoted largely to roadways or pathways, some of which gave access to public streets. No proof was offered at the trial as to the title to any part of the land. Consequently the plaintiff's case had to be considered on the footing that in order to get from the cap shop to any public street it was necessary to pass along a roadway or pathway to which the defendant was, in law, a stranger. There were suggestions in the evidence that the companies respectively occupying the several buildings and owning the land in the area had some form of interconnexion; but even without taking that into account the inference was clear enough that the defendant had with the person or company which held the title to the pathways some arrangement or understanding that persons employed in the cap shop should be allowed to use the pathways for the purpose of passing between the cap shop and public streets.
The cap shop had no fewer than eight doors by which employees might enter and leave. Which was the most convenient for a person to use on a particular occasion depended largely upon which public street he wished to reach, and the defendant had given no instructions as to using any one door rather than another. On the day on which the plaintiff sustained her injuries the ways upon which several of the doors opened were free of danger. But one door, called variously the front door, the back door and the bundy door, opened upon a pathway known as Tenth Street which led to a public highway called Lachlan Street. It was to Lachlan Street that the plaintiff wished to go when she finished her work, for there she could catch a convenient 'bus. The bundy door was open. According to uncontradicted evidence, it was a popular door for employees in the cap shop to use, and the defendant had added to its advantages by placing close to it the bundy clock at which employees had to punch their cards at knock-off time. Tenth Street was a narrow laneway, lying for some of its length between the cap shop and a machine shop used by a company other than the defendant. Building operations in connexion with the machine shop had been proceeding for some weeks, and a barricade of some sort obstructed Tenth Street a short distance to the left of the bundy door. It was to the right of that door that the plaintiff's route lay. The time was about 7.45 in the evening. It was dark, and there was no artificial light except a lamp of undisclosed efficiency some distance from the door. Tenth Street at the relevant part was between eight and ten feet wide. A hole had been dug in it, to the right of a person emerging from the bundy door, and it extended over about half the width of Tenth Street. The plaintiff, having punched the bundy, passed through the door, turned right, hurried towards Lachlan Street and fell into the hole. She had never been warned of any danger there. She had often used Tenth Street; and she said, and the jury presumably found, that on the night of her accident she did not know there was any hole in the pathway.
The jury returned a verdict for the plaintiff for £10,000 damages, and the Full Court of the Supreme Court (Else-Mitchell and Moffitt JJ., Sugerman J. dissenting) dismissed a motion for judgment in favour of the defendant or alternatively for a new trial. The learned dissenting Judge would have ordered judgment for the defendant on the ground (in effect) that it was not open to the jury on the evidence to find the defendant guilty of any breach of the duty of care which it owed to the plaintiff as its servant, since the plaintiff at the time of her injury was outside the place of her employment and of any place under the control of the defendant, the hours of employment had ended, and she was not engaged in the employment or anything belonging or incidental to it. His Honour considered that while she was in Tenth Street the situation as regards the defendant's duty of care was the same as if she had been in a public street on her way home from work.
Whether a breach of a master's duty of care for his servant's safety be regarded as a breach of contract or as a tort (see Matthews v. Kuwait Bechtel Corporation [1] ), the duty is to take all reasonable precautions against injury to the servant "in the course of his employment": Priestley v. Fowler [2] ; Brydon v. Stewart [3] . But as Lord Cranworth was at pains to make clear in his judgment in the lastmentioned case, in this connexion "the course of the employment" is not a narrow conception. It extends beyond the period of work to every situation in which the master sustains the character of master towards the servant. See also Jury v. Commissioner for Railways (N.S.W.) [4] . Such a situation may exist even after the servant has left his place of work at the end of a day: Tunney v. Midland Railway Co. [1] . It may exist (though what is required for its performance may be very little) even in a case where the servant is exercising his right as a member of the public to pass along a public highway, for he may be performing an errand for his master or travelling to or from his place of work in a manner provided for by an express or implied term of the contract of employment. On the other hand it is clear that where the servant is using the highway simply as a means of getting to or from his place of work in such circumstances that the journey is either preliminary or subsequent to, and not in the course of, the employment, the master, as such, owes him no duty of care. The point to be observed is that the question upon which the existence of the duty depends is not in what character has the servant the right of passage, but whether the master is master in relation to the journey. Again, where the servant at the material time is traversing private land of a third person by the latter's leave, as for instance where the employer occupies a suite of rooms in a large building and the employee is using a common lift or passage-way in the building, the existence of a duty of care on the part of the master for the servant's safety depends, not upon whether the owner is to be considered as allowing the servant the use of the lift or passage-way in the character of, or because he is, the master's servant, but upon whether the master is master in relation to what the servant does in exercise of the licence. Suppose, then, that at the time of the hurt which the servant suffers he is upon the land of a third person pursuant to a permission which the master has obtained for him from the owner. If no more than that be known it is impossible to say whether the master owes the servant a duty of care, for it may be that the relation of master to the servant does not subsist in respect of the servant's exercise of the permission. If, for example, a master gratuitously presents his servant with a theatre ticket, he is not master in respect of the servant's exercise of the liberty the ticket gives him in the theatre, and accordingly he owes the servant no duty of care while there.
1. [1959] 2 Q.B. 57.
2. (1837) 3 M. & W. 1, at p. 6 [150 E.R. 1030, at p. 1032].
3. (1855) 2 Macq. 30.
4. (1935) 53 C.L.R. 273.
5. (1866) L.R. 1 C.P. 291.
In the present case, accordingly, it is necessary to determine what was the situation of the defendant in relation to the plaintiff's use of Tenth Street on the occasion when she fell into the hole. As I have indicated, I think it was a necessary inference for the jury to draw that the defendant had some kind of arrangement with the owner of Tenth Street under which the employees in the cap shop might pass by that way in order to get from their work to Lachlan Street. Accordingly the plaintiff was in Tenth Street at the material time in the character of an employee of the defendant in the cap shop. But that merely raises the crucial question, whether the defendant stood in the relation of master to the plaintiff not only in respect of her work, nor only in respect of her presence in the cap shop, but also in respect of her use of Tenth Street on the occasion of her accident. It was at this point that the difference of opinion among the learned Judges of the Supreme Court arose. I find myself in agreement with the majority, and I do so by asking myself two questions: (1) Was there an implied term in the plaintiff's contract of employment—there was no proof of any express term—obliging the defendant to see that one or more ways over the private land surrounding the cap shop should be available to the plaintiff for the purpose of her reaching a public highway after leaving work? and (2) Was the availability of Tenth Street for her use for that purpose being maintained by the defendant on the occasion in question in performance of that obligation? If the answer be Yes to both questions, the conclusion must follow that the defendant was sustaining the character of master to the plaintiff while she was using Tenth Street at the time of her injury, and the duty of reasonable care for her safety existed at that time as an incident of the relationship.
Sugerman J. addressed himself to the first of these questions and thought it should be answered in the negative. His Honour considered that a master "is no more under a legal duty to provide a means of access to the place where (his servants) are to work than, in the ordinary case, he is under a legal duty to provide work for them to do". It is important to bear in mind that whether a master is under a legal duty to provide work for his servant depends on the terms of the contract, and the nature and circumstances of the employment may suffice to raise an implication in the contract that he is: Marbe v. George Edwardes (Daly's Theatre) Limited [1] . Whether he is bound to provide access to the workplace must depend similarly on the terms of the contract, and again the nature and circumstances of the employment may raise a necessary implication that access shall be provided. In a contract of employment requiring the servant to work in a building which is surrounded by land of a third party it must, I think, ordinarily be implied (if there be nothing express) that the master will arrange with the third party to allow the servant to traverse the third party's land for the purposes of access to and egress from the building. It is not to be supposed that the servant binds himself to commit a trespass every time he goes to or from his work; and only in exceptional circumstances could the mutual intention be inferred that the servant shall obtain the third party's permission. If authority be needed it is to be found in the judgment of Havers J. in Ashdown v. Samuel Williams & Sons Ltd. [1] , and in the dissenting observations of Romer L.J. in Holness v. Mackay & Davis [2] which Lord Finlay L.C. approved in John Stewart & Son (1912) Ltd. v. Longhurst [3] . At the very least there must be an implied term in such a case as the present that when the servant has finished his work for the day the master will see that there is available to him some lawful means of crossing the third party's land to a public highway.
1. [1928] 1 K.B. 269.
2. [1956] 2 Q.B. 580, at p. 593 (affirmed [1957] 1 Q.B. 409).
3. [1899] 2 Q.B. 319, at p. 328.
4. [1917] A.C. 249, at p. 254.
On the evidence in this case it was, I think, a conclusion which the jury could not reasonably omit to draw that the terms of the plaintiff's employment included a term that the defendant would see that the plaintiff, whenever she should leave her work, would have open to her a way or ways over the surrounding land to one or more of the highways in the vicinity. I am prepared to assume, as the defendant contends, that it would have been a sufficient performance of the obligation to see that one safe way was available; and I see no reason to doubt that if the defendant had arranged for a way other than Tenth Street to be available and had presented that way to the plaintiff as her only means of egress any use she might have chosen to make of Tenth Street would not have been in the course of her employment and would not have been covered by the defendant's duty of care for her safety. (The case of Pritchard v. Lang [4] , upon which the defendant relied, does not warrant any wider proposition.) But the evidence left no room for doubt that, whatever other ways were available to the plaintiff by express or tacit arrangement between the defendant and the owner of the surrounding land, certainly Tenth Street was so available; and the defendant, by keeping the popular bundy door open and the bundy clock close to it, plainly held out Tenth Street to the employees in the cap shop as a way that was being offered them in performance of the defendant's obligation to see that they could lawfully get to a highway. While, therefore, the plaintiff was proceeding in Tenth Street on the night of her accident, the relationship of master and servant between the defendant and the plaintiff was being sustained: a term of the contract of employment was being currently performed by the one and availed of by the other. It follows, in my opinion, that the defendant's duty to take reasonable precautions for the plaintiff's safety in the course of her employment extended to what she was then engaged in doing.
1. (1889) 5 T.L.R. 639.
That was the footing on which the case was left to the jury by the trial Judge. They had to decide whether they were satisfied that the defendant failed to take the requisite reasonable precautions, and if so whether the failure was a cause of the plaintiff's injury. The fact that Tenth Street was not shown to be in the care, control or management of the defendant was relevant to the question what precautions the defendant ought reasonably to have taken: see Wilson v. Tyneside Window Cleaning Co. [1] , but that, in my opinion, was its only relevance in the case. The learned Judge in his summing-up mentioned some precautions, the omission of which by the defendant he thought the jury might regard as a failure to take reasonable care. Perhaps he might have mentioned others (such as locking the bundy door or forbidding its use by employees), while maintaining the clear distinction between suggestions of possible precautions and evidence of actual negligence: see Crafter v. Metropolitan Railway Co. [2] . His Honour, however, was not asked to rule that there was no evidence that anyone in the defendant's organization knew or had reason to suspect that Tenth Street between the bundy door and Lachlan Street was or might be in a dangerous condition, and he was not invited to direct the jury that in the circumstances they could not properly find against the defendant unless they considered (a) that reasonable care for the plaintiff's safety required, notwithstanding the usually safe condition of Tenth Street, periodical inspections of that street for the purpose of discovering any danger therein: cf. Cole v. de Trafford [No. 2] [3] ; Wilson v. Tyneside Window Cleaning Co. [4] ; Smith v. Austin Lifts Ltd. [5] , and (b) that a cause of her injury was an omission to make such an inspection and to warn the plaintiff against the danger it would have revealed or to take reasonable steps to prevent her from encountering it. Nothing of this kind is open for consideration now. On the only question before us, namely whether the duty of care existed while the plaintiff was in Tenth Street, I am of opinion that the defendant must fail.
1. [1958] 2 Q.B. 110, at pp. 121, 122.
2. (1866) L.R. 1 C.P. 300, at p. 304.
3. [1918] 2 K.B. 523.
4. [1958] 2 Q.B. 110, at p. 119.
5. [1959] 1 All E.R. 81, at p. 94.
I would therefore dismiss the appeal.
Taylor J.
I agree that for the reasons given by Kitto J. this appeal should be dismissed.
Windeyer J.
The only question of law in the case seems to me to be whether the defendant had any duty of care for the safety of the plaintiff at the time and place of the accident. The plaintiff entirely failed to prove, indeed no evidence was tendered in support of the allegation in the declaration, that that place was in the control of the defendant. What was relied upon, however, was a duty of care said to arise from the relationship of the parties as master and servant. The servant was one whose work was performed upon the master's premises, and who had to present herself for work there daily. The breach of duty was said to lie in a failure on the part of the master to use reasonable care to provide for the servant safe conditions of work, including a means of access to and departure from the premises where her work was to be performed. There was evidence on which the jury could find for the plaintiff if when she was hurt she was where she was in the course of her employment. She was in a passage which was one of the ways of access provided by her employer for her use. In what right her employer was able to have the use of the passage for its employees does not appear. But the plaintiff was not concerned with that. She was simply using one of the ways that had been made available to her for her coming and going as an incident of her employment. It was by virtue of her employment, and not otherwise, that she had a right to be where she was. That she was still within the area and course of her employment when using the passage-way to leave the premises after ceasing work appears, I think, from many cases both at common law and under workmen's compensation statutes. That there was another, and safe, way also available to her is not decisive if she were not, by warning, lighting or guarding or otherwise, made aware of or kept away from the pitfall that had been created in this one. I agree in what my brother Kitto has written. The appeal should be dismissed.
Owen J.
The respondent to this appeal was the plaintiff in an action for damages for personal injuries brought by her against the defendant, now the appellant, in which she recovered a verdict for £10,000. An appeal was taken to the Full Supreme Court which by a majority (Else-Mitchell and Moffitt JJ., Sugerman J. dissenting) dismissed it and from that order of dismissal this appeal is brought.
The facts are that the defendant's premises at which the plaintiff was employed at the relevant time included a building used as a factory of which it was the lessee. The building occupied portion of a much larger enclosed area of land known as the Australian Glass Manufacturing Company Works which was bounded by a number of public streets. There were many other buildings in the area which were occupied and used by other organizations, all of which were presumably associated in some way, as was the defendant, with the Glass Company's works. Access to the defendant's building from the public streets surrounding the area was by means of a number of what may be called private roadways or passageways running across the land between the various buildings on it. One of these roadways, called Tenth Street, bounded one side of the defendant's premises. Another, called Twelfth Street, gave access to the other side of those premises. There were several doors in the defendant's building, some opening on to Tenth Street and others on to Twelfth Street. Inside one of the doors opening on to Tenth Street, stood the bundy clock used by the defendant's employees when arriving at and leaving work and for this reason it was a common practice for employees to use Tenth Street as a means of going to and from the building in which they worked. The evidence did not disclose in whom the ownership or control of these private roadways was vested but the inference was obviously open that some arrangement existed between the defendant and the owner of the whole area, under which the former's employees were entitled to use the roadways for the purpose of going to and returning from the defendant's building. On 3rd March 1960, at 7.45 p.m. when her work ended, the plaintiff left the defendant's premises by the door close to which the bundy clock stood and walked along Tenth Street in the direction of one of the public streets bounding the area. The route which she took led her past another building fronting Tenth Street and close to the defendant's premises where constructional work had been in progress for some time. In the course of this work, an excavation, some inches deep, had been made in the roadway. It was dark, the roadway was ill-lit and the plaintiff, failing to see the excavation, stepped into it and sustained the injuries for which she sought to recover damages. In her declaration she averred that "at all material times the defendant had the care control and management of certain premises and of a certain hole situate therein and of certain operations being performed in connexion with the said hole" and went to allege (inter alia) that it had negligently conducted itself "in and about the care control and management of the said premises hole and operations". By one of its pleas the defendant put the preliminary averment in issue. No evidence was led by the plaintiff in support of the allegation that the defendant had the care control and management of Tenth Street, nor was any evidence given from which it could be inferred that it knew or should reasonably have known of the existence of the excavation. At the trial, however, no submissions based upon either of these matters were made by counsel for the defendant. At the close of the evidence he made only one submission, namely that a verdict should be directed in favour of his client on the ground that the defendant's obligation to provide its employees with a safe means of access between its premises and the public streets was shown to have been performed since there were admittedly other and safe routes available to her, either by walking along Tenth Street in the opposite direction to that which she had taken or by walking along Twelfth Street. The learned trial judge refused the application and left it to the jury to say whether the defendant had failed to take reasonable care not to expose the plaintiff to unnecessary risk by omitting to warn her of the existence of the excavation or directing her not to take the route which she had taken. No objection was taken to the summing up nor was his Honour's attention drawn to the fact that there was no evidence to show when the excavation had been made or that the defendant knew or should have known of its existence. Before the Full Supreme Court the arguments for the defendant covered a wide field, the principal submission being that the defendant owed no duty of care to its employees who used Tenth Street as a means of coming to or leaving work because it was not shown that it had any control over that roadway. In the alternative it was submitted, as it had been at the trial, that, since there was a safe alternative route available between the defendant's premises and the public streets, the plaintiff could not recover. Having regard to what had occurred at the trial, the first of these contentions was not, in my opinion, open to the defendant on appeal. It was, however, considered and rejected, the Court proceeding upon the assumption, which seems to have been accepted by counsel for the defendant, that there was evidence that the existence of the excavation was known to the defendant at all relevant times. In these circumstances the Court considered that it was open to the jury to take the view that, notwithstanding the absence of any control by the defendant over Tenth Street, it should have warned its employees who used the roadway of the existence of the excavation. Had the assumption upon which the argument and their Honours' reasons proceeded been correct, I think the submission made on behalf of the defendant was rightly rejected. A similar argument was advanced, without success, in Ashdown v. Samuel Williams & Sons Ltd. [1] and, on appeal, [2] . But, as I have said earlier, I think the point was not open to the defendant and for that reason alone it should have been rejected. Turning then to the alternative submission, which was repeated before this Court, it cannot, in my opinion, be sustained. It concedes that an employer's duty to take reasonable care to avoid subjecting his employees to unnecessary risk does, in circumstances such as existed here, extend to providing them with a reasonably safe means of passing across private land belonging to another in order to get to and from their place of work but asserts, as a matter of law, that if there are several recognized routes used by those employees and one of them is shown to be safe that duty is performed, however dangerous the other routes may be. It is not surprising that authority for such a proposition is lacking and I do not accept it. It finds no support in the cases of Pritchard v. Lang [3] and Bolch v. Smith [4] , upon which reliance was placed.
1. [1956] 2 Q.B. 580.
2. [1957] 1 Q.B. 409.
3. (1889) 5 T.L.R. 639.
4. (1862) 7 H. & N. 736 [158 E.R. 666].
In my opinion the appeal fails and should be dismissed. |
high_court_of_australia:/showbyHandle/1/10293 | decision | commonwealth | high_court_of_australia | text/html | null | Toomaroo Pty Ltd v Commissioner of Taxation (Cth) [1954] HCA 67 | https://eresources.hcourt.gov.au/showbyHandle/1/10293 | 2024-09-13T22:56:09.414847+10:00 | High Court of Australia
Webb J.
Toomaroo Pty Ltd v Commissioner of Taxation (Cth)
[1954] HCA 67
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
Webb J delivered the following written judgment:—
Nov. 22
Webb J
This is an appeal by a taxpayer, a pastoral company, from the decision of the Board of Review which affirmed the disallowance by the Commissioner of Taxation of an objection by the taxpayer to the refusal by the commissioner to allow a deduction of £1,081 as depreciation of "plant" in the assessment of the income of the taxpayer for the year ended 30th June 1951. The plant was actually a building in Toowoomba which for part of the income year was used by the taxpayer in connection with the administration of its pastoral business. The taxpayer was one of a group of five pastoral companies all of which had the same managing director and secretary. The members of the staff of all these companies were on the same pay-roll. They shared the same office, and the cost of running the office in any year was apportioned between all the companies on the basis of turn-over in the previous year. The office was in the city of Toowoomba, but the pastoral holdings or properties were in the Cunnamulla-Thargomindah district several hundred miles away. The administration of the pastoral properties was conducted from the Toowoomba office, and included not only accountancy, but also purchases of foodstuffs for station hands and of the plant and equipment for the stations, and arrangements for the reconditioning of plant and equipment. Machinery already or about to be reconditioned or repaired was sometimes parked in the office yard on its way to or from the pastoral properties.
During the year 1949 the taxpayer purchased this building and made structural improvements. Some of the improvements were made during the income tax year in question. However, there were tenants in the building when it was purchased, and the last of these tenants did not vacate the premises until May 1951. Meanwhile, members of the taxpayer's staff began to work in the building as it became available for office use following the departure of the tenants and the necessary structural alterations.
The sections of the Income Tax and Social Services Contribution Assessment Act 1936-1950 under which the claim for depreciation was made provide, so far as it is necessary to set them out: "s. 54 (1). Depreciation during the year of income of any plant, being plant owned by a taxpayer and used by him during that year for the purpose of producing assessable income, and of any property being plant owned by the taxpayer which has been installed ready for use for that purpose and is during that year held in reserve by him shall be an allowable deduction. (2). In this section "plant" includes (b) fences, dams and other structural improvements on land which is used for the purposes of agricultural or pastoral pursuits but does not include improvements used for domestic or residential purposes, or structural improvements, bores or wells expenditure on which has been allowed as a deduction".
Section 56 provides for the calculation of depreciation, and s. 57A for special depreciation of property "acquired or installed" during the year of income, but within seven years after 30th June 1945.
The first question that arises is whether the office building was "plant" within the meaning of s. 54 (1) (b), that is, whether it was a structural improvement on land which was used for the purpose of agricultural or pastoral pursuits.
I think that the phrase "for the purposes of agricultural or pastoral pursuits" should be read as meaning "for purposes, being agricultural or pastoral pursuits", and not "for purposes incidental to agricultural or pastoral pursuits": see Melbourne Hunt Club v Federal Commissioner of Taxation [1] . That was a decision of Macfarlan J. under the Land Tax Assessment Act 1910-1928 Cth, but nothing in the context or subject matter of that Act or of the Income Tax and Social Services Contribution Assessment Act renders the decision inapplicable. There the question was, as it is here, simply one of the grammatical construction of words not affected by context or subject matter. I think that decision was correct, if I may say so with respect, and I will apply it.
1. (1930) V.L.R. 365; 1 A.T.D. 49.
No doubt the work done in the Toowoomba buil.ding and the parking of machinery in or about the building were incidental to pastoral pursuits; but it would, I think, involve an undue straining of language to hold that this office work and parking of machinery constituted, or was part of, pastoral pursuits. If the context of the Income Tax and Social Services Contribution Assessment Act throws any light on the question of construction, then the legislature in specifying fences, dams, wells or bores in s. 54 gives, I think, an indication of the kind of improvements it has in mind, that is to say, those on a pastoral holding or property itself, and not a city building hundreds of miles distant, but used as an office for the conduct of business incidental to pastoral operations, or for parking machinery on its way to or from the station property. It is common knowledge that there are companies which own and operate pastoral properties and which have in the capital cities office buildings in which the business associated with these operations is conducted; but it cannot seriously be claimed that those offices are on land used for pastoral pursuits, even if in or about those buildings parking is sometimes provided for machinery intended for use on the pastoral properties; and what is true of these buildings in capital cities is also true of such buildings in other cities.
I think, then, that the Toowoomba building was not a structural improvement on land used for pastoral pursuits, and that the depreciation claimed was rightly disallowed.
It becomes unnecessary to consider other questions which might be thought to arise but to which little or no argument was directed.
The appeal is dismissed with costs. |
high_court_of_australia:/showbyHandle/1/11500 | decision | commonwealth | high_court_of_australia | text/html | null | Uebergang v Australian Wheat Board [1980] HCA 40 | https://eresources.hcourt.gov.au/showbyHandle/1/11500 | 2024-09-13T22:56:17.473838+10:00 | High Court of Australia
Barwick C.J. Gibbs, Stephen, Mason, Murphy, Aickin and Wilson JJ.
Uebergang v Australian Wheat Board
[1980] HCA 40
ORDER
Question 1: Does the validity of the Wheat Industry Stabilization Act, 1974 N.S.W., as amended, and the Wheat Industry Stabilization Act, 1974 Q., as amended, depend on the establishment to the satisfaction of the Court of any fact? If so, what is that fact?
Answer: There may be facts whose existence is relevant to the validity of the Acts, but the admissibility of evidence to establish any such facts will be subject to any amendment of the pleadings.
It is not appropriate to answer the second part of the question.
Question 2: Is that fact to be determined solely upon material which is within judicial knowledge?
Answer: No.
Question 3: Does s. 92 prevent the application of the Wheat Industry Stabilization Act, 1974 N.S.W., as amended, and the Wheat Industry Stabilization Act, 1974 Q., as amended, or either of them to the transaction particularized in par. 7 of the statement of claim?
Answer: Not appropriate to answer.
Leave to the defendant to amend its defence as it may be advised. Leave to the plaintiffs to make any consequential amendments to the statement of claim. No order as to costs.
Cur. adv. vult.
The following written judgments were delivered:—
1980, Oct. 28
Barwick C.J.
The plaintiffs in this case challenge the propriety of the Court's decision in Clark King & Co. Pty. Ltd. v. Australian Wheat Board (" Clark King ") [84] . That case was decided by a majority of three Justices in a bench of five Justices. Of the majority, one Justice, Murphy J., took a ground which has never been accepted by any Justice of the Court in any case and which, as I pointed out in my own reasons for judgment in Clark King, is, in my opinion, insupportable on a reading of the Constitution itself. It is inconsistent with every decision of the Privy Council and of this Court upon the meaning and operation of s. 92 of the Constitution: see, in particular, The Commonwealth v. Bank of New South Wales ("the Bank Case ") [85] . Further, it is notable that no party in the argument of the present case has attempted to support these reasons of my brother Murphy. The views of Murphy J. were not shared by the other Justices forming the majority: nor did Murphy J. support the reasons of those Justices. The case of Clark King was therefore decided, so far as concerns the submissions made in the present case, by two Justices. There is thus no decision of this Court, in the sense of the reasoning of those two Justices, operative as a precedent that the Act now in question is valid in its presently relevant provisions.
1. (1978) 140 C.L.R. 120.
2. (1949) 79 C.L.R. 497, at p. 629; [1950] A.C. 235, at p. 299.
A reference in the present case has been before the Court on an earlier occasion when three questions were reserved for its consideration. Two of those questions were answered by the Court's announcement (1) that the Court would allow argument as to the validity of s. 10 (2) of theWheat Industry Stabilization Act, 1974 N.S.W. as amended and s. 12 (3) of the Wheat Industry Stabilization Act, 1974 Q. as amended and (2) that the decision in Clark King does not preclude the examination in the instant proceedings of the facts on which either party may claim validity of the relevant statute depends. The further question was not dealt with at that stage.
Subsequent to that announcement, though prior to the statement of the present case, pursuant to leave given to the parties to amend their pleadings generally, the plaintiffs amended their statement of claim by removing a paragraph therein numbered six, which in relation to the validity of the statutes in question made an allegation of fact. In lieu thereof, the plaintiffs inserted a paragraph which makes a claim for invalidity not rested on any alleged factual situation but upon the terms of the relevant statutes themselves.
The defendant for its part did not avail itself of the opportunity to amend and made no substantial change in its statement of defence, relying, as it seems to me, upon the decision in Clark King [1] as a justification of its assertion of constitutional validity. In particular, the defendant does not allege any matter of fact. Therefore it does not seek to prove nor to rely upon any facts on the existence of which the defendant seeks to base the validity of the statutes.
1. (1978) 140 C.L.R. 120.
Reserved for the consideration of a Full Court on this occasion are the following questions:
(1) Does the validity of the Wheat Industry Stabilization Act, 1974 N.S.W. as amended and the Wheat Industry Stabilization Act, 1974 Q. as amended depend on the establishment to the satisfaction of the Court of any fact? If so, what is that fact?
(2) Is that fact to be determined solely upon material which is within judicial notice?
(3) Does s. 92 prevent the application of the Wheat Industry Stabilization Act, 1974 N.S.W. as amended and the Wheat Industry Stabilization Act, 1974 Q. as amended or either of them to the transaction particularized in par. 7 of the statement of claim?
The form and presence of the first two of these questions seem to have been derived from discussions between the parties which took place before the pleadings were put into their present shape. As the pleadings now stand, as I have pointed out, the issue of validity between the parties is not said to depend upon the existence of any particular fact or situation.
The present reference has been heard by all seven members of the Court. I have no doubt that we should consider for ourselves the questions relating to the validity of the statutes, undeterred by the reasons for judgment expressed in Clark King.
Before proceeding further, it is convenient to indicate the facts as revealed in the pleadings out of which the present proceedings have arisen. The first plaintiffs carry on, under the name of C. and J. Uebergang, the business of wheatgrowers at "Copperfield", Crooble, in the State of New South Wales. The second plaintiff carries on business as a manufacturer of poultry feed containing wheat at Mount Cotton in the State of Queensland. By a contract in writing dated 6th December 1978, the second plaintiff purchased from the first plaintiffs for use in manufacturing such poultry feed at Mount Cotton certain wheat then growing at "Copperfield". Since the contract was entered into, the first plaintiffs have harvested the wheat the subject of the contract. It is separately stored by the first plaintiffs at "Copperfield" pending delivery to the second plaintiff to fulfil the contract between the parties. Whilst the plaintiffs desire to complete performance of the contract and the second plaintiff desires to receive and use the wheat in the manufacture of poultry feed at Mount Cotton, the wheat is none the less subject to certain notices which were published by the defendant in the Commonwealth of Australia Gazette on 21st November 1978. These notices apparently were published in reliance upon the statutes under attack in the case and presumably also upon comparable legislation of the Commonwealth. Those statutes purport, inter alia, to permit the defendant to require the delivery to it of all wheat in, amongst other States, New South Wales and Queensland, with minor presently irrelevant exceptions, including wheat destined to move interstate. No doubt this power of direction and acquisition is given to the Board to enable it alone to market wheat in Australia and overseas. The notices accordingly were published as a means of enabling the defendant alone to have dealings in the subject wheat. Their form and purpose, as indeed of the statutes in question, were in accordance with Sir Hayden Starke's language in Peanut Board v. Rockhampton Harbour Board [2] :
The policy of the Act is doubtless to preserve and protect primary producers in Queensland, but the method adopted for achieving that policy, as gathered from the words of the Act itself, is the compulsory regulation and control of all trade, domestic, inter-State and foreign. The volume of trade is not restricted, but the producers are restricted, and are prevented from engaging in inter-State and other trade in peanuts. Their peanuts are compulsorily taken from them for that purpose, pooled, and the disposal thereof placed in the hands and under the control of the board. It is a compulsory marketing scheme, entirely restrictive of any freedom of action on the part of the producers. The Act confers the power of acquisition with the object of placing restrictions on all trade, domestic, inter-State and foreign, and, following the decision of His Majesty in Council in James v. Cowan [3] , I think the Act operates in contravention of sec. 92 of the Constitution, and so far as it does so is necessarily void.
The form and purpose of the statutes also fall fairly within the scope of the decision in James v. Cowan.
1. (1933) 48 C.L.R. 266, at p. 285.
2. (1932) 47 C.L.R. 386; [1932] A.C. 542.
It is the defendant's contention that the wheat the subject of the contract between the plaintiffs should be delivered to it and that the performance of the contract by the delivery of the wheat to, and the use of the wheat by, the second plaintiff for the purpose for which it was purchased are precluded by the notices, as undoubtedly they are, if the notices and the legislation which supports them are valid and effective.
Turning to the statement of claim, par. 6 (b) now asserts that the legislative scheme, that is presumably that of each State Act and of the complementary legislation of the Commonwealth, to which reference had already been made and the notices published thereunder, contravene s. 92 of the Commonwealth of Australia Constitution and, as a corollary of that assertion, seeks various declarations, the general purport of which is that by virtue of s. 92 of the Constitution the notices published by the defendant in the Commonwealth of Australia Gazette on 21st November 1978, are of no effect in relation to the wheat the subject of the contract between the plaintiffs dated 6th December 1978, and that, as a result, the first plaintiffs may lawfully deliver the wheat and the second plaintiff may lawfully receive and use the wheat the subject of the contract.
For its part, the defendant in its amended defence, as I have said, simply says that the complementary legislation is valid and validly applies to all the wheat that is mentioned in the plaintiffs' amended statement of claim. As I have already indicated, the defendant does not assert the existence of any facts or any situation upon which constitutional validity is claimed to depend.
It is not alleged in the statement of claim that the contract between the parties referred to therein in terms called for the delivery of the wheat across the State border: the contract itself is not pleaded in terms in the statement of claim. But the statement of claim does allege that the wheat was purchased for use in gristing in Queensland. It is abundantly clear that the wheat, according to the evident intention of the parties, was destined to cross the border. As I pointed out in Smith v. Capewell [4] , the presence in a contract of sale of an obligation to transport its subject matter interstate is not indispensable to the establishment of interstate trade in the subject matter of the contract unless the terms of the contract itself are the sole means of proving the existence of such a trade. Here I would suppose that the interstate quality of the trade in the subject wheat could have been established by a course of dealing; or even by the contemplation of the parties, as in Reg. v. Wilkinson; Ex parte Brazell, Garlick & Co. [5] .
1. (1979) 142 C.L.R. 1.
2. (1952) 85 C.L.R. 467.
However, when the stated case was called on for argument, it was in substance agreed by the parties and announced to the Court that the wheat the subject of the contract was the subject of interstate trade. Thus, any argument based on the absence of a contractual obligation either to deliver or to transport the wheat interstate, if there were such an absence, was, in my opinion, removed from the case.
At the outset, a few settled principles in relation to the meaning and operation of s. 92 of the Constitution need reiteration. It has long been decided and accepted that s. 92 does not create juristic rights in any individual but that it does afford the citizen the ability to ignore and, if need be, to seek the assistance of the judicial arm to resist, the use of what purports to be a statute or an executive authority which infringes the constitutional guarantee which the section embodies. It has also long been decided and accepted that the freedom of interstate trade, commerce and intercourse of which the section speaks is not limited to, if indeed it is in reality addressed to, freedom of trade, commerce and intercourse in the abstract. It is obvious that in relation to intercourse, also within the scope of the guranteed freedom, it could not be so limited. The complete collocation, "trade, commerce and intercourse", as a concept, in my opinion, places the individual's participation in these activities at the centre and by no means at the perimeter of the concept. Once decided that it is not enough to satisfy the Constitution that the same volume of interstate trade and commerce would continue notwithstanding the operation of the impugned law or executive act, there can be no escape from the conclusion that the freedom of which the section speaks includes the freedom of the citizen to engage in interstate trade and commerce, just as it is the freedom of the individual to move from State to State which is guaranteed by the section: see per Fullagar J. in McCarter v. Brodie [6] . Further, passages in their Lordships' advice in the Bank Case such as that found in the Commonwealth Law Reports [7] make it impossible, in my opinion, to conclude that the ability of the individual to participate in interstate trade, commerce and intercourse is only "incidental to and consequential under the protection which is given to the entire concept of interstate trade".
1. (1950) 80 C.L.R. 432, at pp. 493-494.
2. (1949) 79 C.L.R., at p. 635; [1950] A.C., at p. 305.
The major problem to which the section has given rise is the accommodation of the concept of freedom with restraints in a civilized and ordered society which in themselves do not in truth impair the guaranteed freedom. After a chequered course of judicial expression, it was finally resolved in the Bank Case that that accommodation is to be effected by allowing as valid what can properly be determined as in its nature no more than such regulation of interstate trade, commerce and intercourse as does not impair the guaranteed freedom.
Two important conclusions flow from this: first, what is said to be regulatory in its nature must be no more than regulatory, in the relevant sense, of interstate trade, commerce and intercourse, including, as I think, such trade, commerce and intercourse as carried on by individuals, including, of course, corporate individuals; secondly, that after the operation of what is said to be no more than regulatory of interstate trade, commerce and intercourse, that trade, commerce and intercourse and the individual's participation therein remain free. This quite obviously involves the use of the words "regulation" and "regulatory" in a very special sense.
I have pointed out elsewhere, but I would like here to repeat, that to accept the validity of laws truly regulatory in nature is not to qualify the freedom of interstate trade, commerce and intercourse. Indeed, as I remarked in what I wrote in Clark King [8] , a regulatory law properly accepted as such is an assertion or demonstration of that freedom rather than a denial or a qualification of it. As has often been said, the idea of free speech offers a very good analogue of what is meant by freedom in relation to interstate trade, commerce and intercourse. A person enjoys freedom of speech though he may not defame his neighbour. He may not defame not because his freedom of speech is qualified but because in the very nature of freedom of speech there resides the limitation against defamation. Defamatory statement is not an exercise of freedom of speech, but rather it is an assertion of or claim to unbridled licence. Another analogy is freedom of passage on a highway. A person has freedom of passage on the highway though some traffic laws which do no more than secure the protection of one traveller, including pedestrians, from damage by another traveller on the road must be observed. Mutual adjustments so that each may safely use the road are not qualifications of freedom of travel or of passage: rather, they are indicative of it. So it is in the case of trade, commerce and intercourse: it is no qualification of or limitation upon the freedom of interstate trade, commerce and intercourse that a trader may not bring a diseased cow into the marketplace from another State: nor is it a qualification of or limitation or impairment of the freedom of interstate intercourse that a person may not come amongst his fellows in another State suffering from a communicable disease. These inhibitions reside in the concept of freedom as opposed to licence. They do not represent qualifications of the relevant freedoms. Thus, laws dealing with diseased items of trade and commerce or diseased persons may not impair freedom of trade or of intercourse. They may not do so if in operation they leave trade, commerce and intercourse free, as such freedom is properly understood in a civilized society.
1. (1978) 140 C.L.R. 120.
To restate the result of the cases in the Privy Council and of those in this Court which have had their Lordships' approval, valid legislation in the field of interstate trade, commerce and intercourse must be legislation of a "regulatory" nature: if in its nature it is to be "regulatory" of interstate trade, commerce and intercourse including such trade, commerce and intercourse as carried on by individuals, after its full operation interstate trade, commerce and intercourse, including the trade, commerce and intercourse of the individual, remain free. That being so, it seems to me natural and, indeed, inevitable that basically the acceptable "regulation" must be in the nature of an accommodation of the rights of man and man in a society where after the operation of the "regulatory" law, each remains free in the proper sense of that word, free in his trade, commerce or intercourse. It cannot represent an accommodation between the right of the individual freely to trade and travel interstate and some possible public interest to deny the individual that freedom. The individual's trade is not to remain free only so long as some actual or supposed public interest to prohibit or impair or reduce that freedom is not exercised.
It is far from irrelevant here to remark that the exigencies of war did not warrant a decision that individual interstate movement could be prohibited or subjected to government discretion. One might be pardoned for thinking that public security in time of war might have been regarded as the ultimate public interest. Yet s. 92 prevailed to secure the individual's freedom to move in available transport in wartime from State to State: see Gratwick v. Johnson [9] . The unavailability of any capacity for private travel because of the complete absorption of travel capacity by troop movement is a different and quite disparate complication not in any wise bearing on the individual's freedom to use such capacity for movement as may exist.
1. (1945) 70 C.L.R. 1.
I have expressed elsewhere this idea of mutual accommodation as the relevant sense of the description "regulatory". Some seem to think that concept too narrow, but with respect it seems to me a necessary and inevitable corollary of an acceptance of two ideas: first, that the freedom guaranteed by s. 92 includes the freedom of the individual to engage in trade, commerce and intercourse interstate and, secondly, that, after the application of the impugned statute or executive act, the individual's ability to engage in these activities in so far as it is affected by that statute or executive act must remain free. Laws which are valid in the area of public health or in the area of commercial honesty are not, in my opinion, acceptable because of the subject-matter with which they deal or the public interest they purport to serve. Health, commercial honesty, and the like, are not legislative areas excepted from the operation of s. 92. Nor do they represent qualifications of the section. At bottom, the validity vis à vis s. 92 of a statute or executive act relating to health, fraud, trade practices and the like must, in my opinion, be determined by considering whether in operation it does no more than accommodate each man's freedom in the relevant respect to that of his neighbour in a society in which, in the relevant sense, each remains free in his trade, commerce or intercourse after the law has fully operated. They can only be valid if in operation they leave the relevant area of trade, commerce or intercourse and the individual's participation therein, free.
No doubt these concepts prove at times difficult in application to which circumstance the decided cases bear witness: but, to my mind, they are not only valid as I have expressed them: they represent the only basis for the accommodation with the guaranteed freedom of laws which in their nature do no more than relevantly "regulate" interstate trade, commerce or intercourse.
It follows that, in my opinion, laws regulatory in nature of interstate trade, commerce and intercourse are not acceptable because of any community interest which overrides or qualifies the guaranteed freedom. Their basis is, in my opinion, as I have stated it. Such laws are but an extrapolation of the guaranteed freedom. There is no warrant, in my opinion, for completely ignoring the presence of the word "absolutely" in s. 92. At the very least it denies that what remains after the operation of the impugned statute may be only qualified freedom. The acceptance of the validity of restraints on licence does not in any sense deny or qualify the guaranteed freedom. These views are, in my opinion, both consistent with and exemplified by the decisions of the Privy Council and by the decisions of this Court which have the approval of the Privy Council.
It has long been accepted, and rightly in my opinion, that all legislative power in the Commonwealth and all legislative power of the States is subordinated to s. 92. Section 92 is a paramount provision in the fullest sense of that description. Section 51 is prefaced with the words "Subject to this Constitution", as is s. 52. So also s. 106 is subject to the Constitution. The effect of these qualifying words in those sections is that no legislative power, Commonwealth or State, whether solely exercised or exercised in co-operation, can validly produce a situation in which the freedom of interstate trade, commerce or intercourse, including the freedom of the individual to participate therein, is denied or impaired.
I expressed in what I wrote in Clark King my views as to the cautionary and obviously tentative remarks of their Lordships of the Privy Council in the Bank Case. I have no need to repeat here what I then said. In any case, the reasons of the two Justices in the majority in Clark King are not, in my opinion, in reality founded on these cautionary remarks of the Privy Council, although those Justices seemed to think the remarks consistent with the propositions upon which basically their judgments in that case are founded.
I made it fairly plain in writing my reasons in Clark King [10] that I do not believe that it can ever be established that the only way to "regulate", in the constitutionally acceptable sense, interstate trade, commerce and intercourse, including the individual's participation therein is to deny the individual any participation in such trade, commerce and intercourse. To state such a proposition is, in my opinion, to establish its inherent falsity. It really is a contradiction in terms to say that the only way in which interstate trade, commerce and intercourse could be free is by denying all participation by the citizen in that trade, commerce and intercourse. It is not permissible, surely, to substitute for interstate trade, commerce and intercourse in this connexion some designated industry or activity and then proceed to treat the question to be whether the only reasonable way to regulate that industry or activity is to deny all individual participation therein. That, it seems to me, is quite a different question to the one supposed in their Lordships' remark. Further, to regard that as the question necessarily involves the use of the word "regulate" in a very different sense to that which it must have in the universe of discourse which involves s. 92. It also concedes to the legislature some legislative power which is not subject to s. 92. It is interstate trade, commerce and intercourse which is at the same time to be free though "regulated".
1. (1978) 140 C.L.R. 120.
Though great respect must be given to their Lordships' expressions, it seems to me, because of these inherent features, it would be better now to decide outright and unequivocally that the total prohibition or denial of the participation of the individual in interstate trade, commerce or intercourse necessarily contravenes the constitutional guarantee of the freedom of such trade, commerce and intercourse. In every decided case in which such a prohibition has been involved, including the case of Wilcox Mofflin Ltd. v. New South Wales [11] , the statute or executive act in that respect has been held to be invalid. I believe it would be better now at the least to indicate quite clearly the inapplicability of their Lordships' cautionary remarks to cases in which government monopoly in the distribution of a commodity is sought to be justified. Otherwise parties may be lured into expensive and unrewarding litigation for, in the end, surely it cannot be established that the only way in which interstate trade, commerce and intercourse can be carried on consistently with the maintenance of the freedom of that trade, commerce and intercourse is to create a government monopoly in that commodity to the exclusion of all participation of the citizen in that trade, commerce or activity.
1. (1952) 85 C.L.R. 488.
But if the Court is not prepared to accept the logic of the Constitution, at least it should be said that any such occasion must be extremely rare: and one not so far within our experience. It is certain that none of the situations dealt with in the reported cases with which their Lordships became familiar during the argument of the Bank Case [12] and the later case of Hughes & Vale Pty. Ltd. v. New South Wales [No. 1] [13] exemplified such a possibility. They could not possibly in their reservation have been referrng to any situation comparable to that in any of those decided cases. They had had before them dried fruits in time of glut, dairy products at risk of out of State competition, peanuts in time of market instability, hides and skins in a period of over-supply, travel in wartime, air transport with its risk of undue density, and banking in time of challenge to government control. In none of these did the possibility to which their Lordships refer reside. None of them were of a kind to which their Lordships could have been making reference. All were cases in which some public interest or community concern other than the maintenance of freedom of interstate trade, commerce and intercourse might be seen. The reservation expressed by their Lordships therefore must be to some situation as yet inexperienced and presumably unlike any that had so far occurred. If the marketing schemes with which the decided cases dealt are reviewed, I think it must be conceded that there are no circumstances attendant on the present scheme which could be regarded as opening up such a rare possibility as apparently their Lordships reserved for future consideration. Whilst I cannot now imagine such an occasion could justify the denial of individual participation, it must at least be said that nothing appears in the circumstances of this case to suggest that it is of that rare nature as to fall within the purview of their Lordships' reservation.
1. (1949) 79 C.L.R. 497; [1950] A.C. 235.
2. (1954) 93 C.L.R. 1; [1955] A.C. 241.
If, though to my mind inconceivable, it must be accepted that there may come to pass a situation in which monopoly of dealing in a commodity is the only reasonable and practicable way of securing the freedom of interstate trade, commerce and intercourse in or in relation to a commodity, it is of the utmost importance that the question to be answered, and answered by convincing evidence, should be precisely delineated. In that exercise, it must be constantly borne in mind that by no manner of "regulation" may interstate trade, commerce and intercourse be rendered unfree—I do not pause in this context to remark on the extent to which burdens on that trade, commerce or intercourse may amount to an invasion of its freedom. The constitutional requirement that such trade, commerce and intercourse be free is both paramount and unqualified. If the only method of dealing with some situation legislatively or administratively involves an invasion of that freedom, then, in my opinion, that method may not be employed. It is clearly not the case that interstate trade, commerce and intercourse shall be free unless the only reasonable and practicable method of handling some situation or industry otherwise within legislative or executive competence is to diminish or destroy that freedom.
The question therefore cannot be whether some legislative or executive scheme is the only reasonable and practicable method of controlling some industry or activity, whether it be primary or secondary. The question must relate to interstate trade, commerce and intercourse itself. Thus, in my opinion, that question should be: Is the legislative or executive scheme the only reasonable and practicable way of regulating interstate trade, commerce and intercourse in the particular commodity or activity, so that that trade, commerce and intercourse and the participation therein of individual citizens remain free: it is the only reasonable and practicable way of securing that freedom?
The onus of maintaining an affirmative answer would lie heavily on those who are supporting the validity of the scheme.
As the pleadings now stand, such a question does not arise. Although the defendant has already had, and I may say disdained, an opportunity to plead in such a way as to raise that question and to assert the circumstances on which it would rely to establish an affirmative answer, I think it should be given an opportunity to amend its pleading if it wishes to undertake the task of supporting the validity of the legislative scheme by an affirmative answer to the question I have posed. It may be that by pressing for proper particulars the plaintiffs may reach a position where even on the allegations of the defendant an affirmative answer is not possible.
I now turn to consider the footing on which the two Justices found themselves able in Clark King [14] to conclude that an absolute, or to use Sir John Latham's synonym in Milk Board (N.S.W.) v. Metropolitan Cream Pty. Ltd [1] , "simple", prohibition of interstate trade and commerce by the citizen in wheat did not offend s. 92. There can be no doubt that the evident intention of the statutes here in question is to effect such a prohibition: further, such a prohibition is what the statutes achieve in operation. Indeed, the defendant's claim in this case is that such a prohibition is valid: that it leaves trade, commerce and intercourse in wheat between the States quite free: it claims to be the only body able to sell or deal in wheat, whether within Australia or abroad. As a means of ensuring that situation, it is given power to acquire all wheat, including wheat which has become the subject of or is intended for interstate trade. The power of acquisition so asserted falls within the scope of decisions such as James v. South Australia [2] and James v. Cowan [3] .
1. (1978) 140 C.L.R. 120.
2. (1939) 62 C.L.R. 116, at p. 127.
3. (1927) 40 C.L.R. 1.
4. (1932) 47 C.L.R. 386; [1932] A.C. 542.
The basic proposition on which it is said that all trade by individuals in a commodity may lawfully be prohibited is that the ability of the individual to enter interstate trade is only incidental and not central but consequential to or upon a public interest which s. 92 is enacted to secure. Therefore, if "public interest" demands, according to the Court's view of the matter, the individual may be excluded entirely from interstate trade in the commodity in question. Presumably, none the less trade, commerce and intercourse between the States in that commodity will remain absolutely free.
The course of that reasoning begins with my brother Mason's judgment in Pilkington v. Frank Hammond Pty. Ltd. (Pilkington's Case) [4] . The relevant passage is as follows:
To elucidate this question it is necessary to turn to s. 92 itself. The section does not in terms speak of the private right of the individual to engage in trade, commerce and intercourse among the States; it refers to trade, commerce and intercourse among the States as an entire and total concept and provides that it is to be "absolutely free" in the sense in which this expression has been discussed in the decided cases. In saying so much the section protects the right of the individual to engage in inter-State trade, commerce and intercourse but it needs to be recognized that this protection is incidental to, and in a sense consequential upon, the protection which is given to the entire concept of inter-State trade, commerce and intercourse, including the various acts and transactions by which it is constituted.
The emphasis which in my opinion should be given to the public, as distinct from the private, character of s. 92 has importance in cases where
1. (1974) 131 C.L.R. 124, at pp. 185-186.
Before the publication of those reasons, no member of this Court had at any time suggested that the protection which the individual obtains in his trade, commerce and intercourse between the States is but incidental to some public character of the constitutional guarantee or that the guaranteed freedom was only qualified freedom, qualified by the demands of some public interest. Apart possibly from the cautionary remarks in the Bank Case [5] to which I have already referred, nothing in the advice of the Privy Council in the Bank Case lends any support to the proposition. The statement by my brother Mason, which I have quoted, was not based upon any authority, nor upon any expression of opinion on the part of any Justice of the Court, past or present, though in a later case some comfort was sought to be derived from the remarks quoted from the Bank Case. Though it is of no present consequence, I might mention that the passage which I have quoted from Pilkington's Case was not, in my opinion, a necessary part of his Honour's justification of his ultimate conclusion in that case.
1. (1949) 79 C.L.R., at p. 635.
The decision of the Court in Pilkington's Case, which was a unanimous decision so far as the result was concerned, was that where goods were in movement between the States in the course of trade and commerce, those who participated in that movement could not be prevented from effecting their part in that trade and commerce nor could their activity as co-operators in that trade and commerce be burdened by law. They could only be affected by a law truly "regulatory" in its nature of interstate trade and commerce. That conclusion all other members of the Court found quite compatible with all the prior decisions of the Court on s. 92 with the possible exception of Hughes v. Tasmania [6] . None of the Justices' views, including the ultimate conclusion of my brother Mason, depended upon a view that the protection afforded the individual in his interstate trade by the constitutional guarantee was but incidental to the promotion of some public interest which it was the purpose of the Constitution to protect or further.
1. (1955) 93 C.L.R. 113.
In truth, in my opinion, as I have said, the protection of the trade, commerce and intercourse of the individual is not incidental but central to the constitutional provision. I have indicated that the word "intercourse" has no relevant meaning if it does not actually, indeed exclusively, include the activities of citizens, natural persons or corporate persons. The same is true, in my opinion, of the word "commerce". Commerce necessarily involves the participation of persons, again natural or corporate—not as a matter of economic policy or theory—but as a matter of language. Commercial activity is the antithesis of governmental or executive activity. Inter-governmental arrangements are not properly described as commercial, however much they have commodities as their subject matter. In my opinion, the same may be said of the word "trade", though we have become, perhaps increasingly, aware of executive participation in activities which bear a close resemblance to the trading activities of persons. But, in my opinion, what the executive or government agencies do in this respect ought not properly to be described as "trading". This, I think, is particularly true of the activities of an agency of the executive which has a monopoly of acquisition and disposal of a commodity. Buy or sell governments and government agencies may, but their buying and selling is not truly a trading activity within the concept of trade, commerce and intercourse as found in s. 92.
The view so expressed in Pilkington's Case [7] received further development in my brother Mason's reasons for judgment in North Eastern Dairy Co. Ltd. v. Dairy Industry Authority of N.S.W. It was there expressed in the following passage [9] :
Nevertheless, some assistance in elucidating this problem is to be gained by recalling, as I had occasion to point out in Pilkington v. Frank Hammond Pty. Ltd., that s. 92 has a predominant public character and that the protection which it gives to the rights of the individual is incidental to and consequential upon the protection which is given to the entire concept of interstate trade. Once the predominant public character of the provision is recognized it is more easily perceived that regulation of interstate trade, for the benefit of the community may be consistent with the freedom which is guaranteed and that it may not necessarily involve any collision with the derivative protection which the section gives to individual rights.
The freedom guaranteed by s. 92 is not a concept of freedom to be ascertained by reference to the doctrines of political economy which prevailed in 1900; it is a concept of freedom which should be related to a developing society and to its needs as they evolve from time to time. Section 92 finds its place in a Constitution which was intended to operate beyond the limits of then foreseeable time—it would be a serious mistake to read the guarantee or immunity which it offers as one which necessarily and rigidly reflects ideas accepted almost a century ago. Instead, the section should be seen as a provision whose operation may fluctuate as the community develops and as the need for new and different modes of regulation of trade and commerce become apparent.
As I remarked earlier, regulation of interstate trade the effect of which is to protect the public from the risk of contaminated or impure milk does not contravene s. 92 so long as it appears that the detriment which it works to interstate trade is reasonably necessary to protect the interests of the public. There is, of course, no reason why the class of regulation consistent with the section should be limited to laws the effect of which is to protect public health. There are many other fields in which interstate trade may be regulated in the interests of the public in conformity with s. 92.
Again, though it may not presently matter, in my opinion, the opinion then expressed did not really form an essential part of the reasoning which led his Honour to his conclusion in that case. It is plain from what I have already said that I would not agree with the basis on which his Honour would justify some laws dealing with contaminated food. Public health is not, as it were, a subject matter excised from the area covered by s. 92: nor are those instances of acceptable regulation to be justified on the theory that they are provisions which the public interest reasonably requires.
1. (1974) 131 C.L.R. 124.
2. (1975) 134 C.L.R. 559, at pp. 614-615.
In Clark King [10] , his Honour repeated the assertion of Pilkington's Case and sought some support for it in the remarks of the Privy Council in the Bank Case, to which reference has already been made. Those remarks were called in aid as being in accord with the views expressed as to the paramount public interest or concern with which s. 92 is said itself to be concerned.
1. (1978) 140 C.L.R. 120.
In my reasons in Clark King, I mentioned that the public interest—and it is, in my opinion, the only public interest—served by s. 92 was the paramount concern that trade, commerce and intercourse, including such trade, commerce and intercourse as carried on by individuals, should remain absolutely free. I am not sure that I apprehend what is meant when it is said that the constitutional guarantee has a public aspect. If no more is meant than that those who drew the Constitution thought that it was beneficial to the public interest that interstate trade, commerce and intercourse should be absolutely free, then the statement adds nothing to our sum of knowledge. I would agree that, in the preparation of the Constitution, there was intense public concern that trade, commerce and intercourse between the States should be absolutely free. That concern for freedom of trade, commerce and intercourse doubtless prompted the inclusion of s. 92 and the securing of its constitutional paramountcy. Indeed, in any case, as I have elsewhere remarked, a provision such as s. 92 is an obvious concomitant of the introduction of a common external tariff in a federated area: and more particularly so when the resources, both primary and secondary, of the citizens of the States forming the federation are uneven and disparate.
But, seemingly, what is meant in the judgments to which I have referred is that there is some public interest or that there are public interests which surpass the public interest in the maintenance of the freedom of interstate trade, commerce and intercourse between the States and that such public interest or interests attract legislative power which is paramount over any right of the individual to ignore laws which impair his freedom to trade or move or communicate interstate. If the proposition is true, it is true for each State as well as for the Commonwealth. The public interest so envisaged will include that of the individual States and will not necessarily be the public interest of the Commonwealth or that of other States. To make the point, a State could on this view for the benefit of its wheat farmers, as representing a public interest of the State, prohibit the sale out of the State of locally grown wheat, particularly at a time when foodstuffs in that State are in short supply. Such a result would fly in the face of the decisions of the Privy Council and those of this Court of which the Council approved.
To say that there is some public interest is in truth, as it seems to me, to reverse the impact of s. 92 on s. 51 and s. 52 and s. 106. I say that because if one accepts the assertion that s. 92 so far from being paramount over all legislative power, State or federal, is itself subject to some legislative power, it would mean that any concern of the public of a State as such or of the Commonwealth or, perhaps, of some section of that public, may justify laws which prohibit the individual to trade in a commodity; which render him absolutely unfree to trade or to travel or communicate over State lines. After all, it must be remembered that the statutes here in question are predominantly based on sectional interest.
This reversal of the paramountcy of s. 92 is indeed, in my opinion, the effect of the reasons of the majority in Clark King [11] . Under the scheme that decision supports, there can be no trade whatever conducted in wheat by citizens. Indeed, there may in fact be no interstate trade even by the Board if for any reason, including the price obtainable internationally for wheat, the Board decides not to dispose of wheat from one State to another. There seems to be nothing, for exmple, to prevent the Board deciding that wheat should not be used for animal food and to that end refusing to sell wheat grown in one State to gristers in another. Such a result, as I have said, is to reverse the impact of s. 92 on s. 51 and s. 52 and s. 106 and to destroy or at the very least to qualify the paramountcy of the constitutional guarantee over all legislative power.
1. (1978) 140 C.L.R. 120.
In my opinion, such a situation does not result from interpreting the Constitution in any manner with which the Court has ever been familiar. Rather, it is an attempt to reconstruct the Constitution and to allow of the exercise of power to render interstate trade, commerce and intercourse unfree. But if the section is to be overturned it cannot be overturned by judicial decision but only by the Parliament and the electors conformably with s. 128.
As I pointed out in my reasons in Clark King, there is, in my opinion, no accretion of power to the Commonwealth or to the States from combined action by them. The legislative powers are several and whilst complementary legislation may enable uniform treatment of a subject matter and thus avoid the effect of territorial boundaries, where there is a constitutional inhibition on the exercise of all legislative power, the consequence may not be avoided by complementary legislation.
I have remarked elsewhere upon the restiveness with which no doubt legislators view an inhibition upon legislative power, particularly when, as in the case of the Australian Constitution, the legislative power is denied both to the Commonwealth and to the States. But such a restiveness is no concern of the Court which is saddled with the duty of interpreting the words of the Constitution, giving them their full weight without qualifications which are not inherent in the language of the Constitution itself.
Clark King [12] was decided on demurrer. There was no evidence of any kind produced in that case. The defendant produced some documents explanatory of its own position but they did not constitute evidence. Yet the conclusion of the two Justices was that the scheme of the Acts under challenge represented the only practical or the only reasonable method by which, not, as I read their reasons, interstate trade and commerce in wheat, but the wheat industry could be regulated. That, if I may say so with due respect, apart from the absence of evidence, could never have been the question in the case. Even giving the cautionary remarks of the Privy Council the fullest effect it is possible to attribute to them, the question was whether the impugned statutory scheme was the only practicable method of regulating interstate trade and commerce in wheat. I have already indicated that to assert that a government monopoly is the only method of "regulating" interstate trade and commerce in wheat, using the word "regulating" in its special sense, appears to me to be in terms a proposition which cannot be made out. Little wonder that counsel for the Australian Wheat Board in Clark King disowned the submission that the statutory scheme in question was of that kind.
1. (1978) 140 C.L.R. 120.
Having regard to something which is said in my brother's reasons in Clark King I should add that the views which heretofore have been accepted as to the meaning and operation of s. 92 have not depended upon the acceptance of some particular theory of political economy, just as I would expect that any attempt to qualify the constitutional guarantee would not be made in an attempt to follow some other and perhaps more recent, and, because of its recency, thought to be a more acceptable, theory of political economy. Of course, the Constitution needs to be applied in a changing world. But, in my opinion, whilst the denotation of its language may enlarge and come to embrace new manifestations, the connotation of its language remains constant. What falls for construction are the words of the Constitution: to them, meaning must be attributed and, being attributed, it remains constant. Thereafter, those words, as construed, must be applied. And, of course, they are to be applied in the situation of current times. Doubtless, on occasions, the width of their applicability will increase. The undoubted fact is that the application of the Constitution to new events and in new times can see a widening of the area which the language of the Constitution properly construed can cover or effect. But that undoubted circumstance affords no justification for the Court to alter the Constitution or to alter the connotation of the language in which it is expressed. The Court has no function to attempt to "modernise" the Constitution or its operation, if that is what some may think ought to be done. If there is to be a change, it is to be done, as I have earlier remarked, by the Parliament and the electors through s. 128 and not by decisions of this Court. Further, in ascertaining the meaning of the language of the Constitution, the reasons for its choice can only have relevance if ambiguity exists in the language employed and must be resolved. For my part, there is no ambiguity in the meaning of the words of s. 92, though the application of the accepted meaning may involve difficulty. It is only in this application that the Constitution is to be applied in a changing world.
It may be, of course, that the presence of s. 92 in the Constitution was supported by those who believed that trade, commerce and intercourse should be carried on by individuals and not by the State. Perhaps there remain many of the same view: but that is of no present consequence any more than the fact that there are some who have an opposite view.
But, even accepting that the presence of s. 92 in the Constitution is due to the entertainment by our forefathers of some theory of political economy current or favoured at the time the Constitution was devised, that circumstance would have little consequence except in relation to the matter of textual construction in case of ambiguity. Once the section was written out, the only remaining question, putting aside questions of textual ambiguity—a matter which, in my opinion, does not here arise—is to give effect to the language employed by the Constitution itself. Since the decision of Amalgamated Society of Engineers v. Adelaide Steamship Co. Ltd. [13] there can be no doubt of that proposition.
1. (1920) 28 C.L.R. 129.
Nothing I have ever written, nor, as far as I am aware, nothing that has been said in the decided cases, on the operation of s. 92 has depended on any other consideration than the words of the Constitution itself.
In my opinion, the impugned sections on their face and in their intended operation are invalid, as in breach of s. 92, and the notices referred to in clause 7 of the statement of claim are void and ineffective. The majority decision in Clark King [14] should, in my opinion, be overruled. The declaration sought by the plaintiffs should be made and consequential relief granted.
1. (1978) 140 C.L.R. 120.
But, if this view is not acceptable to a majority of Justices and the validity of the impugned statutes must depend upon a question of fact, that fact, in my opinion, is whether the statutory scheme they represent is the only reasonable and practicable way in which the freedom of interstate trade and commerce in wheat, including the participation therein of the individual citizen, can be secured. If the defendant desires to support an affirmative answer to that question by evidence, it should be given leave to amend appropriately its statement of defence.
Gibbs and Wilson JJ.
Clark King & Co. Pty. Ltd. v. Australian Wheat Board [14] is a recent decision of this Court upholding by a majority of three Justices to two the validity of Commonwealth and State legislation embodying a wheat stabilization scheme. That scheme, supported by the Parliaments of the Commonwealth and all the States, had the effect of enabling the Australian Wheat Board to acquire all wheat grown in Australia (with immaterial exceptions) and of establishing the Board as the sole vendor of all wheat.
1. (1978) 140 C.L.R. 120.
The present plaintiffs wish to engage in an act of interstate trade in wheat, and claim that s. 92 of the Constitution renders inapplicable to them the provisions of the relevant legislation embodying the stabilization scheme. In so doing, of course, they are immediately confronted with the decision of the Court inClark King. However, in August 1979, the Court gave directions to the parties in the following terms:
1. That the Court will allow argument as to the validity of s. 10(2) of the Wheat Industry Stabilization Act, 1974 N.S.W., as amended, and s. 12 (3) of the Wheat Industry Stabilization Act, 1974 (q.), as amended.
2. That the decision in Clark King & Co. Pty. Ltd. v. Australian Wheat Board does not preclude the examination in the instant proceedings of the facts upon which either party may claim the validity of the relevant statute depends.
Unfortunately, these directions have proved only of limited assistance to the parties in their preparations for trial because of uncertainty as to whether the validity of the legislation depends upon evidence, and if so as to the nature and scope of that evidence. A great deal of material has been supplied to the Court to indicate the range and complexity of the issues of fact upon which the parties are unable to agree, and that may have to be litigated. The doubtful questions of admissibility and relevance have now brought the parties back to the Court in the hope of receiving directions which will facilitate a clarification of the issues for trial. The Chief Justice has reserved for the consideration of the Court three questions as follows:
1. Does the validity of the Wheat Industry Stabilization Act, 1974 N.S.W., as amended, and the Wheat Industry Stabilization Act, 1974 Q., as amended, depend on the establishment to the satisfaction of the Court of any fact? If so, what is that fact?
2. Is that fact to be determined solely upon material which is within judicial knowledge?
3. Does s. 92 prevent the application of the Wheat Industry Stabilization Act, 1974 N.S.W., as amended, and the Wheat Industry Stabilization Act, 1974 Q., as amended, or either of them to the transaction particularised in par. 7 of the statement of claim?
It has been recognized throughout that the third question will only be capable of being answered at this stage if the Court were to conclude that none of the disputed questions of fact are relevant to the question of validity.
When the matter came on for hearing, interventions were announced on behalf of the Attorneys-General of the Commonwealth and each of the States. The Commonwealth and New South Wales and Queensland were joined as parties to the action. The Australian Wheatgrowers' Federation, in the special circumstances of its position as a party to the accord as a result of which the legislation has been enacted, was granted leave to intervene in the argument.
There are evident difficulties and dangers in the Court undertaking an advisory role such as is required by the first and second questions that have been reserved. For this reason, the Court proceeded to invite argument from the parties and the interveners upon a more general question: What are the principles upon which the Court should decide the validity of the statutes presently in question in their application to interstate trade commerce and intercourse?
The form of this question enabled the plaintiffs to join issue with the defendants and the interveners on the basic problem that has confounded successive generations of lawyers and judges, namely, the nature and extent of the freedom which s. 92 secures for interstate trade commerce and intercourse.
For the plaintiffs, the answer in the context of this case is clear: Section 92 protects the interstate trade of the individual, and while one concedes that a measure of regulation may be consistent with absolute freedom, prohibition is not regulation. It is plain that the wheat stabilization legislation is directed to creating a monopoly in favour of the Australian Wheat Board, and that it excludes entirely any freedom of the grower to sell his wheat as he pleases. It is argued that the present condition of Australian society is reasonably stable, that the Court will take judicial notice of such a fact, and that no facts of whatever description could so colour the scheme as to make its purported impact on the interstate trader consistent with s. 92. It then follows as a matter of course, so the plaintiffs say, that the legislation can have no valid application to their transaction of interstate trade, and there is no obstacle to the Court proceeding without further argument to grant them the relief they seek.
The opposing contention is that neither of the two basic propositions advanced by the plaintiffs is correct. As to the first, it is argued that s. 92 is essentially a declaration of a public right from which the individual trader derives such freedom as is compatible with the public interest. As to the second, prohibition of individual rights may be a form of regulation consistent with s. 92. The test for determining such consistency was put in a number of ways. Mr. Pincus, appearing for the Wheat Board, advanced "essential in the interests of the community" as an appropriate test. Mr. Byers, the Solicitor-General of the Commonwealth, provided us with alternative propositions: in a case in which the prohibition formed part of a larger plan such as a marketing scheme the test of reasonableness was sufficient; in a case of simple prohibition, that is to say, simple in the sense that the individual is totally excluded from the trade, then the question is whether it is the only reasonable and practical solution.
We appreciate the dilemma in which the parties have found themselves in this case, confronted as they were with the prospect of a long and costly trial of issues of fact the relevance of which was a matter of dispute; nevertheless we think it is a pity that the Court is required to embark on a discussion of abstract principle. In our view, the words which Dixon J. wrote thirty-five years ago in the case of Gratwick v. Johnson [16] remain apt:
In questions concerning the application of s. 92 of the Constitution, I think that it has become desirable for the Court to avoid as far as possible the statement of general propositions and in each case to decide the matter, so far as may be, on the specific considerations or features which it presents. None of the many attempts that have been made to formulate principles or to expound the meaning and operation of the text has succeeded in giving the guidance in subsequent cases which their authors had hoped. What has been clear has not found acceptance and what has been accepted has yet to be made clear.
Impressed as we are by this advice, we propose to write no more than seems necessary for the immediate purposes of the present case.
1. (1945) 70 C.L.R. 1, at p. 19.
The opposing contentions on the question of the "public" as opposed to the "private" character of s. 92 are sufficiently expressed in the reasons of Mason and Jacobs JJ. on the one hand, and of Barwick C.J. on the other hand, in Clark King [17] . The joint reasons of Mason and Jacobs JJ. are an application of the reasoning employed separately by each of those Justices in earlier cases: Pilkington v. Frank Hammond Pty. Ltd. [18] per Mason J. and per Jacobs J. [19] ; and North Eastern Dairy Co. Ltd. v. Dairy Industry Authority of N.S.W. [20] per Mason J. However, both the competing views are in our respectful opinion attended with logical difficulties. On the one hand, if the public character of s. 92 is pressed to its logical conclusion, leaving individual rights to arise only as a matter of consequence, and in subordination to "the interests of the community" (Permewan Wright Consolidated Pty. Ltd. v. Trewhitt [21] per Mason J.), by reference to what criteria will a citizen ever be able to discern a right to protect his trade against the enactment of a democratically elected legislature? On that approach it would seem that every statute would be entitled, at least at the time of its enactment, to a presumption that it is an Act for the peace, order and good government of the community, and would therefore be subject to a conclusion prima facie that it would not be affected by s. 92. On the other hand, the Chief Justice, when espousing the individual rights doctrine, readily acknowledges that there are fields of regulation open to the legislature as being inherent in the nature of freedom because they are directed to the mutual accommodation of the rights and obligations of individual traders (Samuels v. Readers' Digest Association Pty. Ltd. [22] . But in many cases, with all respect, these examples of proper legislative activity may be characterized as giving expression to the public character of s. 92. More recently, his Honour has made the point in words which admit of such a characterization (Permewan Wright [23] ):
Laws which in terms prohibit dealing in deleterious substances, in practices injurious to human safety, or restrictive or fraudulent practice in trade are not qualifications on or of freedom of trade: they are but extrapolations of what is inherent in the concept of freedom in a civilized society, civilized because freedom is distinguished from licence.
See also the thorough discussion by Stephen J. of such regulatory laws in Permewan Wright [24] .
1. (1978) 140 C.L.R., at pp. 188; 150-157.
2. (1974) 131 C.L.R. 124, at pp. 185-186.
3. (1974) 131 C.L.R., at pp. 198-199.
4. (1975) 134 C.L.R. 559, at pp. 614-616.
5. (1979) 145 C.L.R. 1.
6. (1969) 120 C.L.R. 1, at p. 16.
7. (1979) 145 C.L.R., at p. 10.
8. (1979) 145 C.L.R., at pp. 26-32.
We are unable to accept the proposition that the public character of s. 92 goes so far as to authorize any law however restrictive it may be of the freedom of the individual trader to trade so long as it is reasonable in the circumstances, and does not constitute a mere prohibition. This was the first of the two propositions advanced by the Commonwealth and supported by the other defendants and interveners. Such a test would virtually write s. 92 out of the Constitution, and is unsupported by any decision either of the Privy Council or of this Court. On the other hand, we accept the reservation of their Lordships in The Commonwealth v. Bank of New South Wales [25] relating to a monopoly as of present relevance, given circumstances that justify its application. The plaintiffs, represented by Mr. Fitzgerald, argued that the reservation, if it had any positive character at all, could have application only to situations of national emergency as yet unforeseen or to situations in which the very continuance of society depended upon the prohibition or restriction of interstate trade. It is a submission of substance, but with respect we do not think that one can establish rigid categories either of inclusion or exclusion.
1. (1949) 79 C.L.R., at pp. 640-641; [1950] A.C., at p. 311.
The conclusion to which we have come, doing our best to be sensitive to the collective wisdom of this Court and the Privy Council over the years that have gone, but remembering that our primary loyalty must be to the words of s. 92 itself, is that the section is concerned to protect private rights. Absolute freedom of interstate trade commerce and intercourse requires that the citizens of this Commonwealth shall within the framework of a civilized society be free to engage in these things. The difficulty is that the trend of political theory and practice is to develop and strengthen that framework more and more and often at the cost of individual liberty; but however conservative or reactionary it may seem to some, this Court cannot write s. 92 out of the Constitution. It must therefore do its best to preserve a balance between competing interests, a balance which favours freedom for the individual citizen in the absence of compelling considerations to the contrary. As their Lordships remarked in the Bank Case [26] : "The problem to be solved will often be not so much legal as political, social or economic. Yet it must be solved by a court of law."
1. (1949) 79 C.L.R., at p. 639; [1950] A.C., at p. 310.
In this case we are concerned with legislation which establishes a monopoly in favour of the Australian Wheat Board in respect of all wheat grown in Australia. In the Bank Case, their Lordships, after agreeing with the proposition that simple legislative prohibition, as distinct from regulation, of interstate trade is invalid, went on to say [27] :
Yet about this, as about every other proposition in this field, a reservation must be made. For their Lordships do not intend to lay it down that in no circumstances could the exclusion of competition so as to create a monopoly either in a State or Commonwealth agency or in some other body be justified. Every case must be judged on its own facts and in its own setting of time and circumstance, and it may be that in regard to some economic activities and at some stage of social development it might be maintained that prohibition with a view to State monopoly was the only practical and reasonable manner of regulation and that inter-State trade commerce and intercourse thus prohibited and thus monopolized remained absolutely free.
In Clark King [28] , the Chief Justice found that this possibility strained his credulity. With all respect to his Honour we do not find the reservation at all remarkable. As their Lordships said, it was a reservation which "must be made". Nor can its application be confined to cases of monopoly in trade. Gratwick v. Johnson [29] is one case which must have been decided differently if the circumstances in which the citizen was denied the right to travel interstate had been such that all means of transport were required for troop movements. Their Lordships in a paragraph immediately following the passage quoted above from the Bank Case gave several other examples of prohibitory laws which they considered clearly amounted to no more than regulation of trade and intercourse [30] . Again, in James v. The Commonwealth [30a] , the Privy Council found it necessary to defend the postal services monopoly as "a limitation notoriously existing in ordinary usage in all modern civilized communities".
1. (1949) 79 C.L.R., at pp. 640-641; [1950] A.C., at p. 311.
2. (1978) 140 C.L.R., at p. 156.
3. (1945) 70 C.L.R. 1.
4. (1949) 79 C.L.R., at p. 641; [1950] A.C., at pp. 311-312.
5. (1936) 55 C.L.R. 1, at p. 54.
Nor do we think it possible to regard the reservation as one having no contemporary relevance. If such had been their Lordships' intention, it is remarkable that within five years they could speak as they did in Hughes & Vale Pty. Ltd. v. New South Wales [No. 1] [31] with reference to the passage that has been quoted. Their Lordships said:
As to the passage in the judgment of the Board in the Bank Case upon which counsel for the respondents particularly relied, their Lordships accept without qualification everything that was said by the Board in the Bank Case, but they are not aware of any circumstances in the present case giving rise to the situation contemplated in that passage. As the case was decided on demurrer, no evidence was given on either side at the hearing, although certain documents were annexed to the respondents' defence. Consequently no facts were proved which might have enabled the respondents to base an argument on the passage in question.
This passage brings us directly to the present issue. The plaintiffs argue that none of the facts which the Wheat Board seeks to prove could establish the scheme as "the only practical and reasonable manner of regulation". At this stage, of course, the Court has not heard any argument directed to the facts, and that must be borne in mind. However, some confusion, so it seems to us, centres on the word "only". It is not that a particular scheme, in all its details, must be shown to be the only practical and reasonable method of regulation. The reservation in the Bank Case was expressly made with respect to prohibition with a view to monopoly. Therefore what must first be shown in order to establish validity is that a monopoly covering both intrastate and interstate trade is the only practical and reasonable course open in present circumstances. The test remains a most stringent one, not likely to be satisfied except in exceptional circumstances. If that test is satisfied, it is still necessary for the Court to consider whether the interstate trade, so regulated, is "absolutely free" within the meaning of s. 92.
1. (1954) 93 C.L.R., at p. 34; [1955] A.C., at p. 308.
The present is clearly a case in which "factual information" (to use the neutral expression found in Breen v. Sneddon [32] ) is required to enable the Court to decide on the constitutional validity of the legislation in question—at least, in the absence of the necessary information the defendants must fail. In some cases the factual information may be given in the form of agreed statements, and in others it may be possible to take judicial notice of the relevant facts. However, there is no reason why the facts should not be proved by evidence, and it was recognized that evidence may be given for such a purpose in Wilcox Mofflin Ltd. v. New South Wales [33] , as well as in the passage cited above from Hughes & Vale Pty. Ltd. v. New South Wales [34] . The following statement of Jacobs J. in the North Eastern Dairy Case [35] , is in our opinion correct: " in every case it is necessary to examine the nature and quality of the restriction in the light of the known and proved economic social and other circumstances of its imposition and of the community in which it is imposed." There is no escape from the conclusion that the defendants must be allowed, if they wish, to make any necessary amendment to their pleading and to have the opportunity of proving facts which bear on the question of validity.
1. (1961) 106 C.L.R. 406, at p. 412.
2. (1952) 85 C.L.R. 488, at p. 507.
3. (1954) 93 C.L.R., at p. 34; [1955] A.C., at p. 308.
4. (1975) 134 C.L.R., at p. 624.
This brings us back to the questions which the Court is asked to answer. It is clear enough that the validity of the Acts may depend upon the establishment of facts. However, the second part of the first question really seeks an advisory opinion. The defence does not allege any facts in the light of which the legislation might be held to be valid, and there are differences of opinion within the Court as to the proper principle to be applied. It is therefore particularly inappropriate to answer that part of the question. If this result is unsatisfactory to the parties, as no doubt it is, we can say only that it is the result of embarking on an unusual course of procedure which is attended with precisely this kind of difficulty.
We would therefore answer the questions that have been reserved as follows:
1.
There may be facts whose existence is relevant to the validity of the Acts, but the admissibility of evidence to establish any such facts will be subject to any amendment of the pleadings.
It is not appropriate to answer the second part of the question.
2. No.
3. Not appropriate to answer.
Stephen and Mason JJ.
The joint judgment of Gibbs and Wilson JJ. describes the circumstances of the present proceedings and the contentions of the parties; accordingly, to these we need make no further reference. We share their Honours' reluctance to embark upon a discussion of abstract principle. However, in order to aid in the further conduct and final resolution of these proceedings, some discussion of the substance of what is raised by questions 1 and 2, as reserved for the consideration of this Court, is called for.
In recent cases, in particular in Clark King & Co. Pty. Ltd. v. Australian Wheat Board [36] and Permewan Wright Consolidated Pty. Ltd. v. Trewhitt [37] , we have each stated our separate views concerning aspects of s. 92 which are relevant to the present case. Clark King is particularly in point since it dealt with the case of a monopolization of trade in wheat, albeit under somewhat different legislation. We share the views now expressed by Gibbs and Wilson JJ. about the need for "factual information" in the determination of this case and about the ways in which that need may be met. Accordingly we agree with the answer "No", which they propose to question 2, and that it is inappropriate to provide any answer to question 3.
1. (1978) 140 C.L.R. 120.
2. (1979) 145 C.L.R. 1.
There remains question 1. It asks whether the validity of the legislation depends upon any and, if so, what fact (meaning no doubt, an ultimate as distinct from an evidentiary fact). In Permewan Wright [38] , Stephen J. said:
This leads me to the suggestion made in argument that quite precise rules govern this question of choice between means of attaining desired legislative objectives. It was said that where a law prohibited interstate trade its validity would depend upon it being the only reasonable method of regulation, whereas where no outright prohibition was in question the fact that the law was one of a number of reasonable alternative methods of regulation might suffice to uphold validity.
In the Clark King Case it appeared to me to be appropriate, in light of the legislative and evidentiary context, to apply what their Lordships had said in the Banking Case [39] where they referred to the valid prohibition of interstate trade with a view to State monopoly where that course was "the only practical and reasonable manner of regulation". However no neat formula, to be used for the resolution of different cases on quite different facts, can be extracted from their Lordships' words. If a law which bears upon interstate trade is nevertheless to be valid because regulatory the restrictions which it imposes must be no greater than are reasonably necessary in all the circumstances. The harsher the restrictions the more critically will the necessity be scrutinized and the greater will be the significance to be attached to the existence of other means of attaining the end in view which are, at the same time, less injurious to interstate trade. To say this is, perhaps, to do no more than to repeat, in different words, what I said in Clark King [40] when I observed that "validity will always involve questions of degree and of the relative reasonableness of such laws".
1. (1949) 79 C.L.R., at p. 641; [1950] A.C., at p. 311.
2. (1978) 140 C.L.R., at p. 172.
Mason J. commented in Permewan Wright [41] as follows:
As I observed in the North Eastern Dairy Case [42] the answer to the question whether particular legislation constitutes a reasonable regulation of interstate trade will depend upon a variety of factors. They will include the nature of the regulation sought to be imposed, the mischief which it is designed to remedy and the goal which it seeks to achieve, as well as the effect which the regulation has on the relevant interstate trade.
Nothing which we have heard in argument in the present case has caused us to depart from the views we there expressed. We cannot accept the assumption which appears to be involved in question 1, that some particular ultimate fact, if established, will of itself ensure validity.
1. (1979) 145 C.L.R., at pp. 30-31.
2. (1949) 79 C.L.R., at p. 641; [1950] A.C., at p. 311.
3. (1978) 140 C.L.R., at p. 172.
4. (1979) 145 C.L.R., at p. 37.
5. (1975) 134 C.L.R., at p. 614.
To the extent that such a view has been encouraged by the observations of their Lordships in the Banking Case [43] , we cannot regard those observations as intended to express or, indeed, as capable of expressing in some definitive formula the circumstances in which interstate economic activity may validly be prohibited with a view to state monopoly. Any such formula would, we think, be inappropriate for use in determining constitutional validity in terms of s. 92.
1. (1949) 79 C.L.R., at p. 641; [1950] A.C., at p. 311.
To adopt such a formula will be to accept its indiscriminate application, regardless of circumstance; while the prospects of certainty which its adoption may seem to offer in return will, we think, prove illusory. Both the range of its application and its operation when once applied appear to us to bear the seeds of uncertainty.
The terms of the formula seem to limit its application to only certain prohibitions, those enacted with a view to state monopoly. This may suggest that some other, different test of validity should apply to prohibitions having other aims; for example, the aim of creating duopolies or oligopolies, with or without State participation. If so, there will exist a variety of different tests. Each will apply only to a particular class of restriction upon interstate trade. Each will be distinguished from the others by criteria which may bear little relationship to the words of s. 92. This seems likely to produce a pattern of decisions unlike any which might be expected to emerge from a reasoned reconciliation of the freedom of which s. 92 speaks with the ordered society which enjoyment of that freedom requires.
If, on the other hand, the fomula is to be applied to every case of prohibition its present terms will not do, they will require restatement. Moreover, its application will lead to a quite sharp distinction being drawn between regulation of trade which involves prohibition and that which does not. There seems no warrant for such a distinction; restrictions upon the freedom to trade are infinitely variable in their impact upon the trading community. Arbitrarily to divide them into two different categories, those which involve prohibition and those which do not, ignores the realities of trade and commerce.
The formula seems likely to be no more satisfactory in its operation than in its range of application. Its reference to the "only" practical and reasonable manner of regulation requires that to be valid a particular prohibiting law must be the sole such manner. We cannot think that the face of a prohibitory law, designed to introduce a regimen of state monopoly and which is in itself both practical and reasonable, should depend upon whether or not there exists an alternative means of regulation which prohibits with a view to the introduction of a different regimen, perhaps one similar to Australia's "two airlines policy". Yet this would seem to be the consequence of converting the observations of their Lordships into a formula for validity.
The word "practical" appearing in the formula is also not without difficulty. A discussion of its meaning and of the distinction to be drawn between it and the word "practicable" appears in Fowler's Modern English Usage, 2nd ed. With respect to their Lordships, we would understand "practical", as it occurs in their Lordships' phrase, to bear the meaning perhaps more accurately conveyed by the word "practicable", that is, the meaning of "capable of being carried out in action, feasible": Shorter Oxford English Dictionary. What "practical" conveys, the notion of being "adapted to actual conditions", seems unlikely to have been the meaning intended. What follows proceeds upon this assumption.
The formula couples two concepts, the practical and the reasonable. The quality of being practicable (that being our understanding of what is there meant by "practical") seems to be concerned very largely, if not exclusively, with whether or not a particular statutory scheme is feasible from the viewpoint of those administering it. Reasonableness, on the other hand, we regard as concerned with the adverse effect of the challenged law upon those whose activities in trade are affected by it, that adverse effect being weighed against the need which is felt for regulation in the interests of the public generally.
Although the formula couples them together, these qualities are not, we think, complementary; indeed, they seem, rather, to operate in opposing senses. Those who seek to uphold a law's validity will be concerned to show that it involves a reasonable manner of regulation. The question of whether it is practicable will only enter into consideration if those who urge its invalidity propose an alternative means of regulation which, while directed to the same object, imposes less restraint upon the freedom of interstate trade. The issue will then be whether those alternatives are as practicable as the law in question. If those urging invalidity propose no alternatives the Court will not be concerned to consider whether the law is practicable: the suggested formula apart, the Court has no concern with whether legislation is practicable. If it lacks practicable operation, so much the worse for the government which seeks to operate and enforce it; it will not, of itself, affect, one way or another, that legislation's constitutional validity.
All this may suggest that, despite the grammatical construction of their Lordships' phrase, "only" should be regarded as governing "practical" but not "reasonable". Be that as it may, the foregoing, to our minds, at least casts doubt upon the whole process of extracting this phrase from their Lordships' judgment and converting it into a conclusive formula by which validity is to be tested.
The evidence which we would regard as relevant in determining the validity of the present legislation would be such material as would enable the Court to determine whether or not the restrictions which the legislation imposes upon interstate trade are no greater than are reasonably necessary in all the circumstances. For example, it would be relevant to establish what are the goals sought to be attained by the restrictions; how these may be weighed against those restrictions and whether they can be attained by other means which do not involve such onerous restraints upon traders.
It will of course be for the parties to determine the particular evidence to be adduced, always bearing in mind that the criterion of permissible regulation of interstate trade is that the legislation should be no more restrictive than is reasonable in all the circumstances, due regard being had to the public interest. The importance of this matter of the public interest must never be lost sight of: as Mason J. has said in Permewan Wright [44] , s. 92 is to be "understood as presupposing a society in which conduct is regulated in the interests of the community".
1. (1979) 145 C.L.R., at p. 36.
The spirit, if not the letter, of question 1 requires that guidance be given to the parties concerning the evidence which may be relevant to the issue of validity. As will already have emerged, our response is to say that all evidence is relevant which goes to the issue of whether or not the restrictions imposed by the legislation are no greater than are reasonably necessary in all the circumstances of the case.
Murphy J.
This is another challenge to legislation implementing the national Wheat Marketing Scheme. An earlier challenge was rejected in Clark King & Co. Pty. Ltd. v. Australian Wheat Board [45] which upheld the validity of Commonwealth and State legislation facilitating a comprehensive marketing scheme for the purpose of stabilizing returns to Australian wheat growers and wheat prices in Australia. The plaintiffs challenge the validity of the Wheat Industry Stabilization Acts of New South Wales and Queensland and, as a corollary, the correctness of this Court's decision in Clark King.
1. (1978) 140 C.L.R. 120.
This scheme, which is implemented by co-operation of the Parliaments of the Commonwealth and all States, has the overwhelming support of the wheatgrowing community. The Acts and State Acts, which are in similar form, provide for an Australian Wheat Board with power to acquire compulsorily all wheat grown in Australia and to sell it here and to other countries. The legislation operates to eliminate any economic boundaries between the States in the marketing of the wheat crops. Growers are paid for wheat on the basis of a formula which takes into account receipts from overseas as well as Australian sales, each grower being paid the same price for the same quantity and quality of wheat.
It is clear from this case that the meaning and application of s. 92 is not settled. I adhere to my statements in Clark King, Buck v. Bavone [46] and other cases. Section 92 is only concerned with customs duties and other discriminatory fiscal imposts and guarantees that trade, commerce and intercourse among the States shall be absolutely free from them. The surrounding sections are concerned with fiscal matters. This view is fortified by the decision in Seamen's Union of Australia v. Utah Development Co. [47] in which it was held that s. 91 of the Constitution was confined to fiscal or pecuniary aids and did not extend to non-fiscal or pecuniary assistance. Like the other sections surrounding s. 92 (ss. 86, 87, 88, 89, 90, 93, 94 and 96), s. 91 is concerned with finance. Section 91 does not apply to non-fiscal aids, and s. 92 does not apply to non-fiscal burdens.
1. (1978) 140 C.L.R. 120; (1976) 135 C.L.R. 110.
2. (1979) 144 C.L.R. 120.
If, apart from discriminatory fiscal imposts forbidden by s. 92, a State were to interfere with interstate trade and commerce in any way considered detrimental by the Parliament of the Commonwealth, the remedy is provided by s. 51 (i.) of the Constitution which empowers the Parliament to make laws with respect to "trade and commerce among the States". The federal law will prevail and the State law will be invalid (see s. 109 of the Constitution).
The misinterpretation and misapplication of s. 92 has undermined and destroyed much social legislation. Lord Wright who, as a member of the Privy Council was one of those largely responsible for this distortion of the Constitution, later repented. He said:
"The idea of s. 92 as a power in the air brooding and ready in the name of freedom to crush and destroy social and industrial or political experiments in Australian life ought, I think, to be exploded. In truth, as I said, s. 92 is both pedestrian and humble, though very essential from the point of view of the founders of the Constitution who wished to establish internal inter-State free trade in fiscal matters for all time." "Section 92—A Problem Piece", Sydney Law Review, vol. 1 (1954), 145, at p. 157.
Other views of s. 92 give it an application beyond fiscal imposts. They embrace all legislative and administrative acts impinging on trade, commerce and intercourse among the States. If "absolutely" were given its ordinary meaning, the result of those views would be economic anarchy. This has been avoided by reading the section as if "relatively" were substituted for "absolutely". By this means, "regulatory" measures are regarded as consistent with s. 92. As the unfolding of these views proceeds, it becomes clearer that those who espouse them are being forced to assume a supervisory role over the national economy. Courts have traditionally evolved and applied certain public policy tests. Thus, in human rights and other non-economic areas, courts have applied tests of due process, natural justice, reasonableness and fairness. In economic areas, courts have exercised such a role only in a very limited way, for example, in common law restraint of trade and statutory anti-trust cases. The adoption by the court of a super-legislative role in relation to the national economy is inconsistent with the separation of powers between the legislature and the judiciary. If these views prevail, it will not be enough for the six State Parliaments and the Australian Parliament to pass complementary economic legislation. The court will have to decide whether giving power to the Australian Wheat Board to acquire the whole crop is a reasonable way of regulating the marketing of the Australian wheat crop, or even whether it is the only reasonable and practicable way. For the reasons I outlined in Buck v. Bavone [48] , I do not think s. 92 gives this function to the judiciary.
1. (1976) 135 C.L.R. 110.
However, while adhering to my own view of s. 92, I would, as an alternative, support that which seems to be the nearest to mine in order to obtain or increase the vote for that view and to reject a more extreme alternative. The most extreme alternative is that which simply looks to see whether the State Acts prohibit interstate private trade and, if they do the State Acts are invalid. A less extreme formulation is whether the legislative scheme is the only reasonable and practical way of regulating the marketing of wheat. The least undesirable is that which poses the test whether the Act is a reasonable way of regulating the marketing of wheat, no more restrictive than is reasonable in all the circumstances, with due regard having been given to the public interest. As this case may have to be decided by a trial judge (or one may have to determine the admissibility of evidence on the issue of validity), I would, if my own view does not prevail, support the view expressed by Stephen and Mason JJ.
Although fashioned at the end of the nineteenth century, the Constitution did not entrench nineteenth century economic ideas. Yet for most of its history, s. 92 has been construed as if it guaranteed that nineteenth century notions of laissez-faire would prevail. Regrettably economic and social ideas adopted by society in one era are often persisted with by judges long after they have been discarded by the rest of society. This was noted by Cardozo who quoted with approval the words of President Theodore Roosevelt in his Message to Congress on 20th December 1908:
The chief lawmakers in our country may be, and often are, the judges, because they are the final seat of authority. Every time they interpret contract, property, vested rights, due process of law, liberty, they necessarily enact into law parts of a system of social philosophy; and as such interpretation is fundamental, they give direction to all law-making. The decisions of the courts on economic and social questions depend upon their economic and social philosophy; and for the peaceful progress of our people during the twentieth century we shall owe most to those judges who hold to a twentieth century economic and social philosophy and not to a long outgrown philosophy, which was itself the product of primitive economic conditions. (The Nature of the Judicial Process, pp. 170-171.)
An extreme instance of laissez-faire ideas is the notion that the Constitution does not permit the Commonwealth Government, even with parliamentary authority, to engage in what can properly be described as trade or commerce. Yet the Constitution (s. 63) provided for the transfer to the Commonwealth of the departments of posts, telegraphs and telephones and certain other departments of the public service in each State. The department of posts, telegraphs and telephones was, as the Post Master General's Department for some seventy-five years and now as statutory corporations, the greatest trading business in the nation.
Section 92 prevails against the powers of the State Parliament (see s. 106) and on current theory against the exercise of power by the Parliament under s. 51 (by virtue of the words "subject to this Constitution"). If the plaintiffs are right, it is difficult to see why s. 92 would not prevail against any legislation directed to acquisition (compulsorily, if necessary) and distribution of the Australian wheat crop for any purpose. If they are right, the Australian Parliament and all the State Parliaments, even in co-operation, do not have legislative power to acquire wheat which is the subject of interstate trade in order to overcome a national famine or to fulfil an international obligation to give assistance in a world famine, or to advance Australia's defence.
The possibility that the Australian Parliament may wish (whether because of some international obligation or for humanitarian reasons) to exercise its external affairs power (s. 51 (xx.)) to relieve a famine outside Australia by acquiring part of the Australian food supply including wheat, is not theoretical. Australia is one of the few wheat-exporting countries. Many other countries (particularly those with serious over-population problems) are importers of wheat and other grains. The plaintiffs' theory of s. 92, if accepted, would leave Australia unable even through co-operative legislation of all its Parliaments to acquire wheat from those who wished to dispose of it in interstate trade.
Australia itself has had shortages of wheat, and in the last quarter of a century has had to import wheat (see R v. Commonwealth Conciliation and Arbitration Commission; Ex parte Australian Workers' Union [49] ). If there were a famine in Australia, according to the plaintiffs' contention, the Parliaments could not acquire by common action all the wheat or other crops for equitable distribution. If the extreme view is correct, persons would be entitled to trade interstate to make a profit out of the general distress. Similarly, the Commonwealth could not acquire all wheat or other crops for defence purposes; the immunity of interstate trade would prevail over even the most dire military emergency.
1. (1957) 99 C.L.R. 505.
The extraordinary consequences which would follow from adopting the extreme view of s. 92's scope suggest that this is not what was intended.
Section 92 and Freedom of Travel and Communication.
One of the arguments for regarding s. 92 as going beyond absolute freedom from custom duties or similar imposts, is that this gives a valuable guarantee of personal freedom of inter-state travel and communication. I have stated my views on this subject in several cases (Buck v. Bavone; Ansett Transport Industries (Operations) Pty. Ltd. v. The Commonwealth [50] ; McGraw-Hinds (Aust.) Pty. Ltd. v. Smith [51] ) but it may be convenient to mention them briefly. It would be astonishing to find the guarantees of such fundamental personal rights confined to their exercise "among the States" and in a section dealing with the abolition of customs duties in a Chapter headed "Finance and Trade".
1. (1976) 185 C.L.R. 110; (1977) 139 C.L.R. 54.
2. (1979) 144 C.L.R. 633.
Freedom of travel and communication can be implied from the nature of our society, reinforced by parts of the written Constitution. Implications have always been made in our Constitution (see West v. Commissioner of Taxation (N.S.W.) [52] ; Australian National Airways Pty. Ltd. v. The Commonwealth [53] ; Lamshed v. Lake [54] ; South Australia v. The Commonwealth [55] ; R. v. Commonwealth Court of Conciliation and Arbitration; Ex parte Victoria [56] ; Melbourne Corporation v. The Commonwealth [57] ; Victoria v. The Commonwealth [58] ; see also Uther v. Federal Commissioner of Taxation [59] ). Our Constitution and government could not function without the implications of federalism and responsible government. In my opinion, there are other constitutional implications which are at least as important as these. Our society is a union of free people joined in one Commonwealth with subsidiary political divisions of State and Territories, participating in elections of representatives who exercise the legislative and executive powers. From these flow implications of freedom of speech and assembly and of other forms of communication and travel, not merely interstate, but in and between all parts of Australia.
1. (1937) 56 C.L.R. 657, at p. 681.
2. (1945) 71 C.L.R. 29, at p. 35.
3. (1958) 99 C.L.R. 132, at p. 144.
4. (1942) 65 C.L.R. 373, at p. 447.
5. (1942) 66 C.L.R. 488, at p. 515.
6. (1947) 74 C.L.R. 31, at pp. 65, 70.
7. (1970) 122 C.L.R. 353, at pp. 401, 406, 418, 419.
8. (1947) 74 C.L.R. 508.
The challenged State Acts do not provide for any direct or indirect fiscal impost discriminating against trade and commerce among the States. Section 92 of the Constitution therefore has no application, and the State Acts are valid. The questions should be answered:
1. No.
2. Does not arise.
3. No.
Aickin J.
In this case the Court has before it three questions which have been referred to it by the Chief Justice at the request of the parties. It is however necessary before turning to the questions to consider the origin and status of the proceedings.
The plaintiffs in their amended statement of claim alleged that the first plaintiffs carried on the business of wheat growers in New South Wales and that they had entered into a contract in writing with the second plaintiff, Darwalla Milling Co. Pty. Ltd., a company which carried on business at Mt. Cotton in the State of Queensland as a manufacturer of poultry feed containing wheat, to sell certain wheat then growing in a specified area for use in manufacturing poultry feed. The contract which was annexed to the statement of claim contained a clause which was expressed to provide that the property in the wheat passed to the purchaser at the time of the contract, but nothing turns upon that provision since the statement of claim further alleged that the wheat was duly harvested and stored separately by the first plaintiffs pending delivery in accordance with the contract. It was thereby appropriated to the contract from the moment of its coming into existence as separate property. The contract provided that the vendors should harvest and store the wheat and deliver it to the purchaser at its factory at Mt. Cotton at such times and in such quantities as the purchaser shall determine. The statement of claim also alleged that on 21st November 1978 the defendant published in the Gazette certain notices pursuant to the Wheat Industry Stabilization Acts 1974 of each of the States and the Commonwealth which purported to authorize the defendant to require the delivery to it of substantially all the wheat in Australia and to enable it and no one else to market wheat in Australia and overseas. The notice with respect to the State of New South Wales was given pursuant to the Wheat Industry Stabilization Act, 1974 N.S.W. and required all wheat in or coming into the possession of any person in New South Wales between 1st November 1978 and 30th September 1979 to be delivered to the Board or a receiver licensed by it. The defence did not admit the nature and location of the second plaintiff's business nor the making of the contract, the harvesting or storage of the wheat or the passing of the property therein to the second plaintiff.
Attempts were evidently made by the parties to agree upon relevant facts but in the end no agreement was reached. After a number of applications to the Chief Justice had been made the parties agreed on three questions for the Full Court. Thereafter on 20th August 1979 those questions came before the Full Court. Two of those questions were answered by the Court saying that it would allow argument as to the validity of s. 10 (2) of the Wheat Industry Stabilization Act, 1974 N.S.W. and of s. 12 (3) of the Wheat Industry Stabilization Act, 1974 Q. and further that the decision of the Court in Clark King and Co. Pty. Ltd. v. Australian Wheat Board [60] (Clark King) did not preclude the examination of the facts upon which either party might claim that the validity of the relevant statute depended, or argument as to the correctness of that decision. The third question was not dealt with at that stage.
1. (1978) 140 C.L.R. 120.
Certain amendments were made to the pleadings, but it is not necessary to refer to them beyond saying that they included an allegation by the defendant that the legislation was valid. The amended defence admitted certain formal paragraphs of the statement of claim and refused to admit the critical allegations that the first and second plaintiffs were engaged in interstate trade, but did not allege any facts.
Thereafter certain further questions were reserved by the Chief Justice for the consideration of a Full Court, and it is those questions which are now before the Court. They are:
1. Does the validity of the Wheat Industry Stabilization Act, 1974 N.S.W., as amended, and the Wheat Industry Stabilization Act, 1974 Q., as amended, depend on the establishment to the satisfaction of the Court of any fact? If so, what is that fact?
2. Is that fact to be determined solely upon material which is within judicial knowledge?
3. Does s. 92 prevent the application of the Wheat Industry Stabilization Act, 1974 N.S.W., as amended, and the Wheat Industry Stabilization Act, 1974 Q., as amended, or either of them to the transaction particularised in par. 7 of the statement of claim?
The first of those questions is somewhat curious in that there are no allegations of fact in the defence. The plaintiffs and the defendant were at issue on the question of whether the plaintiffs were engaged in interstate trade, a fact upon which their locus standi as plaintiffs depended. However this latter difficulty was solved when counsel for the Wheat Board stated that the Board admitted the relevant paragraphs of the statement of claim.
The object of the litigation is to seek a re-consideration of the decision in Clark King [61] . That case was heard by a Court of five and by majority (Mason, Jacobs and Murphy JJ., Barwick C.J. and Stephen J. dissenting) the Court upheld the validity of the legislation now in question. However the views of the majority were not identical and their reasons for treating the legislation as valid and not contrary to s. 92 of the Constitution differed significantly. Mason and Jacobs JJ. delivered a joint judgment upholding the legislation substantially upon the ground that the scheme of the relevant legislation of the Commonwealth and the States was "the only practical and reasonable manner of regulation of trade and commerce (including interstate trade and commerce) in wheat produced in Australia". Murphy J. upheld the legislation on the ground that it did not impose any customs duty or similar tax discriminating against trade and commerce amongst the States, thus adhering to what he had said in Buck v. Bavone [62] and subsequent cases. There was thus no ratio decidendi common to the majority of the Court which upheld the legislation. In those circumstances the majority view should not be regarded as authoritative or "binding" and the matter is open for review without the requirement that there should be the kind of "special circumstances" which I discussed in Queensland v. The Commonwealth [63] .
1. (1978) 140 C.L.R. 120.
2. (1976) 135 C.L.R. 110.
3. (1977) 139 C.L.R. 585.
That this is so appears from the joint judgment of Rich and Dixon JJ. in Amalgamated Clothing and Allied Trades Union of Australia v. D. E. Arnall and Sons; In re American Dry Cleaning Co. [64] , where their Honours said:
The judgment of Knox C.J., Gavan Duffy J. and Starke J. in Alderdice's Case [65] is, therefore, a direct authority which completely covers this case. In that case, however, the Court was composed of six Justices and three of them, Isaacs J., Higgins J., and Powers J., although giving the same answer to the question asked by the special case did so for other reasons and two of these Justices, Isaacs J. and Higgins J., expressly dissented from the reasons of Knox C.J., Gavan Duffy J. and Starke J. In these circumstances these reasons cannot be said to be the ratio decidendi of the order made by the Court.
The view so expressed does not appear to have been challenged at any time. A similar view was expressed by Barwick C.J. in Dickenson's Arcade Pty. Ltd. v. Tasmania [66] in his discussion of Dennis Hotels Pty. Ltd. v. Victoria [67] . This view is also implicit in the decision on the preliminary questions in this case, to which I have referred above, namely that the Court would hear argument on the validity of the legislation and the correctness of the decision in Clark King [68] .
1. (1929) 43 C.L.R. 29, at pp. 51-52.
2. (1928) 41 C.L.R. 402.
3. (1974) 130 C.L.R. 177, at p. 188.
4. (1960) 104 C.L.R. 529.
5. (1978) 140 C.L.R. 120.
I proceed therefore upon the basis that the Court is not in the present proceedings in any way inhibited or limited by the reasons expressed by Mason and Jacobs JJ. in Clark King and is free to examine the point there made de novo.
The general principles which this Court has applied in its decisions on s. 92 since 1950 have been derived primarily from authoritative decisions by the Privy Council as discussed and examined in subsequent cases by this Court. This approach has been based on the decisions in James v. The Commonwealth [69] and The Commonwealth v. Bank of New South Wales ("the Banks Case") [70] . Hughes and Vale Pty. Ltd. v. New South Wales [No. 1] [71] may be added to that list as repeating the principles stated in the Banks Case and explaining their application to transport between the States. Cases decided after 1920 and prior to James v. The Commonwealth proceeded upon the basis that s. 92 did not bind the Commonwealth and are in some respects, but not in others, less authoritative or less helpful than the later cases. In addition the Privy Council decision in James v. Cowan [72] is of importance because it represents their Lordships' views on what are often called "marketing schemes". These decisions have not been questioned at any stage in this Court except by the adoption by Murphy J. of the view to which I have referred above. As to that view I need say no more than that it is not one which has previously been expressed by any member of this Court since its inception and that it appears to contemplate that a total ban on the movement of goods from one State to another would be consistent with s. 92, a view which I regard as irreconcilable with both the language of the section and its basic function in the Constitution. I would repeat the following sentence from their Lordships in the Banks Case [73] , "Forty years of controversy upon these words have left one thing at least clear. It is no longer arguable that freedom from Customs or other monetary charges alone is secured by the section." With that observation I respectfully agree.
1. (1936) 55 C.L.R. 1.
2. (1949) 79 C.L.R. 497; [1950] A.C. 235.
3. (1954) 93 C.L.R. 1; [1955] A.C. 241.
4. (1932) 47 C.L.R. 386; [1932] A.C. 542.
5. (1949) 79 C.L.R., at p. 629; [1950] A.C., at p. 299.
It is not necessary to enumerate the many cases in which this Court has accepted and applied the principles expounded by the Privy Council in the cases to which I have referred. That is not to say that differences of opinion have not occurred in the application in individual cases of the principles so laid down. Indeed from the nature of the section and of those principles some differences may be regarded as inevitable.
The scheme of the legislation now in question is set out in the judgment of the Chief Justice in Clark King [74] and I do not need to repeat it here. It is however convenient to point out, as that judgment did, that the "wheat stabilization scheme" introduced by the Commonwealth Act and the various State Acts amounted to an Australia-wide scheme in the sense that virtually identical State Acts applied within each State and the Commonwealth Act applied to the Australian Capital Territory and the Northern Territory, thus covering all the wheat-growing areas throughout the Commonwealth. In this respect, though not in others, it resembles the scheme which was dealt with in Wilcox Mofflin Ltd. v. New South Wales [75] ("Wilcox Mofflin") to which I refer below.
1. (1978) 140 C.L.R., at pp. 129-134.
2. (1952) 85 C.L.R. 488.
As it is now conceded that the wheat in question was the subject of interstate trade, there is therefore no occasion to deal here with the ambit of the conception of interstate trade dealt with in the judgments in Clark King.
Both the New South Wales Act and the Queensland Act contain sections which provide in effect that, if by reason of the Constitution, a provision of the Act or any notice given under it cannot validly operate in relation to particular wheat then it shall be construed as intended to operate in respect of all wheat to which it can validly apply. Accordingly each Act should be "read down" so as to confine its operation to the extent of the legislative power of each State and in so far as their provisions may offend against s. 92 they will have no operation, if the form of the legislation permits such reading down. The legislation is in a form which, if it is invalid in relation to any particular wheat, is capable of applying effectively to other wheat without altogether destroying the scheme of the legislation.
My own view as to the scope and operation of s. 92 in the present context is substantially in accord with the views expressed by Barwick C.J. in Clark King [76] and with the views of Stephen J. in that case [77] . The remainder of each of those judgments deals with certain material which was "handed up", apparently for the information of the Court notwithstanding that the proceedings were on demurrer. Save for copies of legislation, past and present, and statistical material from Commonwealth Year Books handed up by the Solicitor-General for the Commonwealth, to which no reference was made in argument, no such material was placed before this Court for the purpose of the hearing or during argument. The nature and extent of it does not appear from the report save that it included the interim report on wheat stabilization by the Industries Assistance Commission and some material from a Commonwealth Year Book and a volume of the Australian Encyclopaedia to which Mason and Jacobs JJ. refer in their joint judgment to which I refer below.
1. (1978) 140 C.L.R., at pp. 145-159.
2. (1978) 140 C.L.R., at pp. 167-174.
Turning now to the earlier authorities, it is necessary to look at the James Cases [78] but not in detail for they were re-examined and not qualified in any way in the Banks Case [79] . It is however important to note that in both James v. South Australia [80] and James v. Cowan [81] there was substantially identical legislation in two States, South Australia and Victoria (the only States in which there was any significant production of dried fruits) and a Commonwealth Act so that there was in its operation an Australia-wide scheme, and to look at what their Lordships derived from those cases.
1. (1927) 40 C.L.R. 1; (1930) 43 C.L.R. 386; (1932) 47 C.L.R. 386; [1932] A.C. 541; (1936) 55 C.L.R. 1 [1936] A.C. 578.
2. (1949) 79 C.L.R. 497; [1950] A.C. 235.
3. (1927) 40 C.L.R. 1.
4. (1930) 43 C.L.R. 386; (1932) 47 C.L.R. 386; [1932] A.C. 542.
Their Lordships in the Banks Case concluded their discussion of the decision in James v. South Australia [80] and James v. Cowan by saying [83] :
In the earlier case of James v. South Australia it was in the first place the validity of s. 20 of the Act and of determinations made under it that came in question and it was held by the whole Court (Isaacs A.C.J., Gavan Duffy, Rich, Starke and Powers JJ.) that that section, so far as it authorized a determination by the Board limiting the quantities of dried fruits which might be marketed within the Commonwealth, was obnoxious to s. 92. From the decision of the High Court no appeal was brought to this Board. But, s. 20 failing him, the Minister of Agriculture in South Australia sought to make use of his powers under s. 28. Once more James invoked s. 92 of the Constitution and in the case of James v. Cowan [84] challenged the validity of the executive action taken under s. 28 and it was in this case when it came before the Board that the decision was given, which, as their Lordships think, goes far to determine the present case. For, as part of the ratio decidendi of the case and by no means obiter or by way of a historical narrative, the Board expressly affirmed the decision of the High Court in James v. South Australia. The primary importance of the decision lies in this, that in regard to s. 20, Lord Atkin delivering the opinion of the Board, said [85] : "in the result, therefore, one returns to the precise situation created by s. 20 with its determination of where and in what quantities the fruit is to be marketed. Section 20 and the determinations are invalid, and for precisely the same reasons it appears to their Lordships inevitable that the exercise of the powers of the Minister, crediting him with the precise object and intention found by the High Court, were also invalid."
Before further examining what is involved in this decision their Lordships think it convenient to note what was actually decided in the other of the two cases which have come before them. In James v. The Commonwealth [1] it was a similar Act, but in this case an Act of the Commonwealth, that was under attack, and the substantial issue was whether the Commonwealth, as well as the States, was bound by s. 92. If it was bound, then the further question arose whether the Act in question was obnoxious to s. 92. The decision of the Board was that the Commonwealth was bound by s. 92 and it is significant that the judgment thus proceeds [1a] : "For these reasons their Lordships are of opinion that s. 92 binds the Commonwealth. On that footing it seems to follow necessarily that the Dried Fruits Act 1928-1935 must be held to be invalid. On the interpretation of "free" in s. 92, the Acts and the Regulations either prohibit entirely, if there is no licence, or if a licence is granted, partially prohibit inter-State trade. Indeed, the contrary was but faintly contended, if the Commonwealth was held to be bound by the section." There does not in fact appear to have been any ground for contending that, if the Act which was challenged in James v. Cowan was invalid, that challenged in James v. The Commonwealth could be valid.
1. (1936) 55 C.L.R. 1; [1936] A.C. 578.
2. (1936) 55 C.L.R., at p. 61; [1936] A.C., at p. 633.
It might well appear that these two decisions were a serious obstacle to the present appellants' case. Section 20 of the South Australian Act was invalid. It was general in its terms: it did not discriminate between inter-State and intra-State trade in dried fruits. But because it authorized a determination at the will of the Board the effect of which would be to interfere with the freedom of the grower to dispose of his products to a buyer in another State, it was invalid. And for the same reason the Commonwealth Act fell.
1. (1927) 40 C.L.R. 1.
2. (1949) 79 C.L.R., at pp. 633-635; [1950] A.C., at pp. 303-305.
3. (1932) 47 C.L.R. 386; [1932] A.C. 542.
4. (1932) 47 C.L.R., at p. 397; [1932] A.C., at p. 559.
5. (1936) 55 C.L.R. 1; [1936] A.C. 578.
6. (1936) 55 C.L.R., at p. 61; [1936] A.C., at p. 633.
Their Lordships dealt with what was established by the James Cases by saying [2] :
The necessary implications of these decisions are important. First may be mentioned an argument strenuously maintained on this appeal that s. 92 of the Constitution does not guarantee the freedom of individuals. Yet James was an individual and James vindicated his freedom in hard-won fights. Clearly there is here a misconception. It is true, as has been said more than once in the High Court, that s. 92 does not create any new juristic rights, but it does give the citizen of State or Commonwealth, as the case may be, the right to ignore, and if necessary, to call upon the judicial power to help him to resist, legislative or executive action which offends against the section. And this is just what James successfully did.
1. (1949) 79 C.L.R., at p. 635; [1950] A.C., at p. 305.
Their Lordships there rejected the argument that if the same volume of trade moved from State to State then freedom of trade between the States was not impaired. They regarded it as contrary to the James Cases imposing an unreal and impracticable criterion and as not reconcilable with use of the word "intercourse" in the constitutional prohibition. They then said [2a] :
Yet it would be a strange anomaly if a grower of fruit could successfully challenge an unqualified power to interfere with his liberty to dispose of his produce at his will by an inter-State or intra-State transaction, but a banker could be prohibited altogether from carrying on his business both inter-State and intra-State and against the prohibition would invoke s. 92 in vain. In their Lordships' opinion there is no justification for such an anomaly.
1. (1949) 79 C.L.R., at pp. 635-636; [1950] A.C., at p. 306.
Their Lordships then quoted [3] from the judgment of Latham C.J. in Australian National Airways Pty. Ltd. v. The Commonwealth [4] where he repeated what he said in Milk Board (N.S.W.) v. Metropolitan Cream Pty. Ltd. [5] as follows:
"One proposition which I regard as established is that simple legislative prohibition (Federal or State), as distinct from regulation, of inter-State trade and commerce is invalid. Further, a law which is "directed against" inter-State trade and commerce is invalid. Such a law does not regulate such trade, it merely prevents it. But a law prescribing rules as to the manner in which trade (including transport) is to be conducted is not a mere prohibition and may be valid in its application to inter-State trade, notwithstanding s. 92."
That passage was again approved in Hughes and Vale [No. 1] [6] .
1. (1949) 79 C.L.R., at p. 640; [1950] A.C., at pp. 310-311.
2. (1945) 71 C.L.R. 29, at p. 61.
3. (1939) 62 C.L.R. 116, at p. 127.
4. (1954) 93 C.L.R., at pp. 18-19; [1955] A.C. 241, at pp. 291-292.
In the immediately following paragraph they made a further statement concerning the nature of the expression "regulation" as they had used it. They said [7] :
Their Lordships must therefore add, what, but for this argument so strenuously urged, they would have thought it unnecessary to add, that regulation of trade may clearly take the form of denying certain activities to persons by age or circumstances unfit to perform them, or of excluding from passage across the frontier of a State creatures or things calculated to injure its citizens.
They also referred to the difficulties of being precise about the application of the word "regulation" and the application of the distinction between what is direct and what is too remote. They said in effect that the distinctions were nonetheless real although they might be difficult to apply and might give rise to differences of opinion in particular cases.
1. (1949) 79 C.L.R., at p. 641; [1950] A.C., at p. 312.
It is of importance also to note that in the course of the decision in Hughes and Vale a passage from the dissenting judgment of Dixon J. in McCarter v. Brodie [7a] was quoted with approval, where, after referring to the judgment of the Privy Council in the Banks Case [8] , he said:
I do not think that there is any room for doubting that their Lordships have rejected as erroneous three propositions that have often been put forward. The first is "that sec. 92 of the Constitution does not guarantee the freedom of individuals." The second is "that, if the same volume of trade flowed from State to State before as after the interference with the individual trader then the freedom of trade among the States remained unimpaired." The third relates to the relevance of absence of discrimination. As I understand it their Lordships have rejected the theory that because a law applies alike to inter-State commerce and to the domestic commerce of a State, it may escape objection notwithstanding that it prohibits, restricts or burdens inter-State commerce.
I shall not stop to examine or explain the contraries of these propositions or to state how they should be understood to apply. They have been much canvassed and there ought to be no difficulty in understanding them. All that is important for present purposes is that in face of the pronouncement of the Privy Council the propositions themselves are no longer tenable.
There are two further matters settled by the decision of their Lordships that are relevant to the basis upon which the Transport Cases appear to me to rest. One is that the object or purpose of an Act challenged as contrary to s. 92 is to be ascertained from what is enacted and consists in the necessary legal effect of the law itself and not in its ulterior effect socially or economically. The other is that the question what is the pith and substance of the impugned law, though possibly of help in considering whether it is nothing but a regulation of a class of transactions forming part of trade and commerce, is beside the point when the law amounts to a prohibition or the question of regulation cannot fairly arise. Now I think that every one of these five errors will be found to have a place in what in the passage I have quoted I ventured to call the pragmatical solution which the Transport Cases gave to a problem they approached as a complex.
Trade and commerce was treated as a sum of activities. The inter-State commercial activities of the individual and his right to engage in them were ignored. Inter-State commerce as a whole was considered and the adverse effect upon the total flow was treated as the test or at all events a test. Great importance was attached to the absence from the Act of discrimination against inter-State trade. The purpose imputed to the Act of making a planned structure of the internal transport of the State was taken into account as another element weighing in favour of the valid operation of the Act upon inter-State carriage. But that purpose was a matter of supposed policy which as it was thought it was the design of the Act to carry out: not the legal effect of the enacted provisions. The use of the idea expressed by the words "pith and substance" may not appear so clearly; but I think that underlying much of what is said in the judgments in the Transport Cases is a view of the Act which treated the restriction on the carriage of goods by road as a means of effecting a main purpose of distributing the traffic between road and rail in a "rationalized" manner.
To these elements one other was added; one not the subject of consideration by the Privy Council. That element is the distinction taken between on the one hand motor vehicles as integers of traffic and on the other hand the trade of carrying by motor vehicle as part of commerce. It is a distinction that I have never understood. The statutes dealt with the commercial use of motor vehicles and not with motor vehicles as such or at rest so to speak. There are tendencies in the Transport Cases to thrust the carriage of goods and persons towards the circumference of the conception of commerce, but in the Airlines Case [9] , it was shown that it must lie at or near the centre. The combination of ideas upon which, according to my view, the Transport Cases are based, consists therefore of no element which can survive. Five of them have been destroyed by the judgment of the Privy Council. The sixth would not suffice as a separate reason and is unsustainable. I am therefore of opinion that we should no longer regard ourselves as bound by the authority of the Transport Cases.
1. (1945) 71 C.L.R. 29.
1. (1950) 80 C.L.R. 432, at pp. 465-467.
2. (1949) 79 C.L.R. 497; [1950] A.C. 235.
3. (1945) 71 C.L.R. 29.
Those views were approved by their Lordships and they said that the six conceptions referred to could not be regarded as sound. Their Lordships quoted with approval a passage from the dissenting judgment of Fullagar J. in McCarter v. Brodie [10] . The passage quoted describes the kind of laws which might govern interstate road transport and yet not infringe s. 92, and throws light on what is involved in the conception of regulation. This view is reflected also in the judgment of Barwick C.J. as expressed in Mikasa (N.S.W.) Pty. Ltd. v. Festival Stores [11] where he said:
To my mind, basically, the law to be relevantly regulatory must in its nature and in the extent of its reach be concerned with the accommodation of the activities of members of the Australian community each to other, particularly in matters of trade and commerce, so that it can properly be said that each is free to engage in such trade and commerce.
1. (1950) 80 C.L.R., pp. 495-496.
2. (1972) 127 C.L.R. 617, at p. 629.
In the Banks Case [12] their Lordships, after quoting the passage which I have set out above from the judgment of Latham C.J. in Australian National Airways Pty. Ltd. v. The Commonwealth, said [13] :
With this statement which both repeats the general proposition and precisely states that simple prohibition is not regulation their Lordships agree. And it is, as they think, a test which must have led the Chief Justice to a different conclusion in this case had he decided that the business of banking was within the ambit of s. 92. They do not doubt that it led him to a correct decision in the Airways Case [14] . There he said "In the present case the Act is directed against all competition with the inter-State services of the Commission. The exclusion of other services is based simply upon the fact that the competing services are themselves inter-State services . The exclusion of competition with the Commission is not a system of regulation and is, in my opinion, a violation of s. 92 ." Mutatis mutandis, these words may be applied to the Act now impugned, for it is an irrelevant factor that the prohibition prohibits inter-State and intra-State activities at the same time.
1. (1949) 79 C.L.R. 497; [1950] A.C. 235.
2. (1949) 79 C.L.R., at p. 640; [1950] A.C., at p. 311.
3. (1945) 71 C.L.R. 29, at p. 61.
It is immediately after quoting those passages from Latham C.J. that their Lordships [1] set out the reservation which has been relied upon by the defendant and was relied upon by Mason and Jacobs JJ. in Clark King [2] .
Yet about this, as about every other proposition in this field, a reservation must be made. For their Lordships do not intend to lay it down that in no circumstances could the exclusion of competition so as to create a monopoly either in a State or Commonwealth agency or in some other body be justified. Every case must be judged on its own facts and in its own setting of time and circumstance, and it may be that in regard to some economic activities and at some stage of social development it might be maintained that prohibition with a view to State monopoly was the only practical and reasonable manner of regulation and that inter-State trade commerce and intercourse thus prohibited and thus monopolized remained absolutely free.
1. (1949) 79 C.L.R., at pp. 640-641; [1950] A.C., at p. 311.
2. (1978) 140 C.L.R., at p. 186.
From these quotations from the Banks Case [3] there emerge two problems in the application of those principles quite apart from what is meant by the reservation. There is first the distinctions between direct and remote and between regulation and prohibition. These do not appear to me to be mutually exclusive but to involve a least some degree of overlap. A prohibition of some particular kind of trade, commerce or intercourse can scarcely be other than "direct" but regulation is not necessarily remote and may be "direct". Amongst earlier phrases and synonyms it may still often be necessary and useful to ask whether the relevant law imposes a "burden" or a "significant burden" on interstate trade. To do so it must no doubt be "direct" but that which may in some contexts be described as "regulatory", as distinct from "prohibitive", may nonetheless constitute a very real burden. Moreover there are other tests which appear to be concurrent with those which have been formulated in the Banks Case and to operate independently and in addition to those tests. Thus it remains undoubted that a law which discriminates against, in the sense of treating differently, intrastate trade and interstate trade, whether it be a federal or a State law, contravenes s. 92 and is invalid. If it does thus discriminate it matters not that it is regulatory and not prohibitive and it remains elementary that the imposition of a tax or monetary impost at the border, whether it be capable of being classified as prohibition or regulation, does offend against s. 92. Their Lordships in the Banks Case were not, as it seems to me, intending what they said to be exclusive, nor did they intend to convey that the meaning of "regulation", in the context in which they use that expression, is equivalent to a law "with respect to interstate trade". Many laws which would fall within the scope of the expression in s. 51 (i) of the Constitution, i.e. laws with respect to trade and commerce among the States, will nonetheless be contrary to s. 92 and invalid. That this is so is demonstrated by the judgments of Fullagar J. and Kitto J. in Hughes and Vale Pty. Ltd. v. New South Wales [4] . Kitto J.'s observation was repeated in Breen v. Sneddon [5] and was subsequently adopted by the Privy Council in Freightlines and Construction Holding Ltd. v. New South Wales [6] , which is referred to, along with other cases to the same effect, in the judgment of Stephen J. in Clark King [7] in the passages with which I have already expressed my agreement.
1. (1949) 79 C.L.R. 497; [1950] A.C. 235.
2. (1955) 93 C.L.R. 127, at pp. 205, 218.
3. (1961) 106 C.L.R. 406, at p. 415.
4. (1967) 116 C.L.R. 1, at p. 20; [1968] A.C. 625, at p. 683.
5. (1978) 140 C.L.R. 120.
It is to be remembered that the legislative powers given by s. 51 are expressed to be "subject to this Constitution", i.e. to the balance of the Constitution, including s. 92, and that s. 92 is not so expressed and is therefore to have an overriding effect.
In my opinion it is not enough to save legislation which operates to prohibit, not absolutely, but sub modo, interstate trade to say that such legislation is reasonable. Hughes and Vale [8] seems to me to demonstrate beyond doubt that that is so. Regulation or partial prohibition will not contravene s. 92 if it is a necessary or a reasonable mode of enabling all traders or potential traders, private individuals as well as governments and statutory authorities, to conduct their interstate trade without excluding each other, and with due regard to the protection of the general public from danger, deceit or restrictive trading practices. The expression "reasonable" in the abstract seems to me to have no content. It must be measured against some criterion and that which I have stated appears to me to be the criterion established and applied by the cases in the Privy Council.
1. (1954) 93 C.L.R. 1; [1955] A.C. 241.
The critical questions which have been discussed in this case and in Clark King [9] are what is the meaning in this context of the expression "regulation" and what is the significance of the reservation expressed by their Lordships in the passage which I have quoted above.
1. (1978) 140 C.L.R. 120.
The judgments in Wilcox Mofflin [10] discuss at some length the operation of s. 92 on "marketing schemes" in the light of the James Cases [11] and the Banks Case [12] . The joint judgment of Dixon, McTiernan and Fullagar JJ. contains a full description of the scheme there in question and of the effect of sections such as s. 15A of the Acts Interpretation Act 1901, Cth, as amended, which were present in all the legislation there in question, as they are in the Wheat Industry Stabilization Acts in the present case. The passage at pp. 517-520 applies equally to the legislation now in question.
1. (1952) 85 C.L.R. 488.
2. (1930) 43 C.L.R. 386; (1932) 47 C.L.R. 386; [1932] A.C. 542.
3. (1949) 79 C.L.R. 497; [1950] A.C. 235.
In Wilcox Mofflin the application of those sections saved from invalidity provisions of a compulsory marketing scheme which would otherwise have been invalid as contrary to s. 92. There was however a further provision which required all hides to be submitted for appraisement by the relevant authority whether or not the subject of trade and commerce between the States. This provision was upheld as not upon its face imposing any burden on interstate trade but their Honours pointed out that no evidence was adduced to indicate the manner in which the system operated, leaving open the possibility that as operated it did impose a burden. A provision prohibiting sale before appraisement was however held not capable of applying to hides the subject of interstate trade.
The James Cases and Wilcox Mofflin demonstrate that, but for the "reading down sections" the Wheat Industry Stabilization Acts would be invalid as contravening s. 92 in that they prohibit all trade in wheat except by a government agency armed with powers of compulsion by legislation of the Commonwealth or the States. There is in my opinion no basis upon which those cases can be distinguished. The circumstances which saved one of the sections considered in Wilcox Mofflin do not apply in the present case. Accordingly the application of those cases would require the Wheat Industry Stabilization Acts of New South Wales and Queensland to be read as not applying to the wheat in question in this case.
It is said however that the reservation made by their Lordships in the Banks Case applies or may apply so as to save the legislation without reading it so as to exclude its operation on wheat the subject of interstate trade.
I find myself unable to agree with the reasons of Mason and Jacobs JJ. in their joint judgment in Clark King [13] . It appears to me that their reasons cannot be reconciled with the decisions in the James Cases, the Banks Case [14] and Wilcox Mofflin. It is true that the James Cases [15] were prior to the Banks Case and their Lordships' reservation could not have been in the minds of those who decided them. Nevertheless they were expressly approved and relied upon by their Lordships in the Banks Case.
1. (1978) 140 C.L.R. 120.
2. (1949) 79 C.L.R. 497; [1950] A.C. 235.
3. (1927) 40 C.L.R. 1; (1930) 43 C.L.R. 386; (1932) 47 C.L.R. 386; [1932] A.C. 542; (1936) 55 C.L.R. 1.
I cannot accept that the material referred to by Mason and Jacobs JJ., at pp. 189-193, even if it were the only relevant material, would demonstrate that State and Commonwealth monopoly was "the only practical and reasonable manner of regulation and that inter-State trade, commerce and intercourse thus prohibited and thus monopolized remained absolutely free" however that statement may be understood. I find difficulty in reconciling that part of their Honours' reasoning at p. 187 with the decision of this Court in North Eastern Dairy Co. Ltd. v. Dairy Industry Authority of N.S.W. [16] .
1. (1975) 134 C.L.R. 559.
With due respect I am unable to accept the views expressed in the joint judgment of Stephen and Mason JJ. in the present case. Those views appear to me not to be reconcilable with the reasons of their Lordships in the cases to which I have referred, and in particular with their Lordships' approval of Dixon J.'s reference to six misconceptions which had been exposed as erroneous by their Lordships' observations in the Banks Case [14] .
1. (1949) 79 C.L.R. 497; [1950] A.C. 235.
I do not think however that one can say in the abstract that there can never be such a situation as their Lordships postulated in their reservation, paradoxical though its expression may be. It is difficult at this stage in Australia's history to visualize circumstances in which it would be possible to say that a government monopoly of a particular trade was consistent with the freedom of those who carried on or formerly had carried on that trade as part of their interstate trade and commerce, particularly as their Lordships have emphasized that s. 92 is concerned with the freedom of the individual trader to engage in interstate commerce. I think it clear that the kind of circumstances which might answer the description must be both rare and exceptional.
Their Lordships' reservation is not to be read as though it were a statutory provision and the kind of linguistic analysis appropriate to a statute is in my opinion inappropriate and likely to lead to error. Its language does not seek or achieve great precision. I am however satisfied that their Lordships' reservation could not be consistent with s. 92 if it means that the test of compliance is simply whether or not the legislation is "reasonably necessary in all the circumstances". I do not take their Lordships to have said that or to have intended to convey that meaning for to do so would have been in conflict with the carefully expressed reasons in the earlier part of their advice.
Nor can I agree that there is some aspect of "public interest" which this Court can apply which can rise higher than the Constitution itself and so govern the operation of s. 92 otherwise than by the use of the settled meaning of its terms. To say that its operation is governed by some fundamental public interest which overrides the settled meaning and operation of its words is to change the fundamental place in the Constitution which the words of that instrument plainly give it by subjecting the legislative powers of the Commonwealth Parliament to its operation, and to set at nought the decisions which after so much controversy gave a settled and established operation to the section notwithstanding that such operation left room for differences of opinion in its application to individual cases.
No doubt wisely their Lordships did not attempt to describe the kind of circumstances which might produce the result to which they refer in their reservation. Moreover they speak in terms of possibilities, not of certainties or probabilities, without expressing any view as to the kind of circumstances in which the possibilities referred to might in fact occur. We are not endowed with the gift of prophecy and, their Lordships having envisaged this possibility, we should not say that it cannot possibly occur. I can however say that nothing has been alleged or said in these proceedings as they presently stand, or in Clark King [18] , which has suggested to me that such a possibility has now occurred.
1. (1978) 140 C.L.R. 120.
However I do not think that we can or should prevent the defendant from attempting to prove by evidence that the circumstances which their Lordships postulated existed in the field of the marketing of wheat in 1978 and 1979. Such evidence however would not be admissible on the present pleadings. The mere allegation that the legislation is valid is not sufficient to support the leading of such evidence for it merely states a conclusion of law. If facts are to be relied upon as warranting that conclusion then they must be pleaded in proper form so that both the plaintiff and the Court may know what is alleged, but it will not be enough to allege the ultimate fact that the circumstances of their Lordships' reservation have occurred, which is no more than a conclusion which it may be contended could be drawn from facts proved in evidence.
As the matter stands at present the legislation has not been shown to be valid in its operation upon wheat the subject of interstate trade and commerce.
The first question asked appears to assume that some single fact may by itself establish or deny the validity of the legislation in so far as it purports to apply to wheat the subject of interstate trade. I find it impossible to envisage any such fact and none was suggested in the course of argument. However if the defence is amended to allege particular facts evidence directed to the proof of those facts may be admissible. It is not the function of this Court to proffer to litigants advice on evidence or on the facts which they should seek to prove, even if the Court had the necessary information to enable it to do so. Accordingly I am not prepared to answer the second part of the first question.
My conclusion that some evidence may be admissible demonstrates that I do not take the view that relevant evidence is confined to facts of which the Court may take judicial notice.
As the defendant may wish to amend its pleading it is not appropriate to answer the third question. |
high_court_of_australia:/showbyHandle/1/11392 | decision | commonwealth | high_court_of_australia | text/html | null | Sharman v Evans [1977] HCA 8 | https://eresources.hcourt.gov.au/showbyHandle/1/11392 | 2024-09-13T22:56:18.911602+10:00 | High Court of Australia
Barwick C.J. Gibbs, Stephen, Jacobs and Murphy JJ.
Sharman v Evans
[1977] HCA 8
ORDER
Appeal allowed. Order of the Supreme Court of New South Wales (Court of Appeal Division) set aside and in lieu thereof order that the appeal to that Court be allowed, and order that the amount of the judgment for the respondent be varied by the substitution of the sum of $270,547.50 for the sum of $300,547.50. Respondent to pay one half of the appellant's costs of the appeal to this Court and of the appeal to the Supreme Court of New South Wales (Court of Appeal Division).
Cur. adv. vult.
The following written judgments were delivered:—
1977, Feb. 25
Barwick C.J.
The respondent when twenty years of age suffered calamitous injuries whilst a passenger in a motor car which was involved in a road accident. She became a quadriplegic: and as well she has lost her power of speech. Though she has some limited use of her arms, so that amongst other things she can operate a typewriter, she has no hope of ever being able to drive a motor vehicle, no matter what adaptation be made. She has become an epileptic though, by the use of drugs, her epilepsy is under control.
As the learned trial judge found:
The plaintiff needs constant nursing attention. Three particular matters make this essential. Firstly, she has difficulty in breathing and this difficulty may be aggravated by an accumulation of mucus in her breathing passages which must be aspirated as soon as possible. Secondly, there is a continuing risk of the development of an infection in the urinary tract. Her urine, which drains into a bag, must be watched continuously for signs of infection. Thirdly, there is a strong likelihood that one or more pressure sores will develop if she is not regularly turned. Additionally to the matters I have mentioned there is a risk that she will have an epileptic fit or some other, and unexpected, problem which will require more or less immediate attention. It must be remembered that she lacks the ability readily to make herself understood, particularly to strangers, and this circumstance necessitates a greater degree of watchfulness on the part of those in whose charge she is than would be the case if she had her voice.
The many operative procedures to which she has been subjected are fully detailed in the careful exposition by the trial judge who awarded her the sum of $300,547.50. The appeal by the present appellant to the Court of Appeal Division of the Supreme Court of New South Wales against this award was, by majority, dismissed. The ground of appeal was that the damages were excessive. In this Court, the appellant maintains his submission that the award of damages is excessive: in that connexion, the appellant points to particular matters on which he says the trial judge erred in point of law. To these I shall refer later.
I have found the resolution of the appeal a matter of considerable difficulty. In the first place, the fundamental principle is that the exercise of discretion by the trial judge in the estimation of damages ought not to be interfered with by an appellate court unless the trial judge has erred in point of law or in his approach to the assessment or unless the assessment itself, by its disproportion to the injuries received, demonstrates error on the part of the trial judge. Notwithstanding some views which have been expressed, the function of a court of appeal, in my opinion, is not to offer what in connexion with another discipline would be called "a second opinion". Such a court is strictly confined to the remedy of error in the trial or in the assessment of the trial judge. It cannot be too strongly said that a mere difference of opinion as to what ought to have been the proper award of damages does not indicate error on the part of the trial judge. This distinction between mere difference of opinion and error has been variously expressed, perhaps not always with satisfaction to the mind. But there is a radical distinction between the two situations whether the error be styled demonstrable or otherwise described. Suffice it for present purposes that mere difference of opinion on a matter of fact or assessment does not warrant a conclusion that the trial judge's view was mistaken or erroneous calling for remedy by a court of appeal.
I think it is relevant to the decision of this appeal to remember that our system by which differences between citizens and, for that matter, between the state and the citizen are resolved is one of trial. It is not a system of resolution by appeal. Further, the trial itself is an adversary process where each side of the record is free to choose the ground and manner upon and in which it will fight the case and contest its issues. By that choice each is bound, unless for special reasons a court of appeal allows a deviation to be made from that course. Adherence to these basic principles places great responsibility on the trial judge in deciding the case: and also upon advocates who decide for their clients exactly how and upon what grounds the issues will be fought. I have said elsewhere, and I venture to repeat, that resolution of difference by trial rather than by appeal is of great public benefit. It tends to earlier finality and greater certainty than would be the case if cases were chiefly decided on appeal.
Holding these views, it is apparent that my own deep inclination is not to interfere with the assessment made in this case by the trial judge. I have elsewhere stated what I believe to be the proper approach to the assessment of damages and have been reminded recently of what I said in Arthur Robinson (Grafton) Pty. Ltd. v. Carter [1] and other cases. I adhere to the stated principles which I have thought to be proper.
1. (1968) 122 C.L.R. 649.
However, after considering the reasons which the trial judge has clearly expressed for making his award of damages, I have been driven to the conclusion that his Honour fell into error in four respects in making that award.
The first ground of error, in my opinion, was that his Honour allowed the cost of providing premises at the respondent's mother's house and of nursing attention during those periods in which the respondent might choose to sojourn in that house as part of the award. It seems to me that it was not reasonable to make the appellant pay for these costs. They were not reasonably necessary in any real sense for the treatment and care of the respondent. True it may be that the transfer of the respondent to her mother's house from time to time would give the respondent personal satisfaction and may have some psychological effect on her outlook of life. I can well understand the desirability from the respondent's personal point of view of being able from time to time to change from her hospital to her mother's house. But the expense of that course would be, to my mind, quite disproportionate to any causal connexion which might possibly be found between that transfer and the appellant's negligence. Further, I think there were practical reasons which would make this transfer undesirable in itself. The task of finding nurses of the right disposition and capacity to co-operate with other nurses in caring for the respondent at her mother's house on what must, at best, be a casual basis has not been sufficiently regarded. Of necessity the transfer to her mother's house would be exceptional rather than the rule for her care and maintenance. Periods of her stay at that house would necessarily be relatively few. To my mind, the practical difficulties of organizing these transfers and of providing a very considerable nursing capacity would prove nigh insuperable. For all that the medical advisers might think that there was some psychological benefit in allowing the respondent to have the satisfaction of being in her mother's house for some periods, I think the disturbance and the upset both of the initial transfer of the respondent and particularly of her re-transfer could far outweigh any other advantage which has been supposed. The reasonableness of the proposed course and its practicality or impracticality do not appear to me to have been given sufficient prominence. They could not be resolved by the medical witnesses but rather are matters for close consideration and decision by the court.
However, the appellant's counsel throughout has been prepared to agree that it was reasonable to provide for periods of residence of the respondent at her mother's house including provision for the actual construction of premises in which she might thus sojourn. In consequence, I would not be prepared to interfere with the amount of the award of damages on the ground that the award ought not to have reflected any provision for the respondent to be transferred from time to time to her mother's residence. I do this not because I think that was a reasonable or proper course to take but simply because the appellant chose to concede the point. He should not be allowed now to resile from the attitude which he has taken throughout.
The second ground of error, in my opinion, is that his Honour allowed what must have been a substantial amount in the composition of his award for economic loss. In this respect I agree with the analysis made by Mahoney J.A. in his reasons for judgment in the Court of Appeal. I have no need to restate them but can shortly state my own expression of what I conceive to be the error. The respondent had a prospect of earning a net sum of not less than $70 per week. Out of this she had to provide herself with food, clothing and perhaps residence. I should have thought that there was little scope for saving or making any accumulation of capital out of such an earning capacity. Such need as she has in these respects is now substantially embraced in the considerable award made for her institutional care, along with the periods of transfer to her mother's house. It seems to me right to say that to allow any substantial ingredient in the total award to represent economic loss in the circumstances is to double up and fail to perceive the overlap which would exist between any allowance for economic loss and the allowance for institutional and other care and attention.
Thirdly, his Honour evidently included a substantial sum in his award for the shortening of the life expectancy of the respondent. I am of opinion that this loss calls only for compensation by the inclusion of a nominal sum. Nothing in the case, bearing in mind other items to be the subject of compensation, calls for that nominal sum to exceed the sum of $1,250.
Fourthly, I feel his Honour failed to look closely at what his proposed award was capable of producing when reasonably invested and in not comparing that yield with what the necessities of the respondent's condition required. Leaving aside that part of the general award which it may be thought relates to compensation for loss of amenities in life, I think that the yield of the resultant sum is very considerably in excess of what the respondent's requirements are. Even if one were to take the respondent's maintenance and care to require a sum of $175 per week, that sum would be provided without entrenching on the capital by an award of less than the sum of $200,000. To award such a sum would more than provide for institutional care and occasional therapy and professional advice, and for residence in the mother's house for some periods of time, leaving the capital, albeit possibly affected by changes in the value of money, untouched. It seems to me that such a result in the assessment of damages is unreasonable. It neglects the considerable scope of investment and possible accretion which a large verdict provides.
I am of the opinion that the amount awarded by the trial judge is excessive and that it ought to be reduced. If I felt free to give effect to my views as to the first ground of error to which I have referred, I would be inclined to make a much more substantial reduction than I now propose. However, it seems to me that the least sum by which the award should be reduced, having regard only to grounds other than the first to which I referred, is the amount of $25,000. This sum would minimize but perhaps not eliminate the effect of including too great an allowance for economic loss and for loss of life expectancy. The reduced sum still represents, in my opinion, a not ungenerous award which, being wisely invested, will fully provide the reasonable needs of the respondent in her injured condition. I have not thought it necessary in this case to enter into any detailed discussion of all the elements of the compensation by award of damages for the respondent's injuries. The danger of undue elaboration is evident and needs no emphasis. The endeavour must be to make a fair and reasonable compensation as between the parties. I have felt in this case that it is sufficient, having found error in the assessment, to determine a sum, somewhat in the broad, by which the judge's award should be reduced in order to bring it within the range of a fair and reasonable compensation. Accordingly, I would reduce the award by the amount of $25,000.
I would not make any order for the costs of this appeal. I think that the appellant has brought on himself the major difficulties. He has failed to persuade me that there should be a reduction in respect of the amount allowed for the transfer of the respondent to her mother's house from time to time. Each side has had some success and some failure and I would propose that there be no order for costs. I would vary the order of the Court of Appeal as to costs so as to allow the appellant to that Court only one half of his costs of that appeal.
Gibbs and Stephen JJ.
The defendant, Dennis Sharman, appeals against the dismissal, by a majority of the New South Wales Court of Appeal, of his appeal from a verdict for $300,547.50 in favour of the plaintiff, June Marilyn Evans.
Miss Evans, then aged twenty, was injured in a motor car accident in December 1971. She suffered very serious injuries including brain stem damage; she was unconscious for almost a month and is now a quadriplegic. This condition, disastrous enough in itself, is in her case aggravated by trauma-caused epilepsy, by unusually severe impairment to her respiratory function as a consequence of the brain injury and by an almost total loss of the ability to speak because of the injury to the larynx. She is fully aware of her plight.
By the time of the trial, in November 1973, Miss Evans had undergone a great number of operations and had endured much pain; her condition had become stabilized and her disabilities could then be summarized, in the reasons for judgment of the learned trial judge (Sheppard J.) in the following terms:
1. She suffers from quadriplegia with the problems to which I have already referred. She has more movement in her right arm than her left but the movement is nevertheless restricted and she cannot make anything like full use of her right hand. She is able to eat, paint and operate a typewriter as well as point to the card to which I have referred but she cannot do up buttons, brush her teeth, or her hair or use a pen. She can be sat in a wheel chair but if she is not propped up she will collapse to one side. She is able to operate, with the use of her right hand, the mechanism of an electric chair but, according to Dr. Griffiths, she is not a good driver. She has no hope, as do some quadriplegics, of ever driving a motor vehicle however it may be adapted.
2. She has the inability to speak which I have mentioned.
3. She is an epileptic but her epilepsy is controlled, for the time being, by drugs.
1. She has lost some intellectual capacity but is still intelligent, capable of reading and painting, and is well aware of her predicament.
2. She has continuing pain in her right shoulder which is relieved by the taking of analgesics.
Before the accident the prospects for Miss Evans' future were bright; she was a healthy, out-going and intelligent girl who was trained for and was experienced in secretarial work; by taking two jobs in her home State of Western Australia she had saved enough money to undertake a two-year full-time course as a resident student at the Commonwealth Bible College in Brisbane. At the time of the accident, she had just completed her first year there, coming dux of her year. She had an understanding with a young man, a fellow student, that they would marry in due course. After the accident their engagement was announced and but for her ultimate decision that she could not permit him to take as his wife a quadriplegic she would by the time of the trial have been married to him; he has a good position and a secure future in the Department of Civil Aviation. Had she resumed her secretarial work after finishing her two-year college course she could have earned at least $70 per week net.
In these circumstances the learned trial judge, in a most carefully reasoned judgment, assessed general damages at $275,000, the agreed special damages of some $25,500 making a total of just over $300,000.
Three consequences of her injuries account in large measure for the size of the award of general damages; her need for intensive nursing and medical attention in the future, her total loss of earning capacity and the gross impairment of the future enjoyment and amenities of her life. She has, in addition, experienced particularly severe pain and suffering and her life expectancy has been substantially reduced.
The learned trial judge did not essay any exact quantification of damages for every item of detriment suffered by the plaintiff. He arrived at a range of from $150,000 to $175,000 for the future cost of her nursing and medical care and at a sum of $6,000 for the shortened life expectancy of the plaintiff. He explained with clarity and in detail his approach to the assessment of damages for each other item but concluded that they did not lend themselves to any precise individual quantification. In arriving at the total of $275,000 for general damages his Honour expressed his keen awareness of the need to guard against overlap in undertaking that process of separate consideration of components of the award which he had felt obliged to engage upon.
The range of damages assessed in respect of future nursing and medical attention involved an assumption that the plaintiff would not spend all of the rest of her life in hospital but would instead be able to spend periods being cared for at home. Before the Court of Appeal the appellant contended that those periods spent at home would involve the plaintiff in additional health risks and that the learned trial judge had therefore erred in taking so long a period as twenty or more years as the plaintiff's life expectancy. This the majority rejected, concluding that there was ample evidence upon which the learned trial judge could find that, notwithstanding periods at home, the plaintiff might nevertheless live so long; nor did Mahoney J.A. in his dissenting judgment take issue with the verdict on this specific point. The other main attack made before the Court of Appeal concerned the amount of damages awarded for loss of earning capacity and for pain and suffering and loss of the amenities of life. In the view of the majority of the Court no fault was to be found with these items. Mahoney J.A., on the other hand, not only regarded the assessment of compensation for lost earning capacity as excessive and as involving incorrect principles but also discerned more fundamental errors affecting the verdict as a whole.
On the appeal to this Court the grounds raised before the Court of Appeal were again relied upon. In addition the method of assessment which the learned trial judge had adopted was also attacked; so too, for the first time, was the assumption that the plaintiff should be compensated on the footing that she would spend part at least of her future life being cared for out of hospital.
A variety of difficulties, both of principle and of fact, surround the assessment of damages in this case. They stem from at least three distinct sources: the great increase in the cost of future nursing care should the plaintiff be cared for at home rather than in hospital; a variety of problems involved in assessing compensation for the plaintiff's loss of future earning capacity and, finally, the doubts as to the plaintiff's present life expectancy.
That the learned trial judge should have engaged in a close scrutiny of each head of detriment was, we think, inevitable; that in doing so he should seek to evaluate that detriment in money terms was a necessary consequence of the fact that it is only by recourse to those terms that the plaintiff can be compensated for the wrong done to her. Criticism was directed both to this separate examination of the conventional heads of damage and also to the ascertainment of a sum appropriate as a starting point for compensation under a particular head of damages, followed by a process of discounting or deduction from it. We regard this criticism as misconceived; so long as courts are careful to avoid the risk, inherent in such a procedure, of compensating twice over for the one detriment there seems no better way of applying processes of reasoning and the realistic and methodical evaluation of probabilities to the task of assessing compensation. In cases of any complexity any other approach is open to serious objection, especially in times of rapid inflation. In such times what Salmon L.J. described in Fletcher v. Autocar & Transporters Ltd. [2] as the "uncertain role" of instinct, and what this Court has described as a "general awareness", a knowledge of "current general ideas of fairness and moderation" (Planet Fisheries Pty. Ltd. v. La Rosa [3] ), while still of use in determining, as a matter of first impression, the general level of appropriateness of an award, tends to become blurred by the constant shift of money values. Moreover where the assessment of damages is undertaken by a judge sitting without a jury it is, we think, most desirable that the process of assessment should be described in the reasons for judgment. As was pointed out by Sachs L.J. in George v. Pinnock [4] it is only by the setting out in a judgment of the main components of an award of damages, or at least of the approach taken to each component, that the parties may obtain a proper insight into the process of assessment and an adequate opportunity of seeking the correction of error on appeal. In the particular circumstances of this case Sheppard J. found himself unable to assign anything like precise money sums to the different heads of damages; he did however very clearly explain his approach to each head of damages, a course which has lightened the task of appellate courts.
1. [1968] 2 Q.B. 322, at p. 362.
2. (1968) 119 C.L.R. 118, at p. 125.
3. [1973] 1 W.L.R. 118, at p. 126; [1973] 1 All E.R. 926, at p. 934.
In view of the attack made upon various aspects of his Honour's assessment of damages it is appropriate to examine the various heads of damage which presented themselves for assessment so as to appreciate and deal with the various criticisms raised by the appellant. First are those costs which the plaintiff will be obliged to incur in consequence of her injuries, principally although not exclusively, the cost of nursing and medical care. It is clear that she will require such care for the rest of her life. It can be provided either in a hospital in Perth devoted to the care of persons incapacitated as she is or, at very much greater cost, in her own home. The plaintiff would much prefer the latter but the question is whether the defendant should be required to make compensation upon this much more expensive basis. The learned trial judge's award of damages contemplated that the plaintiff, while spending the greater part of her life in hospital, would spend some part of it being cared for at home.
Where the plaintiff is to be cared for in the future will not only directly affect the extent of nursing and medical expenses which are to be compensated for; it will also bear upon the extent of her loss of the amenities and enjoyment of life, a lifetime substantially spent in hospital will greatly aggravate that loss. In our view the medical evidence in this case does not justify the conclusion that the defendant should be required to compensate for future nursing and medical expenses on any basis other than that the plaintiff's future will be one substantially spent in hospital.
The appropriate criterion must be that such expenses as the plaintiff may reasonably incur should be recoverable from the defendant; as Barwick C.J. put it in Arthur Robinson (Grafton) Pty. Ltd. v. Carter [5] "The question here is not what are the ideal requirements but what are the reasonable requirements of the respondent", and see Chulcough v. Holley, per Windeyer J. [6] . The touchstone of reasonableness in the case of the cost of providing nursing and medical care for the plaintiff in the future is, no doubt, cost matched against health benefits to the plaintiff. If cost is very great and benefits to health slight or speculative the cost-involving treatment will clearly be unreasonable, the more so if there is available an alternative and relatively inexpensive mode of treatment, affording equal or only slightly lesser benefits. When the factors are more evenly balanced no intuitive answer presents itself and the real difficulty of attempting to weigh against each other two incomparables, financial cost against relative health benefits to the plaintiff, becomes manifest. The present case is however one which does to our minds allow of a definite answer; it is a case of alternatives in which the difference in relative costs is great whereas the benefit to the plaintiff of the more expensive alternative is entirely one of amenity, in no way involving physical or mental well-being. This may be demonstrated from the evidence.
1. (1968) 122 C.L.R. 649, at p. 661.
2. (1968) 41 A.L.J.R. 336, at p. 338.
Assuming, for convenience of comparison, a life expectancy of twenty years, the future expenses of the plaintiff if confined to hospital would be of the order of a present value, computed on six per cent tables, of $108,500, inclusive of nursing, medical and physiotherapy services and cost of special beds etc. The provision to her of like services at her mother's home over that period would amount to a present value of about $390,000, to which would have to be added a weekly cost for medicaments etc. of about $23 per week and a capital cost of some $11,750 for suitable alterations to her mother's home; moreover this is exclusive of the cost of food and of the cost of providing another home should her mother die during the period and the present home cease to be available to the plaintiff. The benefit to the plaintiff of being cared for at home rather than in hospital is not any benefit to her health but rather to her future enjoyment of life which would be enhanced by a home atmosphere; her life would not thereby be prolonged nor would her physical condition be at all improved; indeed she would be somewhat more at risk physically at home than in hospital. There is no evidence suggesting any likely psychiatric benefits, probable though these might appear to the layman.
In these circumstances the future cost of reasonable nursing and medical attention must, we think, be assessed on the basis of a lifetime substantially spent in hospital. We have, to date, for convenience of comparison, quoted costs based upon a post-accident life expectancy of twenty years. Assuming a lifetime of hospital care, devoid of the extra risks involved in nursing care at home, the medical evidence suggests that this is too conservative an estimate. His Honour, without specifically nominating any precise period as that selected by him as appropriate, clearly contemplated that if the plaintiff spent part of her life at home something in excess of twenty years was nevertheless an appropriate assumption as to life expectancy. For the purpose of our present examination of the award, and since we would regard the plaintiff's future as one involving permanent hospitalization in conditions of maximum nursing and medical care, we adopt thirty years as the appropriate period. For that period the present value, on six per cent tables, of the cost of hospital care, medical and physiotherapy treatment and the provision of a special bed and the like will amount to about $128,000.
There is another item of future expense which must enter into the assessment process. Because we conclude that the defendant should not be required to compensate the plaintiff on any basis other than that of a lifetime in hospital it follows that the plaintiff's loss of the enjoyment and amenities of life will be the greater. She must be regarded as wholly deprived of the everyday pleasures of living in the environment of her own home. Instead she will be exposed to a lifetime of institutional life. Not only must this be reflected in the damages to be awarded under the conventional head of pain, suffering and the loss of enjoyment and amenities of life. In the present case it is also appropriate to reflect rather more positively one particular aspect of this situation of permanent hospitalization. The effect of the latter upon the plaintiff can clearly be somewhat mitigated if she is able to vary the monotony of the hospital ward by occasional day visits to her home and by other outings, possibly even by occasional weekends away from hospital. The medical evidence discloses that these would be possible provided that constant nursing attention was provided. Applying again the criterion of reasonableness but now weighing the expense of such attention against the clear benefits in amenity and enjoyment of life that such breaks in a lifetime in hospital would provide we are in no doubt that the plaintiff is entitled to compensation for the cost of such outings. That their cost will be high is apparent from the data as to nursing costs already referred to, to which must be added transportation either by ambulance or by chauffeur-driven car. If enjoyed as frequently as, say, once every few weeks over thirty years that cost would not be overstated by the adoption of a present value figure of about $20,000. We accordingly adopt that sum as a second item of future cost to be compensated for by the defendant.
In dealing in this way with these two items of future expenditure we have departed in principle from the method of assessment adopted by the learned trial judge but have endeavoured to reflect, as do his reasons for judgment, the need for damages to be more liberal than they would be were the plaintiff to be restricted to recovery only of the present value of the cost of thirty years of hospitalization. Our approach conduces, we believe, to clarity of analysis while emphasizing the extent to which damages for loss of amenity must interact with other heads of damages, including that concerned with the defraying of future expenditure reasonably incurred by the plaintiff and attributable to her injuries.
We turn next to the question of compensation for lost earning capacity and in particular to an examination of the deductions which should be made in assessing that compensation. In doing so we leave aside, for the present, the question of compensation for loss of earning capacity during the years by which the plaintiff's life expectancy has been shortened, the "lost years".
Both principle and authority (Skelton v. Collins [7] ) establish that where, as here, there is included in the award of damages for future nursing and medical care the plaintiff's entire cost of future board and lodging, there will be overcompensation if damages for loss of earning capacity are awarded in full without regard for the fact that the plaintiff is already to receive as compensation the cost of her future board and lodging, a cost which but for her injuries she would otherwise have to meet out of future earnings. If the true concept be that it is lost earning capacity to the extent to which it is likely to be exercised in the future, rather than loss of future earnings, that is to be compensated it may seem inelegant to speak of deducting from damages for that lost capacity an amount for some saving in outgoings. It would better accord with principle if the savings in board and lodging could be isolated from, and excluded from the damages to be awarded in respect of, hospital expenses. However so long as the true nature of the adjustment is understood no harm is done by making an appropriate deduction from the damages for lost earning capacity. What is to be avoided is double compensation and, as is apparent from what was said by their Lordships in Shearman v. Folland [8] , it is not a question of estimating the plaintiff's likely future costs for board and lodging and treating them as an outgoing which the consequences of the defendant's tortious act have now spared her from making; that is a notion which is as distasteful as it is misconceived. Rather is it a matter of her already having been compensated for future board and lodging as a component of hospital expenses, so that to disregard this and award the full sum for lost earning capacity, part of which would be used to provide the very item of board and lodging already compensated for, would be to award compensation twice over. Accordingly some no doubt fairly arbitrary proportion of the present value of future hospital expenses regarded as attributable to board and lodging must be taken and deducted from the present value of lost earning capacity; it will be quite irrelevant how expensively or how frugally the plaintiff might in fact have lived had she not been injured.
1. (1966) 115 C.L.R. 94, at p. 106.
2. [1950] 2 K.B. 43.
Although it is only the cost of board and lodging which, unless subject to deduction in this way, will lead to actual double compensation there are other items which require consideration as possible deductions when assessing damages for loss of earning capacity. This is because, quite apart from double compensation, that is, the payment twice over in respect of one and the same item of loss, it is also necessary to avoid compensating for gross rather than for net losses. This becomes of particular importance not only when assessing compensation for ordinary loss of earning capacity but also when that process of assessment must be undertaken in the context of a plaintiff's "lost years", his life expectancy having been reduced as a result of the injuries he has received.
Again we ignore for the moment the question of "lost years". Where, as here, a plaintiff suffers a total loss of earning capacity he will not normally continue to incur all of the outgoings necessary for the realization of that capacity which would have been incurred had his capacity been unaffected; items such as the cost of clothing suitable to his particular employment and of transportation to and from work provide examples, no doubt there are others. Compensation for loss of earning capacity is paid only because it is or may be productive of financial loss (Graham v. Baker [9] ) and to compensate for total loss of earning capacity without making allowance for the cessation of these outgoings is to compensate for a gross loss when it is only the net loss that is in fact suffered.
1. (1961) 106 C.L.R. 340, at p. 347.
On the other hand there are other types of saved expenditure upon which a defendant cannot rely in diminution of damages. It is now well established that no reduction is to be made, when awarding damages for loss of earning capacity, for the cost of maintaining oneself and one's dependants unless an element of double compensation would otherwise intrude, as in the case of hospitalization as a non-fee paying patient or where the cost of future hospital expenses is also awarded and necessarily includes, as in the present case, the patient's board and lodging—Fletcher v. Autocar & Transporters Ltd. [10] ; Daish v. Wauton [11] ; Taylor v. Bristol Omnibus Co. Ltd., per Lord Denning [12] . The dissenting judgment of Windeyer J. in Chulcough v. Holley [13] refers to an award for diminished earning capacity being reduced in respect of the "ordinary costs of maintenance of a plaintiff as a person", citing what had earlier been said by Taylor J. in Skelton v. Collins [14] ; however we would understand Taylor J. to have been there concerned with compensation for lost earning capacity during "lost years", in respect of which rather different considerations apply.
1. [1968] 2 Q.B. 322.
2. [1972] 2 Q.B. 262.
3. [1975] 1 W.L.R. 1054, at p. 1060; [1975] 2 All E.R. 1107, at p. 1113.
4. (1968) 41 A.L.J.R., at p. 338.
5. (1966) 115 C.L.R., at p. 121.
The present plaintiff is now denied many of the opportunities for pleasure-giving expenditure, as distinct from what may be regarded as expenditure on maintenance, which our society affords. Are the savings in expenditure, thus involuntarily thrust upon her by reason of the state to which her injuries have reduced her, to have the effect of reducing the damages awarded for her loss of earning capacity? We think not. They may be left out of reckoning, they neither produce double compensation nor compensate for gross rather than net loss. Indeed to treat them as items going to reduce damages is unjustifiably to assume that because pre-accident avenues of expenditure are now foreclosed to a plaintiff the necessary consequence is a corresponding non-expenditure.
We leave aside the case of the plaintiff who by the nature of his injuries is made wholly incapable of experiencing pleasure. This was the position in Fletcher v. Autocar & Transporters Ltd. [15] but the majority judgments in that case go much further, they contemplate reduction of damages for lost earning capacity because a plaintiff is "saved" expenditure on those pleasurable pursuits which he formerly enjoyed but which the consequences of his injuries now deny him. A somewhat similar concept underlies Smith v. Central Asbestos Co. Ltd. [16] and both cases reflect a concern lest there should be duplication of damages as between loss of earning capacity and loss of the amenities of life. We find much of what was said by the majority in Fletcher's Case difficult to reconcile with what was said by the majority of their Lordships in West & Son Ltd. v. Shephard [17] , especially by Lord Morris [18] and by Lord Pearce [19] ; in the dissenting judgment of Lord Devlin the making of fair compensation is said to involve that the defendant has made good "all the expenses to which the plaintiff has been put and he has replaced all the income which she has lost" [20] .
1. [1968] 2 Q.B. 322.
2. [1972] 1 Q.B. 244.
3. [1964] A.C. 326.
4. [1964] A.C., at pp. 349-350.
5. [1964] A.C., at p. 364.
6. [1964] A.C., at p. 357.
Of course, when damages for the loss of amenities come to be considered regard must be had to such pleasures as the plaintiff is capable of enjoying and which are made possible by the total damages which she receives; but it is in this way, rather than by any reduction in the assessment for lost earning capacity, that we consider that the general task of assessment should proceed.
The present plaintiff still possesses powers of enjoyment through the use of her senses; her sight, her hearing and her taste are unaffected and in place of sport, entertainment, cosmetics and clothes she may find pleasure in recorded music, in a movie projector and the hire of films, in days spent on drives in a chauffeured car, perhaps in special foods. She can thus experience pleasure and ward off melancholia by such distractions as may be to her taste and within her means. Many of her former modes of enjoyment are closed to her but some new ones remain to be explored and from which she will be capable of deriving pleasure. It follows that, still disregarding "lost years", it will be appropriate in any assessment of the plaintiff's damages for lost earning capacity to reduce those damages only in respect of the cost of board and lodging actually provided for in the award of damages for future hospital expenses and in respect of those "saved" outgoings associated with the exercise of earning capacity, that is, fares and the like.
As to "lost years", the plaintiff is to be compensated in respect of lost earning capacity during those years by which her life expectancy has been shortened, at least to the extent that they are years when she would otherwise have been earning income (Skelton v. Collins, per Taylor J. [21] ). But, unlike the thirty years of her actual post-accident life expectancy, no outgoings whatever will be involved in respect of that period since it is assumed that the plaintiff will then be dead. What adjustments are, then, to be made on that account in assessing damages for loss of earning capacity in respect of those lost years? This is not a question giving rise to considerations of double compensation; the only element involving any possibility of double compensation, the component of board and lodging contained in the award of future hospital expenses, will have ceased to operate by the time that the "lost years" are reached. It is rather a question of confining an award of damages to no more than compensation, ensuring that the plaintiff is merely compensated for loss and is not positively enriched, at the defendant's expense, by the damages awarded.
1. (1966) 115 C.L.R., at p. 121.
It is well established in Australia that there should be taken into account in reduction of damages for the lost earning capacity of "lost years" at least the amount that the plaintiff would have expended on his own maintenance during those lost years (Skelton v. Collins, per Taylor J. [22] , applied in Jackson v. Jackson, per Sugerman P. [23] and per Jacobs J.A. [24] , by Williams J. in Gannon v. Gray [25] and by Sheppard J. in Jackson v. Stothard [26] ). It is noteworthy that such a solution to the problem of compensation for economic loss in respect of "lost years" finds support from recent text writers in England, who deplore the consequences of the decision in Oliver v. Ashman [27] with its exclusion of any compensation for the economic loss of "lost years"; they urge instead the adoption of what they would regard as the result attained in Australia as a consequence of Skelton v. Collins [28] : Kemp, Quantum of Damages, 4th ed., (1975), vol. 1, pp. 408-413, Ogus, Law of Damages (1973), pp. 185-188, and see Street, Principles of the Law of Damages (1962), p. 52. It is this result which also represents the method of reforming the present state of the law in England preferred by the Law Commission in its 1973 Report on Personal Injury Litigation—Assessment of Damages (Law. Com. No. 56, par. 87). In par. 58 of the Report the desired reform is described as "the adoption of the formula accepted in the Australian case of Skelton v. Collins i.e. compensation for loss of earnings in the so-called "lost years" should be based upon the amount of such earnings less what the plaintiff would have spent on his own maintenance".
1. (1966) 115 C.L.R., at pp. 121, 122.
2. [1970] 2 N.S.W.R. 454, at p. 460.
3. [1970] 2 N.S.W.R., at p. 464.
4. [1973] Qd R. 411.
5. [1973] 1 N.S.W.L.R. 292.
6. [1962] 2 Q.B. 210.
7. (1966) 115 C.L.R. 94.
But is this in fact what was decided in Skelton v. Collins ? In that case Taylor J. described the proper measure of compensation for a plaintiff's loss of earning capacity in the lost years as "a balance of what his future income and expenditure on maintenance would have been" [29] , having earlier said that there should be taken into account "the fact that if the plaintiff had survived for the full period it would have been necessary for him to maintain himself out of his earnings and, no doubt, his expenditure on his own maintenance would have increased as his earnings increased" [30] . Somewhat earlier again, however, his Honour had adverted to the possibility, also discussed in Oliver v. Ashman [31] , of portion of the damages awarded for lost earning capacity in lost years being capable of being recovered twice over, once by a personal representative on behalf of the estate of the injured party and a second in an action brought under Lord Campbell's Act. He observed that in the first of such actions the relevant damages would be assessed having regard to whatever gain the deceased might have had "from his future probable earnings after taking into account the expenditure which he would have incurred, if he had survived, in maintaining himself and his dependants, if any" [32] . This passage has been understood in Gannon v. Gray [33] and in Jackson v. Stothard [34] , and no doubt in numerous unreported cases, as requiring that not merely a plaintiff's own expenses of maintenance but also whatever he might have spent on the maintenance of his dependants should, even in the ordinary case of a claim for lost earning capacity of lost years made by a plaintiff during his lifetime, go in reduction of damages. In consequence it is only the loss of surplus income, whether in the form of cash savings or of acquired assets, which might have been derived during lost years that is to be compensated for—and see Luntz, Assessment of Damages (1974), pp. 146-150.
1. (1966) 115 C.L.R., at p. 122.
2. (1966) 115 C.L.R., at p. 121.
3. [1962] 2 Q.B. 210.
4. (1966) 115 C.L.R., at p. 114.
5. [1973] Qd R. 411.
6. [1973] 1 N.S.W.L.R. 292.
This result of course departs from the understanding of the effect of Skelton v. Collins [35] expressed in the English texts and in the Law Commission's Report; perhaps more importantly it appears to ill accord with any rational principle of compensation. This Sheppard J. recognized when, understanding Skelton v. Collins to require this result and recognizing the binding effect of the decision, he said in Jackson v. Stothard [36] :
It seems to me, however, to be an odd thing that damages up to the date of death are given without any deduction, whereas damages thereafter are given after the deduction, not only of moneys which would have been spent by the deceased in the maintenance of himself, but of moneys which would have been spent by him in the maintenance of dependants. I can understand, damages being compensatory, that they ought to be reduced by the amount necessary to maintain the deceased during the lost years because, ex hypothesi, he is no longer in need of the amount in question, and if he had lived the money would have been expended on him. But the reason why earnings which would in the normal course have been spent on the maintenance of dependants must be excluded is not clear to me.
1. (1966) 115 C.L.R. 94.
2. [1973] 1 N.S.W.L.R., at p. 298.
We share the difficulty felt by Sheppard J. and have concluded that, properly regarded, Skelton v. Collins [35] does not require that anything, other than the cost of a plaintiff's own maintenance, should go in reduction of damages for lost earning capacity for "lost years". Taylor J. spoke in terms not inconsistent with that view [7] . It is important to bear in mind that the circumstances of Skelton v. Collins were not such as to focus attention upon the point here in question; the important issues central to that decision were not at all concerned with it. Indeed of so little significance was it that in his review of earlier English cases Taylor J. was able to regardPhillips v. London and South Western Railway Co. [8] ; Roach v. Yates [9] ; Pope v. D. Murphy & Son [10] , and Oliver v. Ashman [11] (at first instance) as decisions which had adopted the same approach as that which his own reasoning pointed to; and so they did in the essential aspects which were of immediate concern to his Honour, yet in each no deduction at all appears to have been made from the calculated economic loss due to shortening of life expectancy to take account of any costs of maintenance, whether of the plaintiff or of his dependants. Indeed until Oliver v. Ashman [12] went on appeal and this whole discussion became, in consequence, irrelevant for the purposes of English law this remained the preferred English view—see Kemp, op. cit., 1st ed. (1954), p. 92.
1. (1966) 115 C.L.R. 94.
2. (1966) 115 C.L.R., at pp. 121, 122.
3. (1879) 5 Q.B.D. 78.
4. [1938] 1 K.B. 256.
5. [1961] 1 Q.B. 222.
6. [1961] 1 Q.B. 337.
7. [1962] 2 Q.B. 210.
There is an alternative explanation of what was said by Taylor J. in Skelton v. Collins [13] , that it is to be understood as confined to the particular circumstance with which his Honour was dealing at that point in his judgment, namely an action brought not by an injured plaintiff suffering loss of life expectancy but by a personal representative for the benefit of the estate of one who had suffered injury and loss of life expectancy and later died before proceedings were instituted. If so, it is enough to say that this is not such a case and that what may be a special rule applicable to such cases is inapplicable here. We leave to another day the whole question of such actions and of the possible risk to a defendant of double liability should an action for the benefit of the estate be followed by an action under Lord Campbell's Act, a matter which his Honour had occasion to discuss in Skelton v. Collins.
1. (1966) 115 C.L.R., at p. 114.
In these circumstances it would, we think, be wrong to treat Skelton v. Collins as any authority for the proposition that only surplus income, in effect savings, are to be taken into account in assessing economic loss in the "lost years". It is well enough to take into account in reduction of damages the likely expenditure on the plaintiff's own maintenance and this for the reason stated by Sheppard J. in Jackson v. Stothard [14] . As Jolowicz observed in a note in the Cambridge Law Journal (1960), at p. 163, "a dead man has no personal expenses", hence there should be a deduction of "the plaintiff's personal living expenses"—and see J. G. Fleming's article in California Law Review, vol. 50 (1962), p. 598, esp. at p. 605. However no further deduction is, we think, called for in order to ensure that no more than proper compensation is made to the plaintiff. The making of this one deduction will accord recognition to the curious feature of this head of damages; that the plaintiff receives compensation for lost earning capacity in respect of a period which he will not live to see and during which he will have no expenses to be defrayed out of the fruits of the exercise of that capacity. Because in the ordinary case a plaintiff must maintain himself in the future out of his damages, the cost of doing so is not to go in reduction of an award for lost earning capacity during his remaining years of life; the converse of that proposition may well be, in the special case of lost earning capacity in "lost years", that because those years can involve him in no cost of maintenance the cost thus avoided must go in reduction of damages. Like reasoning does not apply to the cost of maintaining others. It is for a quite different reason that, in the ordinary case, that cost does not go in reduction of damages, that reason being that the courts do not concern themselves with the manner in which the plaintiff expends his income or damages.
1. [1973] 1 N.S.W.L.R. 292.
The outcome of this all too lengthy discussion of Skelton v. Collins [15] is, then, that if the learned trial judge, consistently with his judgment in Jackson v. Stothard [16] , regarded himself as bound, in assessing the damages to which the plaintiff is entitled in respect of the lost years, to make a deduction in respect of money that she might have spent on her dependants, he would in our opinion have taken somewhat too restricted a view. However this can have had little, if any, effect on the award. The fact that the first of those years lies thirty years in the future itself results in a drastic reduction in the present value of any economic loss which may thus be suffered, and it was so uncertain whether she would then have had any dependants that it is unlikely that this consideration significantly affected the learned judge in the making of his assessment.
1. (1966) 115 C.L.R. 94.
2. [1973] 1 N.S.W.L.R., at pp. 298-299.
There remains one future aspect of the assessment of damages for loss of earning capacity. Loss must depend upon the likelihood that there would have been a future exercise of that earning capacity, but what of a female plaintiff likely to marry and who may cease to exercise her earning capacity on, or at some time after, marriage? Despite recent changes in patterns of employment of married women this remains a not unusual situation, the woman in effect exchanging the exercise of her earning capacity for such financial security as her marriage may provide. The measure of the one of course bears no necessary relationship to the other and the whole situation must be full of critical uncertainties such as whether the plaintiff marries, the extent if any of her employment after marriage, the success of that marriage and the extent to which it in fact provides her with economic security. Perhaps the only relatively certain factor will be her pre-injury possession of earning capacity and this in itself may be sufficient reason, absent any clear evidence pointing in a contrary direction, for the adoption of the expedient course of simply disregarding the prospect of marriage as a relevant factor in the assessment of such a plaintiff's future economic loss; this course at least recognizes the plaintiff's retention of capacity, which would have been available to her for exercise, in case of need, despite her marriage.
The last two heads of damages which call for particular mention are those conventionally described as pain, suffering and loss of the enjoyment and amenities of life and damages for shortening of life expectancy. As to the latter it bears no relationship to lost earning capacity during "lost years" but is rather the loss of a measure of prospective happiness (Skelton v. Collins, per Taylor J. [17] ); it is not compensation for "the mental distress due to the realization of the loss" (per Kitto J. [18] ). That forms instead a part of the general damages for pain and suffering [19] : compare Windeyer J. [20] . In the present case a figure "of the order of" $6,000 was allowed for this item in reliance upon the views expressed by Windeyer J. in Skelton v. Collins [21] . If it be correct that compensation under this head is not to take into account the anguish of mind which any appreciation of the loss may cause, that being compensated for under another head, then Windeyer J.'s suggested maximum figure of $6,000, which reflected this very factor, may be thought to have been excessive at the time and to depart from the general standard of the "conventional sum" which the courts have quite arbitrarily fixed upon ever since Benham v. Gambling [22] . The amount awarded may properly take into account a fall in the value of money (Yorkshire Electricity Board v. Naylor [23] ) but is to be no more than a quite conventional sum, very moderate in amount. In our view, despite the fall in the value of money, $6,000 departs from previous notions of what is appropriate under this curious and unsatisfactory head of damages. We would have thought that the sum of $2,000 is about the amount now appropriate as the conventional award under this head.
1. (1966) 115 C.L.R., at p. 121.
2. (1966) 115 C.L.R., at p. 98.
3. (1966) 115 C.L.R., at p. 100.
4. (1966) 115 C.L.R., at pp. 131-132.
5. (1966) 115 C.L.R., at p. 132.
6. [1941] A.C. 157.
7. [1968] A.C. 529.
It remains only to say something about damages for loss of the enjoyment and amenities of life. It is in this field that there exists the need to recall what has often been said about fairness, moderation and the undesirability of striving to provide an injured plaintiff with "perfect" compensation. The warning against attempting perfectly to compensate means, we think, in the case of pecuniary loss, no more than the need to make allowance for contingencies, for the vicissitudes of life, compensating for probable rather than for merely speculative detriments. But when a non-pecuniary detriment is in question the injunction against "perfect" compensation means rather more. It cannot refer to the exclusion of all question of punishment of the wrongdoer; the word "compensation" standing on its own would be sufficient to do this; rather is it designed to remind that the maiming of a plaintiff and its consequences cannot wholly be made good by an award of damages and that the recognition of this fact is to be no occasion for any instinctive response that no amount is too large to atone for the plaintiff's suffering. Such a response will be unfair to the defendant and may be of little advantage to the plaintiff; many consequences of injury are not capable of remedy by the receipt of damages, particularly those of the most personal character—the loss of the opportunity of a fulfilling marriage, of parenthood, of sexual satisfaction, of the realization of ambitions. It is very much at these detriments that the warning against any attempt at "perfect" compensation must be aimed. The authorities also require, as does good sense, that to the extent that damages awarded under other heads produce freedom from economic uncertainty and the availability of funds for pleasurable activities, the less will be the loss to be compensated under this head. This will be of particular relevance when a considerable sum is assessed for lost earning capacity.
Having made these general observations concerning the award of damages in a case such as the present it remains only to look more specifically at the damages in fact awarded. The total award is said to be the largest yet made for personal injuries in Australia, although it is modest indeed compared with that in the very recent case of a young Canadian quadriplegic, Thornton v. Board of School Trustees [24] . The award includes two components with a stated money value or range: the cost of nursing and medical attention, a "figure of the order of $150,000 to $175,000", and the amount for loss of expectation of life, $6,000. Each we regard on the approach we would adopt as excessive for reasons already stated; the former we would assess as of the order of $128,000, made up, in round figures, of $103,000 for hospital expenses, $15,500 for medical and physiotherapy services and $10,000 for special beds and the like, the latter at not more than $2,000. To these two must be added the sum of $20,000 which we have assessed in respect of the cost of constant nursing attention and transportation during periodic visits to the world outside the hospital ward.
1. (1975) 57 D.L.R. (3d) 438.
The learned trial judge specified no precise amounts for lost earning capacity or for pain, suffering and loss of the amenities of life. The former will, in the case of the thirty years of life expectancy, necessarily be considerable, representing as it does a loss of earning capacity the exercise of which would have produced net earnings of $70 per week over those years. There must, however, be brought to account the minor expenses, such as fares and special clothing, which would have been incurred in earning that income, also some allowance for sickness, early death, a measure of unemployment and the like. In all we would deduct $2 per week, a figure which is necessarily arbitrary, in respect of these matters. In addition some allowance, again an arbitrary one, must also be made because of the inclusion in the hospital costs of the element of board and lodging. To take about twelve per cent of these hospital costs, say $16 per week, may not be inappropriate; that this percentage represents much less than actual costs of board and lodging is to be accounted for by the surprisingly low total charges, of only $20 per day, made for the all-inclusive hospital services, due perhaps to some element of government subsidy. The present value, on six per cent tables, of, say $52 per week, being $70—($16 + $2), is about $38,500 and an award somewhere in the range of $34,000 to $43,000 could not be regarded as erroneous. For the twenty-four lost years quite different considerations apply both because of the need to take into account maintenance "saved" and because for part at least of that period the plaintiff, if regarded as having a working life, would have ceased to work or, if regarded as enjoying the security provided by her likely husband, would be the wife or widow of a retired breadwinner. To award more than a quite small sum for the present value of this long deferred and greatly to be discounted loss of earning capacity would be wrong; to take these "lost years" into account it is enough to increase the above range to one of from $37,000 to $45,000. Reviewing all these sums they come to a minimum total of $187,000 and to a maximum total of $195,000.
There remains the question of damages for pain and suffering and the loss of the enjoyment and amenities of life. As to the last item in this category we need say very little, what has already been said of the plaintiff's present state (not least her constant hospitalization) and a comparison between it and her former prospects of a happy and rewarding life is enough to establish entitlement to substantial damages under this head. Although she is a quadriplegic, the very numerous operations and other treatments which have been necessary, and in particular those involving her larynx, an area in which she retains full feeling, have caused her long periods of great pain and discomfort. She has suffered and will continue to suffer pain for the rest of her life in her left shoulder, another of her few remaining sensory areas. In addition there is her mental suffering, including the anguish which knowledge that her life expectancy has been substantially reduced must entail. Proper allowance must of course be made for such of the remaining pleasures life as money can now afford her. There is no doubt that, as we have already pointed out, her lot can be made much more enjoyable by the expenditure of money and will be materially improved by her financial ability to enjoy periodic outings from hospital. There nevertheless remains a great area for the award of damages under this head.
The learned trial judge awarded a total of $275,000 for general damages, or $80,000 more than what we would regard as the maximum for heads of damage other than pain, suffering and loss of the amenities of life. Of course our analysis of the total award of damages is not intended as an accurate estimate of the amount attributed by the learned trial judge to this particular head of damages, if indeed his Honour formed any view at all of an appropriate sum under this distinct head. We are not, therefore, to be taken as attributing to his Honour the view that a sum of $80,000 represented appropriate compensation for damages under this head, a head of damages which is peculiarly difficult to assess and the assessment of which must always be especially responsive to factors of which a trial judge will be more aware than can be any appellate court. Before we express our conclusion on the question whether the amount of general damages awarded was excessive, there are two matters to which brief reference should be made. The first concerns what is commonly described as the vicissitudes of life. Once a probable life expectancy is determined these enter not at all into the assessment of future hospital expenses or the conventional amount for shortening of life expectancy but are significant in the case of loss of earning capacity. However their significance is less in the case of an adult such as the present plaintiff, trained for and experienced in work of a character which is largely immune from industrial disturbances and which is not as exposed to the effects of economic depression as are many other occupations. Similar considerations applied to the plaintiff's intended spouse. Other hazards of life, including illness and disablement, remain but all have, we think, been adequately accounted for. Whatever effect should be given to vicissitudes of life in the case of the non-pecuniary head of damages, and there is nothing to suggest that the plaintiff's prospects for a happy married life were in this case other than good, they cannot affect what we have said concerning the amount which might have been assessed under this head of damages.
The second question is the degree of usefulness of a final testing of the appropriateness of the total amount of the award of general damages by seeing what annual income that amount, whether or not after deduction of damages for non-pecuniary loss, would produce year by year if invested at interest. In the present case it will be very large indeed, especially if thought of as invested in, say, first mortgages at current rates of interest; even if regarded somewhat more conservatively it will amount to more than $20,000 per annum before tax. Of this, on the view we take of the future of the plaintiff, a lifetime spent in hospital, less than half will be absorbed in nursing and hospital expenses, including food and shelter. In addition the capital sum would, on this basis, remain to her estate at her death. The latter fact we regard as of relatively little account in the present case because, when any period as long as thirty years in the future is in question, the difference in amount is small as between a fund to which only the income is resorted and one producing a like annual amount by recourse both to income and to capital, the total fund being thus used up by the end of that period.
Such a means of testing an award is, in present circumstances and when applied to a case like the present, likely to prove misleading, and this for three reasons. It presupposes investment at what, some years ago, would have seemed very high rates of interest. Those high rates are in part a reflection of anticipated future inflation; yet the essence of the process of assessment the result of which is to be tested by this means is that the effect of future inflation is to be ignored. So the high yield from the award should, to be consistent, be regarded as received year by year over a long period in which rapidly progressing inflation has its effect upon costs; so regarded the apparently very large future disposable income of the plaintiff may be seen in proper perspective. Further, if amounts awarded for pain, suffering and loss of amenities of life be included in the interest-bearing capital sum, greatly inflating it, the process of looking at the resultant income involves to a degree the subjection to purely economic terms of a head of detriment which cannot be expressed in those terms. Nor is it a complete answer to that proposition to recall that those are the only terms in which any award of damages can speak. Finally since loss of earning capacity has been estimated on the basis of probable net loss it is most relevant that the plaintiff's quite substantial annual income will attract tax at high rates, even if large deductions are allowed for hospital and medical expenses. This tax effect need not be elaborated upon for its considerable impact to be appreciated.
We have carried out the detailed examination of the factors constituting an appropriate award of damages in order to equip ourselves to determine whether the judge erred in his conclusion on the total amount of damages appropriate to be awarded. We bear in mind that this is the ultimate question to be decided and that the trial judge had a wide discretion. We have therefore adopted in the process the maximum figures which on the evidence in this case could be accepted under each head of damages. It does not follow that these amounts are those which we would have adopted in the first instance. When the approach which we have thought appropriate in the circumstances of this case is adopted in order to test the award and when consequently maximum figures under each head are taken there is of course no room for a further allowance whereby the verdict could be sustained as one within permissible limits. It would be otherwise if less than maximum figures were taken under each head, that is to say, if a court on appeal were to form its own estimate of the appropriate, rather than the maximum, amount of damages under each head.
The result of this approach which leaves a sum of $80,000 in respect of pain, suffering and loss of the amenities of life demonstrates that the total amount of the verdict is too high. Pain and suffering and loss of the amenities of life is a head of damages which is peculiarly difficult to assess but when full compensation has been determined in respect of all other heads of damages, it appears to us that an additional sum of $80,000 exceeds what could properly be awarded under this last head.
We conclude, therefore, that the amount awarded cannot stand. It is necessary therefore for us to determine what was a proper amount. We make this determination wholly on the basis of the findings of fact made by the trial judge. It must, however, be made clear that, while the process which we have followed of analysing the separate maximum amounts possible under the various heads of damage will be of assistance in a re-assessment, they cannot of themselves lead to a conclusion on the amount proper to be substituted. In all the circumstances we are of the opinion that a proper amount is $270,547.50.
We would accordingly allow this appeal and substitute for the present award an amount of $270,547.50.
Jacobs J.
Although I conclude that this appeal should be dismissed I fully concur in the analysis which has been made by Gibbs J. and Stephen J. of the approach which a court should take to the assessment of damages in such a case as the present one. I entirely agree with the balance which is struck in their approach between the process of computation and the recognition that mere computation does not of itself, useful and indeed essential though it is, provide a final answer to the proper amount of damages which should be awarded. I agree also with the principles which are enunciated in respect of loss of earning capacity both during the period of life expectancy and the so-called "lost years".
I differ only on two items in the assessment but the difference leads to a different result on the appeal. First, I would not alter the figure "of the order of" $6,000 for the shortening of life expectancy. It is a small difference. I agree that the sum is necessarily a conventional one, when the element of suffering from the consciousness of the shortening of life expectancy is excluded. Nevertheless, I think that a figure of $6,000 is an appropriate one at the present time. It is a head of damage which the law recognizes. In the case of injury which does not cause immediate or close to immediate death, it is an aspect of the damages which a plaintiff is entitled to recover for the injury itself, considered apart from the suffering and loss of amenities which are its consequence.
My second point of difference is more substantial. I would not alter the trial judge's estimate of "a figure of the order of $150,000 to $175,000" for hospital and nursing care and services, including costs incurred in spending periods at home. The trial judge upon making this finding added, "I think it likely that a greater sum is needed, but having done my best to allow for the risks and contingencies which are involved in an appreciation of the total problem, that is the range which I consider appropriate". I have come to the conclusion that nothing less than the top of this range was appropriate. The amount payable by the respondent for hospital care was, at the time of the trial, $20 per day. It did not require evidence in order to establish that a hospitalization cost of $20 per day could only be maintained in the future if the costs were subsidized or further subsidized. A judge, like a jury, can bring to his task his knowledge of the community and, although it would be wrong for judge or jury to attempt a precise estimate of hospital costs without evidence to support the estimate, the fact is that no member of the Australian community could at the end of 1973 or at the time of the appeal by way of rehearing in mid-1975 be unaware that hospitalization costs without subsidy substantially exceeded $20 per day and were rising rapidly. It could not be assumed that government subsidy would be, or would continue indefinitely to be, paid in relief of a defendant found liable in negligence for the injuries which required hospitalization. Therefore, the trial judge, on finding that a greater sum for hospital and medical expenses was likely to be needed than one in the range which he expressed, was at least entitled, I should say bound, to take the figure at the top of this projected range.
When this allowance is made, the figure which remains on the computation for the injury itself and for the pain and suffering and loss of the amenities of life becomes one which cannot in my opinion be regarded as disproportionate. I would therefore dismiss the appeal.
Murphy J.
On 6th December 1971 the respondent, June Evans, was severely injured when she was thrown out of a car which ran off a straight road in Western New South Wales and hit a tree. Sheppard J. awarded Miss Evans $300,547.50 and the Court of Appeal (Reynolds and Glass JJ.A., Mahoney J.A. dissenting) rejected an appeal against the alleged excessiveness of the award.
Miss Evans was born on 18th November 1951. The trial judge found (on undisputed evidence) that before the motor accident she was a bright, intelligent young woman who enjoyed life thoroughly. She was a talented singer and was often a soloist at religious gatherings. She attended primary and secondary schools in Perth, won a scholarship to a business college and after completing this course, worked as a secretary with a television station in Perth for two years. She then worked as a breadcarter's assistant for twelve months to earn enough money to take a full time course at the Commonwealth Bible College in Brisbane. In 1971 she studied at the College, became dux of her year, and intended to spend 1972 at the College. She was unofficially engaged to a young man, a public servant with good prospects. Whether she would have continued to work after marriage was not settled, but she would have had little difficulty in obtaining employment. By the time of the trial she would have been earning at least $70 per week net.
Miss Evans was taken by ambulance from the accident to Narrabri District Hospital, deeply unconscious, barely breathing, without pulse and near death. Her legs were completely paralysed and she had fractures of two cervical vertebrae, a number of ribs, the right shoulder blade, the left upper arm and left forearm. One of the ligaments supporting her liver had been torn from it causing internal bleeding which threatened her life. She needed continuous artifical respiration and a tube in her trachea. The next day, she was taken by air ambulance and, still deeply unconscious, admitted to Royal North Shore Hospital, Sydney. During her admission, she had a grand mal epileptic fit. Her right lung and part of her left had collapsed. She remained unconscious for weeks with a tube in her trachea, intravenous injection of fluids and no response to stimuli. She developed a very large bed sore, eight by four inches (perhaps initiated by the injury), a posterior ulcerated area completely raw almost down to the bone for which at first no treatment was possible.
Towards the end of December, she regained consciousness. She had persistent fever and could only manage ten minutes every hour without artifical respiration; the bed sore did not heal. She still had a nasal tube to remove mucous from her breathing passages and lungs, the tube in her trachea to breathe, and intravenous feeding. On 5th January 1972 she was flown to her home city and admitted to the Spinal Unit at Royal Perth Rehabilitation Hospital where she still is. She is expected to live at least twenty years and may live thirty or forty. Only a detailed consideration of her condition can show the seriousness of it.
Quadriplegia. This is a permanent condition from a broken spine causing the complete loss of nerves controlling movement and sensation and paralysis below the lower part of the neck, except for some feeling and movement in her shoulders and right arm. She has movement at the right elbow and can bring her hand up to her mouth with a splint. She has a little movement backward and forwards of the right wrist and flicker in one or two of the fingers. On the left side there is even less; she has some elbow function, but practically none in the wrist or hand. She cannot brush her teeth or her hair, or do up buttons. Her trunk and legs are completely paralysed.
Left Shoulder. Although the fracture of the left upper arm and shoulder blade were united, she has suffered persistent pain and stiffness. To relieve this, part of the shoulder blade was removed in June 1973. The treatment was only partially successful and she requires pain relieving drugs many times during an average day.
Bowels and Bladder. She has no control. Her bowels are emptied by use of suppositories introduced into the rectum. She must have a catheter permanently inserted which drains continuously into a urine bag and which causes an unavoidable continuous low grade infection of the bladder. Her paralysis is of such a high degree that the intermittent catheterization or bladder draining carried out on less disabled persons is not possible.
Kidneys. To avoid the constant problem of ascending infection and inflamation of the kidneys with secondary and irreversible destruction of tissue, she must have more fluid intake than ordinary persons and a constant regime of intravenous pyelograms. The catheter is also necessary to prevent distention of the bladder damaging the kidneys.
Pressure sores. She must be nursed on a regular programme to prevent pressure sores in the areas of the sacrum, the protuberances over the upper thigh bone and the heels. These sores are very hard to shift and may require major surgery. She must be turned regularly day and night and the areas rubbed or massaged with spirits and powder. She suffers from inflammation and skin peeling in her groin and the cleft of her buttocks which must be treated with mercurichrome. Dr. Griffiths, the eminent and very experienced specialist who treated her, regarded this as a major problem and said her large bedsore was nearly the worst he had ever encountered. It was ultimately cured by a most substantial graft from the flesh of the buttocks.
Spasms. She has an uncoordinated involuntary contraction of the muscles of the abdomen and lower limbs. The part of the spinal cord which controls them is disconnected from her brain. The leg muscles go into twitching contractions which either extend from the knee upwards, bringing the legs very tightly together, or force the ankles into a downward position. The abdominal and spinal muscles may also spasm. She is treated with anti-convulsants and valium tablets four times daily to prevent the spasms from becoming too severe.
Brain Damage and Epilepsy. She sustained injury to the brain or brain stem which has resulted in a series of epileptic fits which are quite separate from the spasms. In May 1972, she had a full grand mal which lasted for a few minutes followed by a further four attacks in the next thirty minutes.
Eating and Drinking. She initially had to be fed by using a tube through the nose, and later had difficulty in swallowing and making food go down the correct passage apparently because the brain damage had caused a deviation in her tongue.
Deterioration of Intellectual Capacity. Her intellectual capacity has deteriorated and, although it may recover, it had not at the time of the trial. Except for her initial weeks of unconsciousness, she has been able to co-operate and has answered questions to the best of her ability. She is perfectly aware of where she is and what she is doing, and understands what has happened to her. However, her concentration is not good, her memory fails and she tends to forget requests she has made a few minutes before.
Depression. Understandably she is depressed. Dr. Griffiths has often seen tears, which she can not mop away, trickling down her face.
Horner Syndrome. On one side of her face, sweating has ceased, the eyelid droops and the pupil of the eye is dilated. This may be due to brain damage, damage to the sympathetic nervous system in the neck, or psychosomatic depression. It is not clear whether this is a continuing condition.
Temperature Regulating Mechanism. She must live in air conditioning as she has lost control of her heat and sweating mechanisms. If air temperature rises, either her body temperature rises or she will come out in a bath of sweat all over, depending upon the reaction of her bladder or bowels (which is beyond her control).
Breathing. She has had a complete collapse of one lung and since then partial lung collapses. She had a tube in her trachea for a year. She cannot cough and to avoid further collapses, requires frequent daily physiotherapy and suction through her mouth to control bronchial secretions.
Speech. Her damaged right vocal chord was removed. Cartilage on the right side of the larynx was fractured, and an inflamed growth of cartilage (on and around the vocal chord) was removed in an open operation through the neck. A skin graft was taken from the right arm to line the raw part of the vocal chords where the growth had been and pressure to enable the graft to take was achieved by putting it into a pack in the larynx and keeping it there for fourteen days by two large needles through the throat. This was a most unusual, uncomfortable and painful procedure. She was fed by nasal tube by-passing the throat.
Although her left vocal chord moves well and can practically meet continuously with the scar tissue on the right, vocalization has been very difficult. As her breathing and articulation are not co-ordinated, air escapes through the mouth and nose before a sound is produced, leaving only enough for one syllable (rarely two) per breath. Her inability to coordinate breathing is related to her inability to get rid of mucous which affects her exhalation. As she tries to speak, her tongue swivels to the left and protrudes. The best result, which she manages infrequently, is a strained slurred sound which she cannot maintain for long. She tires quickly after a few words. Despite her co-operation, the speech therapist decided against further speech therapy because of her physical defects, tiredness and accompanying periodic bouts of depression.
She is, however, able to communicate by pointing to a card containing the letters of the alphabet and by using an electric typewriter with the aid of a splint.
Assessment. The trial judge adopted a convenient and proper approach to such an assessment by examining the conventional elements of damage individually, taking care to avoid any overlap of allocations.
A. Non-economic Loss.
1.
Physical injury, pain and suffering, loss of enjoyment of life. Sheppard J. chose not to fix a separate amount in respect of this element but analysis of this award shows that it was less than $100,000. Miss Evans had the experience of the accident and operations and will not be free of the daily ordeal of suffering and discomfort until she dies. Her ability to breathe, eat, speak, move, control her excretions, have social and sexual intercourse, bear or look after children is either greatly impaired or destroyed. She also went through the ordeal of deciding to release the young man from his promise to marry her, although after the accident, he visited her constantly both in Sydney and Perth and proposed to her.
Allocation of less than $100,000 for the shocking injuries, pain and suffering and loss of enjoyment that Miss Evans has suffered and will suffer would not reflect community standards. Higher sums would be reasonable. I agree with Evatt C.J.'s statements that "the estimate in respect of pain and suffering is seldom adequate" (Cucinotta v. Nominal Defendant [25] ) and that "the tendency is for this head of compensation to be understated" (Polley v. O'Donnell [26] ).
1. [1961] S.R. (N.S.W.) 23, at p. 30.
2. [1961] S.R. (N.S.W.) 18, at p. 21.
2. Shortened Life Expectancy. I see no reason for dealing with this separately from the element of physical injury, pain and suffering and loss of enjoyment of life (apart from its effect on earning capacity which is properly dealt with under economic loss). Pain and suffering includes that arising from knowledge that life is shortened. Loss of enjoyment of life includes not only the impaired (or loss) enjoyment during the shortened years, but also that of the lost years. Physical injury covers breakdown, not only of some functions but the premature cessation of all functions (i.e. death).
1. [1961] S.R. (N.S.W.) 23, at p. 30.
2. [1961] S.R. (N.S.W.) 18, at p. 21.
B. Economic Loss.
1. Special Damages. These were agreed at $25,547.50.
2.
Hospital and Medical Care. These are not covered by the National Health Scheme or insurance under it. At the time of the trial, the charges for Miss Evans' hospital and nursing care were $20 per day and the trial judge treated them as if they would be frozen at this rate during Miss Evans' life. He then discounted the future payments (at six per cent) to arrive at a figure of $86,000 (if she lived twenty years) or $103,000 (if she lived thirty years). He also treated the cost of the additional medical services and physiotherapy for which she will be liable in the same way and arrived at an amount of about $15,000. He thus allocated $100,000-$118,000 for institutional medical and hospital care. He considered this was the appropriate range having done his best to allow for risks and contingencies, although thought it was likely that a greater sum would be needed.
The assumption that the daily cost of hospital care for Miss Evans would remain at $20 throughout her life is unrealistic. It was obvious at the time of the trial that the cost of hospital and nursing care (as a labour-intensive service) would increase substantially and probably at a higher rate than the general level of costs. The trial judge referred to this:
How long fees at the Royal Perth Hospital will remain at their present level or salaries payable to nurses in Western Australia will remain at the figures given in evidence I do not know but I should not think it would be for very long. However, I am not permitted to take that matter into account, and I have not, but the fact that I am prevented from doing so in a case such as this leaves me with a sense of uneasiness.
It is common knowledge that minimum charges (even in a government subsidized hospital such as the one in which Miss Evans is) have already risen from $20 a day to $40 a day ($60 a day for a private room). The costs of the extra medical services and physiotherapy have also risen greatly.
The question whether Miss Evans should spend some time at home arose at the trial. The appellant agreed and the trial judge's assessment was made on that basis. The appellant should not be allowed to renege on the agreement and this Court should not consider it unreasonable for the appellant to pay for part-time care at home. The trial judge estimated that the costs of treatment (including special nursing equipment and some alteration to her mother's home) would total $150,000-$175,000. The hospital charges (which are subsidized) of course represent only a fraction of the real cost, so the social cost of keeping her in hospital may well exceed the costs of keeping her at home. Leaving aside any extra costs of her spending some time at home, the allocation for medical and hospital costs is quite inadequate and it is obvious (and was at the trial) that the amount allocated is much too small to pay the charges if she lives the expected period.
3. Loss of Earning Capacity. Before the accident, Miss Evans' mental and physical capacity was unimpaired. The trial judge accepted that the plaintiff, if uninjured, would have been able to earn $70 net per week as a secretary at the time of the trial, and then felt bound to calculate her loss of earning capacity on the assumption that her earnings would have continued at $70 per week throughout her working life. This assumption is contrary to ordinary experience. Apart from the effects of inflation, the tendency has been for wages (measured at constant values) to increase, mainly because of general increases in productivity. The statement issued by the Australian Bureau of Statistics show that average weekly earnings per male unit (this being a composite of male and female earnings) were $119.90 gross at the time of the trial (May 1973), and by 1976 they had increased to $180.30 gross in the June quarter.
Any estimate of loss of earning capacity based on probable earnings should take into account:
(a) Increase in earnings because of normal age progression and promotion.
(b) General increases in earnings due to national increases in productivity. These average about three per cent per year and are distributed through the work force by our system of wage fixing. The wage earner can expect (apart from inflation) an annual increase of about three per cent (Report of the Working Party on the Measurement of Labour Productivity, Department of Employment and Industrial Relations, November 1975).
(c) Inflation (see Lord Reid's observation in Taylor v. O'Connor [27] ; Cavanagh v. Ulster Weaving Co. Ltd. [28] ; and my reasons in Jacobs v. Varley [29] ).
J. H. Prevett's view in "Actuarial Assessment of Damages: The Thalidomide Case—I" (Modern Law Review, vol. 35 (1972), p. 141) is that "a direct allowance for future increases in earnings attributable to general economic forces, including both increased productivity and wages inflation, should be made on a conservative basis" (p. 153). He suggested (for England) a compound rate of increase of four per cent to six per cent per annum. Even this conservative approach would roughly offset the usual discount rates.
(d) The necessity when calculating present values to allow for taxation on the notional interest component of any sum equivalent to lost earnings. If the loss is to be assessed on the pre-accident net earnings position (as adjusted to trial), then the compensation should be assessed on post-trial net return to the plaintiff. Because of the respondent's income from other components of the award, the rate of taxation will be much higher than that on her probable earnings if uninjured. The calculation must of course take into account using up the capital over the period. Although the trial judge mentioned taxation on earnings on the investment of the award (and referred to reduction by concessional deductions), he seems to have discarded it except for treating it as a reason to adopt a six per cent discount rate rather than a higher one.
1. [1971] A.C. 115, at p. 130.
2. [1960] A.C. 145.
3. (1976) 50 A.L.J.R. 519, at p. 527.
Effect of former prospects of marriage on Loss of Earning Capacity. The expression "loss of earning capacity" does not precisely describe this element of loss in its modern application. What is measured is the impairment or destruction of the capacity to engage in work that is economically valuable, whether it would be paid for in money or not. It is a loss of working capacity sometimes referred to as loss of economic capacity. There is a discernible factor of economic loss in loss of ability to do non-earning work of economic value. The allocation for loss of earning capacity should not be reduced because of Miss Evans' former prospects of marriage. A woman who loses her capacity to make the usual contributions of a wife and mother in a household suffers great economic deprivation. Actions for loss of services correctly treat this as economic injury, but as a loss to the husband on the archaic view of the husband as master or owner of his wife. The economic loss is one to the wife or mother. It is her capacity to work, either in the household or outside, which is affected. In any event, the notion underlying earlier cases that women retired automatically from the work force on marriage is no longer correct. The most important social change recently is that women now form a large part, almost half, of the workforce.
Lost Years. In the context of this case, the question of loss of earning capacity because of premature death is a minor aspect. The approach in Oliver v. Ashman [30] is not the law in New South Wales (see Skelton v. Collins [31] ). If a reasonable application of the principle of restitution is to deduct from assessment of lost earning capacity what would have been maintenance of the respondent during the lost years, it should be the bare amount necessary to enable her to use the earning capacity. Her spending for enjoyment or maintenance of others is irrelevant. Obviously, one has to be alive to use earning or other economic capacity, but the expenses of being alive are properly regarded as private expenses, not to be set off as a deductible expense against income.
1. [1962] Q.B. 210.
2. (1966) 115 C.L.R. 94.
Board and lodging in hospital should not be set off against loss of economic capacity. If set off at all, it should be against hospital expenses.
Conclusion. The award by the trial judge reflects a substantial under-assessment of the major economic elements of Miss Evans' damages (loss of earning capacity, and medical and hospital expenses) as well as non-economic elements (physical injury, pain and suffering and loss of enjoyment of life). If she continues to be liable for the rapidly increasing costs of her hospital and medical care, it is highly probable that she will suffer severe hardship. The allocation for hospital and medical expenses will be exhausted long before the expected end of her life and she will have to resort to damages allocated to other elements of her loss to pay her hospital and medical bills. The reduced award to be ordered by this Court will, even more than the original award, destine Miss Evans to be a charity case, primarily because of persistence with judicial approaches which have not been adapted to the circumstances of present and prospective inflation.
Sheppard J. referred to the increasing social costs of deaths and injuries in road accidents. The judicial practice of depressing damages, especially in catastrophic personal injury cases (see Arthur Robinson (Grafton) Pty. Ltd. v. Carter [32] ; Chulcough v. Holley [33] ) conceals the social costs of negligent driving, unsafe vehicles and unsafe roads and transfers much of the burden to injured persons. The award is far from excessive.
1. (1968) 122 C.L.R. 649.
2. (1968) 41 A.L.J.R. 336.
The appeal should be dismissed. |
high_court_of_australia:/showbyHandle/1/10306 | decision | commonwealth | high_court_of_australia | text/html | null | Spiratos v A/asian United Steam Navigation Co Ltd [1955] HCA 39 | https://eresources.hcourt.gov.au/showbyHandle/1/10306 | 2024-09-13T22:56:19.160796+10:00 | High Court of Australia
Dixon C.J. Webb and Fullagar JJ.
Spiratos v A/asian United Steam Navigation Co Ltd
[1955] HCA 39
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The Court delivered the following written judgment:—
July 18
Dixon C.J., Webb and Fullagar JJ.
This is an appeal from a decision of the Local Court of Port Adelaide, constituted by a special magistrate, on a claim for compensation under the Seamen's Compensation Act 1911-1953 Cth.. The claim was made, on behalf of herself and two infant children, by Irene Spiratos, the widow of Theotokis Spiratos, a seaman employed by the respondent company, who disappeared from s.s. Caloundra at sea on the night of 28th August 1953 and must be presumed to have been drowned. The claim was rejected by the magistrate.
Under s. 5 of the Seamen's Compensation Act compensation is payable in respect of the death of Spiratos if that death was occasioned "by accident arising out of or in the course of his employment". The burden of proving that it was so occasioned rests upon the claimant. In the present case, if it could be taken as established that the death was occasioned by "accident", it seems to us that no difficulty would arise with regard to the connection of the accident with the employment. It could readily be inferred that it arose out of, if not in the course of, the employment. But death by suicide is not death by accident. And the magistrate was of opinion that there was in this case such a possibility or probability of suicide as to make him unable to find affirmatively that the death of Spiratos was occasioned by accident.
The burden of proving death by accident rests, as we have said, on the claimant. She is assisted at the outset by a presumption against suicide: see, e.g. R. v. Huntbach: Ex parte Lockley [1] . But this means no more than that, if nothing relevant were proved except that the deceased disappeared from a ship at sea, the only proper inference would be that he fell overboard accidentally. If other relevant facts are proved, these must be taken into account along with the presumption, and the question at the end of the case is not whether the presumption has been rebutted in the sense that the death has been proved not to have been accidental, but whether, having regard to the evidence and to the presumption, there is a real balance of probability that the death was accidental. The position in such cases is explained by Lord Lindley in delivering the judgment of the Privy Council in Ajum Goolam Hossen & Co. v. Union Marine Insurance Co. Ltd. [2] . After referring to the presumption of unseaworthiness, which arises from the entirely unexplained loss of a ship at sea, his Lordship said: "If nothing more were known, unseaworthiness at the time of sailing would be the natural inference to draw; there would be a presumption of unseaworthiness which a jury ought to be directed to act upon, and which a Court ought to act upon if unassisted by a jury. But if, as in this case, other facts material to the inquiry as to the seaworthiness of the ship are proved, those facts must also be considered; and they must be weighed against the unaccountable loss of the ship so soon after sailing, and unless the balance of the evidence warrants the conclusion that the ship was unseaworthy when she sailed, such unseaworthiness cannot be properly treated as established, and the defence founded upon it must fail" [3] .
1. (1944) K.B. 606.
2. (1901) A.C. 362.
3. (1901) A.C., at p. 366.
It is in the light of this principle that the evidence in the present case must be examined.
The Caloundra left Port Adelaide at 3 p.m. on 27th August 1953, bound for Sydney. Spiratos was in the evening watch (8 p.m. to midnight), and on 28th August was at the wheel on the bridge from 8 p.m. to 10 p.m. At 10 p.m. he was relieved at the wheel for a customary "half-hour break". It was his duty to return to the bridge at 10.30 to assume look-out duty. When he did not appear on the bridge at 10.30, the officer on watch sent a cadet to look for him. The cadet reported that he could not find him, and the seaman at the wheel was then sent to search for him, the cadet taking the wheel in the meantime. At 11.10 p.m. the seaman reported that he had been unable to find Spiratos, and the officer on watch, "fearing that something was amiss", called the master to the bridge. The master had all deck personnel called, and a thorough search of the entire ship was made under the direction of the chief officer, but Spiratos was not found. At 11.20 the vessel was turned about, and her course was retraced, with extra lookouts placed, floodlights trained on the water, and lifeboats cleared away. A thorough search was made, which was continued until 8 a.m. on the 29th, but it was vain, and at that hour the ship resumed her interrupted voyage.
If nothing more had appeared than what is stated above, it might well have been said that the only proper course was to apply the presumption against suicide with the result that the claim for compensation would succeed. There was, however, other evidence.
Spiratos was a competent and experienced able seaman. At the time of his disappearance the weather was fine, and the sea slight. The wind was force 2-3 (light breeze) and on the starboard quarter. The ship was deeply laden. The chief officer said that she "would be a steady ship with no appreciable roll". The ship has a "continuous high bulwark" around the weather deck, and a thorough inspection of her by the magistrate appears to have discovered no place on her from which it was at all likely that a man might fall overboard accidentally. In their report to their owners the master and the chief officer expressed the opinion that "the possibility of the man going overboard by accident was remote". This report, as such, was probably not admissible in evidence, but it aptly expresses the reasonable inference to be drawn from the evidence as to the construction of the ship and the circumstances existing at the time of the disappearance of Spiratos. Some evidence to support a contrary conclusion was given by a seaman named Cuming, who was not at the material time a member of the crew but had sailed on previous voyages in the Caloundra. This evidence, however, is obviously unsatisfactory on its face, and it was not accepted by the magistrate.
The matters so far considered go a long way towards weakening the effect of the presumption against suicide. But there is other evidence which, while hardly sufficient to support an actual finding of suicide, does affirmatively suggest that the case may well be one of suicide. It appears that Spiratos was very worried over the result of a business transaction in which he had recently engaged. The details of this transaction are not entirely clear, though the agent who negotiated it was called as a witness for the claimant. But it seems that Spiratos and a man named Mavratzakis had bought a cafe business with the freehold of the premises on which it was carried on. The price was £2,600, of which sum Spiratos provided £600 and his partner £400, the balance of £1,600 being borrowed on first mortgage. The money put into this transaction represented the whole of Spiratos' savings. It is a reasonable inference that the business did not prosper. At any rate after a very short time Spiratos sold out to his partner, taking a second mortgage for the amount of his interest. A little later the partner in his turn sold out and left. Spiratos was thus left with a liability of £1,600 on the first mortgage, while his chance of recovering a due contribution to that liability, and also the money which he had put into the business, depended entirely on a former partner who had "sold out and gone away". Enough appears to show that he had serious cause for worry, and he appears in fact to have been seriously worried over the position. When the news of his disappearance was conveyed to his widow, the claimant, she said:—"Why? Why? Why did he do it?" She also said that he had been worried over the business and was "disgusted and fed up". There is also the evidence of a man named Tziotis, a compatriot and shipmate of Spiratos, who told of a conversation between himself and Spiratos on the day when the latter joined the Caloundra. He had heard that Spiratos had "left the sea and bought a business ashore." They spoke of this, and Tziotis said that Spiratos appeared to be "very sad at having to go back to sea". There is a good deal of other evidence to the effect that Spiratos was normal in his conversation and behaviour, but this, of course, does not weaken the evidence as to his state of mind.
It is for the claimant to establish death by accident. This means that she must induce in the tribunal a belief that death did occur by accident—not as a matter of certainty but as a matter of definitely preponderant probability. "The truth is that, when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality" (per Dixon J. in Briginshaw v. Briginshaw [1] ). Looking at the whole of the evidence in this case, and giving all due weight to the presumption against suicide, we do not think that an affirmative finding of death by accident could be justified. Having regard to the circumstances surrounding the disappearance of the deceased and the evidence as to his state of mind, one might even be inclined to say that there is a slight preponderance of probability against accident. But, however this may be, an affirmative finding of accident is not, in our opinion, possible. We think that the magistrate reached a right conclusion on the evidence before him.
1. (1938) 60 C.L.R. 336, at p. 361.
We have not thought it necessary to refer to a number of interesting English cases, which were very properly cited to us in argument, and which have arisen on facts more or less similar to those in the present case. They are collected and discussed in Simpson v. London, Midland & Scottish Railway Co. [2] but Viscount Dunedin in that case himself said:—"It is no use trying to decide a case by looking at decided cases and then inquiring which case most resembles the present on the facts. Decided cases are only useful so far as they lay down principles" [3] . The principles applicable in the present case have seemed to us to be clear enough.
1. (1931) A.C. 351.
2. (1931) A.C., at p. 357.
We asked counsel during the argument whether the right of appeal in this case was a right of appeal on questions of law only, or whether the appeal was a re-hearing with all questions of fact and law open. Counsel agreed that an appeal lay as to all questions of fact or law, but they did not refer to any provision of the Seamen's Compensation Act, the assumption presumably being that the Local Court at Port Adelaide was a State court exercising federal jurisdiction, from which an appeal lay to this Court under s. 73 of the Constitution. We have since looked at the relevant provisions of the Seamen's Compensation Act, which are contained in s. 5 (3) and cll. 2 and 3 of the second schedule. The position does not appear to us to be clear, but appeals have been entertained by this Court in similar cases: see Nelson v. Mutton [4] and McKenzie v. William Holyman & Sons Pty. Ltd. [5] . In neither of these cases was it suggested that the appeal was incompetent or that the right of appeal was limited to questions of law. Assuming an unlimited right of appeal to exist, we are of opinion that this appeal should be dismissed.
1. (1934) 8 A.L.J. 32.
2. (1939) 61 C.L.R. 584. |
high_court_of_australia:/showbyHandle/1/10975 | decision | commonwealth | high_court_of_australia | text/html | null | Healing (Sales) Pty Ltd v Inglis Electrix Pty Ltd [1968] HCA 60 | https://eresources.hcourt.gov.au/showbyHandle/1/10975 | 2024-09-13T22:56:20.016997+10:00 | High Court of Australia
Barwick C.J. Kitto, Menzies, Windeyer and Owen JJ.
Healing (Sales) Pty Ltd v Inglis Electrix Pty Ltd
[1968] HCA 60
ORDER
Appeal and cross appeal dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
Oct. 11
Barwick C.J. and Menzies J.
This case raises, apparently for the first time, an important question relating to the assessment of damages for the conversion of goods by taking them and depriving the owner of them permanently. Here the goods taken by the appellant from the respondent were worth $10,320.15 and the sum of $10,350.15 was owing by the respondent as buyer to the appellant as seller for the goods under a contract of sale providing for sixty day terms. At the date of the seizure the sixty days had not expired in respect of any of the goods seized so the respondent was not in default under the contract of sale. In these circumstances the learned trial judge, in assessing compensatory damages for conversion, took the purchase price owing into account and decided that the respondent was entitled to nominal damages only but awarded $3,500 exemplary damages because of the appellant's high-handed action in seizing the goods. The Court of Appeal Division of the Supreme Court increased the award to $13,820.15 by adding to the exemplary damages awarded the value of the goods seized.
The respondent cannot retain the increased verdict unless, notwithstanding the seizure, it, as buyer of the goods, remained liable to pay the appellant, as the seller of the goods, the agreed price. In the absence of such liability the award of the value of the goods as damages for conversion would be to give the buyer more than compensation for its loss.
Prima facie the buyer did remain liable for the price, for the seizure did not rescind or determine the contract of sale. That contract continued to exist unmodified by what had occurred. The appellant's case in this Court is, however, that in an action by it against the respondent for the price the respondent could, pursuant to s. 54 of the Sale of Goods Act, 1953 N.S.W., set up, in extinction of the price, damages for the seizure of the goods as a breach of the warranty of quiet possession implied in the contract of sale by virtue of s. 17 (2) of the Sale of Goods Act. The first question for decision therefore is whether the seizure was in breach of the warranty that the buyer should have and enjoy quiet possession of the goods, it being common ground that the circumstances of the contract did not exclude the implication of this warranty.
For the respondent it was argued that the warranty in question does not cover a tortious seizure of goods from a buyer by a seller. This contention we do not accept. The unlawful seizure of goods sold but not paid for and still subject to the contract of sale is, in our opinion, a breach of this warranty in the contract. Such a seizure is a wrongful exertion by the seller of a claim to goods of which possession has been given and in respect of which the seller has warranted that the buyer shall enjoy quiet possession. The language of s. 17 (2) is amply wide enough to protect the buyer against such a seizure and we find nothing in the other provisions of s. 17 to reduce the warranty implied by virtue of s. 17 (2) to exclude a tortious act of the vendor. The consideration that, if it be construed as we would construe it, the buyer would have the choice of suing in tort or in contract seems unimportant. Moreover we do not share the view of Dr. K. C. T. Sutton—The Law of Sale of Goods in Australia and New Zealand (1967)—that s. 17 (2) is no more than an assurance to the buyer against the consequences of a defective title and of any disturbance thereon. So to read the subsection would be to give it little, if any, operation additional to that of s. 17 (1) and would give no significance to the words "have and" in sub-s. (2). There is no compelling reason for reading down sub-s. (2). The authorities support our construction of the subsection. Thus in Niblett Ltd. v. Confectioners' Materials Co. Ltd. [1] , Atkin L.J. said:
I think there was also a breach of the implied warranty in sub-s. (2), that the buyer shall have and enjoy quiet possession of the goods. It may be that possession would not be disturbed if the only cause of complaint was that the buyer could not dispose of the goods, and that the warranty is confined to disturbance of possession of the goods delivered under the contract of sale. The warranty so interpreted was broken. The appellants were never allowed to have quiet possession. They had to strip off the labels before they could assume possession of the goods. Probably this warranty resembles the covenant for quiet enjoyment of real property by a vendor who conveys as beneficial owner in being subject to certain limitations, and only purports to protect the purchaser against lawful acts of third persons and against breaches of the contract of sale and tortious acts of the vendor himself. But it is unnecessary to define its scope.
Later in Mason v. Burningham [2] , Greene M.R., speaking of the implied warranty, said:
The warranty is an implied warranty that the buyer shall have and enjoy quiet possession of the goods. Mr. O'Sullivan at one stage of his argument said that in that sentence there should be implied an exception in the case of disturbance by title paramount; and, of course, it is familiar learning that in the case of the ordinary covenants for title upon a sale of land the covenant for quiet enjoyment does not extend to cover disturbance by title paramount I invited Mr. O'Sullivan to refer us to any authority that would justify the insertion into that statutory phrase of an exception in the case of disturbance by title paramount, but he was unable to do so, and, in the absence of some such authority, I ventured to inform him in the course of the argument that I would not be prepared to introduce any such gloss on the language of the statute. He did not refer us to any authority, and, in the absence of any authority, I can only express my opinion that the statute means what it says and is not to have any such gloss put upon it.
1. [1921] 3 K.B. 387, at p. 403.
2. [1949] 2 K.B. 545, at pp. 562, 563.
We conclude therefore that, by reason of the appellant's seizure of the respondent's goods, the respondent became entitled to damages for breach of warranty and that, as the seizure did wholly deprive the buyer of the goods, the damages were prima facie the value of the goods seized.
The appellant next relies upon s. 54 (1) of the Sale of Goods Act which authorizes the buyer to set up against the seller a breach of warranty in diminution or extinction of the price. This provision recognizes that, notwithstanding a breach of warranty, the contract of sale remains in existence and that, subject to the rights conferred by the subsection, the full price of the goods is recoverable. The statutory provision does, however, afford the buyer protection against the seller in an action for the price even to the point of its extinction where the damages recoverable for breach of warranty equal or exceed the price. Not, of course, by an automatic extinguishment of the liability to pay the price but by the provision of a means whereby the buyer can ensure that the vendor does not recover the price where the damages for the breach of warranty equal or exceed the price. It seems to us, therefore, that where, as here, the damages recoverable by the buyer for breach of warranty on the part of the seller equals the price, that, in principle, the buyer should not be entitled to damages for conversion on the footing that the seller can still recover the price. The conversion is a breach of warranty of the contract of sale, which may be used by the buyer to extinguish the price payable under the contract of sale. If, therefore, the price and the value of the goods converted coincide—as they do here—there being no further damage, the extinguishment of the price would fully compensate the buyer for the conversion of the goods. It is, of course, true that the buyer is not bound to set up a breach of warranty in extinguishment of the price, Davis v. Hedges [1] , but what is of vital importance is that a buyer is entitled so to do and that, therefore, the seller cannot enforce payment of the price. In the assessment of his damages for conversion in breach of warranty the buyer cannot be treated on the footing that he could refrain from exercising the right he has to prevent recovery of the price. If he can avoid its payment he has not lost the amount represented by the price which he has not paid. In principle, therefore, the buyer in this case cannot be said to have lost the value of the goods by reason of the conversion which did, as it were, give as well as take away. The authorities, however, require consideration.
1. (1871) L.R. 6 Q.B. 687.
The respondent relied principally upon Gillard v. Brittan [1] , but this decision is distinguishable. Here the conversion was in breach of the very existing contract under which the price was payable, whereas there the amount owing to the defendant was a balance of account for cloth sold and all that appeared was that the made-up clothes seized by the defendant from the plaintiff had been made from cloth bought by the plaintiff from the defendant. Non-payment for the actual cloth from which the seized clothes were made up was not clearly proved. In these circumstances a direction to the jury that in estimating damages for trespass of goods, they must take into account the plaintiff's debt to the defendant was held to be mistaken. The decision was that compliance by the jury with the direction was equivalent to allowing a set off in trespass. Rolfe B. did say however:
It has been contended that where the party wrongfully retakes his own goods, he thereby debars himself from suing for the price. No authority has been cited which supports that position. It is unnecessary, however, to give any opinion on that point, because here the goods seized were in no respect the same as those which the defendant had supplied to the plaintiff, but were altogether altered in character; neither did it clearly appear that they were made of cloth which had not been paid for. [2]
1. (1841) 8 M. & W. 575 [151 E.R. 1168].
2. (1841) 8 M. & W., at pp. 578, 579 [151 E.R., at p. 1169].
This case is therefore clearly distinguishable both upon the facts and by virtue of the provisions of s. 54 of the Sale of Goods Act which does in terms permit what amounts to a set off of damages against price. Moreover Gillard v. Brittan [1] was decided before Mondel v. Steel [3] , where it was established that in an action for goods sold and delivered with a warranty it is competent to show how much less the subject matter was worth by reason of a breach of warranty in order to obtain an abatement in price. Section 54 of the Sale of Goods Act carries the law so decided further because thereunder damages for breach of a seller's warranty can be set up against price not only when the breach diminishes the value of the goods—as is specially provided for in s. 17 (3) in the case of breach of warranty of quality—but in the case of any breach of warranty.
1. (1841) 8 M. & W. 575 [151 E.R. 1168].
2. (1841) 8 M. & W. 858 [151 E.R. 1288].
Furthermore Stephens v. Wilkinson [1] , affords a respondent no support on the point now under discussion. There it was held that the tortious retaking of goods sold and delivered does not bring about the rescission of the contract of sale so that a bill given for the price could not be regarded as having been given for a consideration which had wholly failed.
1. (1831) 2 B. & Ad. 320 [109 E.R. 1162].
There are in the books, e.g., Benjamin on Sale, 8th ed. (1950), pp. 951, 952, statements to the effect that the seizure of goods by the seller after delivery is tortious and that the buyer may recover as damages the full value of the goods and the seller cannot set up the unpaid price. Gillard v. Brittan [2] is cited as authority. Where, however, the seizure is a breach of warranty of the contract of sale under which the price is payable, provision having been made by s. 54 for the diminution or extinction of the price by means of damages for breach of warranty, it is not a matter of the seller setting up the unpaid price against the full value of the goods; it is rather that the full value of the goods is no longer the measure of the real damage suffered by the buyer as a result of the conversion: Chinery v. Viall [3] and Butler v. Egg and Egg Pulp Marketing Board [4] . The principle of Chinery v. Viall [3] is, we think, applicable even after the delivery of the goods to the buyer in a case where the seller's conversion of goods is a breach of warranty of the contract of sale. The distinction between Chinery v. Viall [3] and Gillard v. Brittan [2] lies not in the circumstance that in the former case the conversion was of undelivered goods and that in the latter the conversion was of delivered goods but in the circumstances that the attempt made in Gillard v. Brittan [2] was simply to set off a debt against damages for trespass. There the question whether the party wrongfully taking his own goods debars himself from recovering the price was not decided one way or the other. Moreover, Gillard v. Brittan [2] was not, so far as it appears, a case of the conversion being in breach of the contract of sale. Furthermore, it was still to be established by Mondel v. Steel [1] that damages for breach of warranty in the contract of sale could be set off against the price. It was said in Chinery v. Viall [2] that "it would be singular if the same act which saved the vendee the price of the sheep should vest in him a right of action for their full value without deducting the price". This statement is applicable to a conversion after delivery as well as to a conversion before delivery if, as is now the law, the conversion after delivery, being in breach of warranty, does give rise to damages which can extinguish the price.
1. (1841) 8 M. & W. 575 [151 E.R. 1168].
2. (1860) 5 H. & N. 288 [157 E.R. 1192].
3. (1966) 114 C.L.R. 185.
4. (1860) 5 H. & N. 288 [157 E.R. 1192].
5. (1860) 5 H. & N. 288 [157 E.R. 1192].
6. (1841) 8 M. & W. 575 [151 E.R. 1168].
7. (1841) 8 M. & W. 575 [151 E.R. 1168].
8. (1841) 8 M. & W. 575 [151 E.R. 1168].
9. (1841) 8 M. & W. 858 [151 E.R. 1288].
10. (1860) 5 H. & N., at p. 294 [157 E.R., at p. 1195].
The Court of Appeal, as we read the judgments of the learned members of the Court, did not have the advantage of the argument addressed to this Court. In the judgments [3] there is no reference to the Sale of Goods Act, ss. 17 and 54, and Herron C.J. said [4] :
An important and significant test in a vendor and purchaser transaction is whether or not the vendor is entitled to maintain an action against the plaintiff for the price of the goods sold. If he is, the damages are the value of the goods. However, where the same act renders the vendor liable in tort and in contract for non-delivery the plaintiff cannot recover more in an action for tort than he can recover in contract.
In the present case the wrongful act of the respondent did not relieve the appellant from payment of the price, the act of the defendant not being a breach of contract. Hence no question arises of the appellant having alternative remedies.
The italics are ours. It is because we regard the conversion as being in breach of the warranty of the contract of sale under which an action for the price would lie that we consider that the damages recoverable for the conversion can go in reduction of the price.
1. (1967) 69 S.R. (N.S.W.) 311.
2. (1967) 69 S.R. (N.S.W.), at p. 317.
For the foregoing reasons we consider that the learned trial judge was correct in taking the price of the goods seized into account in assessing damages for trespass or to a conversion of the goods.
There is, however, a further matter for decision. Macfarlan J. held that the appellant's entries upon the premises of the respondent on 6th June 1963, on the occasion of the seizure of the goods in about twenty shops did not constitute trespass to land. The Court of Appeal held that the entries were trespasses but that they gave the respondent nothing beyond a right to nominal damages. The respondent has argued in this Court that the Full Court was correct in deciding that the entries were trespass but was in error, notwithstanding that no damages were proved, in either not giving exemplary damages for trespass or increasing the exemplary damages awarded for the wrongful seizure of the goods. To understand the difference between the learned trial judge and the Court of Appeal requires a short account of the business relationship between the appellant and the respondent.
The appellant had supplied the respondent with electrical goods, not only upon contracts of sale as already described, but also upon terms of what was called a display plan under which the goods remained the property of the appellant. The respondent hired the goods for ninety days in order to sell them by retail and undertook that if they were not returned within the ninety days to pay a fixed purchase price within thirty days of the expiration of the hiring. The display plan agreements contained certain provisions including the following:
2. The dealer agrees that so long as he remains the hirer of the goods:
(e) The dealer will not assign or encumber his rights in respect thereof except so far as may be necessary to put the goods into the possession of an approved customer as aforesaid.
5. If the dealer shall become bankrupt or execute any assignment for the benefit of or compound with creditors or if the dealer is a company and any order or resolution shall be made or passed for the dealer's winding up or if any execution or distress shall be levied against the dealer or if the dealer shall fail to observe or perform or commit any breach of any provision binding on him in respect of the goods then and in any such case it shall be lawful for the company immediately and without notice to the dealer and without prejudice to any other rights it may possess to determine the hiring of the goods and retake possession of the goods and for that purpose to enter upon any premises where the same may be. Upon the termination of the hiring the rights of the dealer shall thereupon cease and determine.
It was admitted by the respondent for the purposes of the action that on or about 22nd January 1963, a deed of charge between P.I.L. Finance Pty. Ltd. and the respondent was executed by the respondent and "that on 3rd June 1963 Keith Stobo Fleming was appointed receiver and manager of the property of Inglis Electrix under powers contained in the deed of charge".
It was common ground that on the date of the seizure there were, in every shop from which goods were seized, goods held upon the terms of the display plan and the appellant's contention was that there was no trespass because entry upon the premises was, in these circumstances, authorized by the display plan. Macfarlan J. accepted this argument regarding the appointment of the receiver as the levying of an execution within the meaning of the display plan so that cl. 5 applied and authorized the entries. The Court of Appeal came to a different conclusion. The learned judges were unanimous: (1) that the appointment of the receiver did not amount to an execution within the meaning of cl. 5 of the display plan agreements; and (2) that nevertheless it should be held (Sugerman and Jacobs JJ.A.) or it could be assumed (Herron C.J.) that the appointment of the receiver amounted to an assignment or encumbrance of the present respondent's rights evidencing a breach of cl. 2 of the display plan agreements. Herron C.J. and Jacobs J.A. considered nevertheless that the entries were trespasses because each entry was not only for "the lawful and licensed purpose of removal of the display plan goods but also for the unlawful and unlicensed purpose of removal of the plaintiff's own goods". There was therefore, in the opinion of those learned judges "a trespass to land pro tanto". Sugerman J.A. differed as to this and said [1] :
While it is thus clear that a licensee who enters solely for a purpose which exceeds his licence becomes a trespasser upon the land, it is difficult to grasp the notion of a person who at the same time is both a trespasser and not a trespasser which is implicit in the doctrine advanced by Mr. Samuels of trespass pro tanto. As in the present case, a person enters for a purpose which is partly within the licence and partly beyond it and, having entered, he takes goods which are partly within the authority of the licence to take and partly outside it. Either, it appears to me, he is a trespasser because he has exceeded the terms of the licence, that is, a trespasser in toto, or he is not a trespasser at all qua the land, because he was licensed to enter it, but only qua the goods which he has wrongfully taken.
His Honour held, therefore, that the learned trial judge [2] "was not in error in holding that there were no trespasses to land in the present case and in giving judgment for the defendant on the counts in trespass to land"
1. (1967) 69 S.R. (N.S.W.), at p. 330.
2. (1967) 69 S.R. (N.S.W.), at p. 331.
In any event the difference between the learned judges of the Court of Appeal upon the question whether or not the entries were trespasses to land became academic for the majority considered that no damages should be awarded in respect of such trespasses. It was said that nominal damages only should be awarded—but none were—and that there should be no exemplary damages.
Counsel for the respondent, as has already been indicated, requested this Court to find that the entries were trespasses and to assess additional exemplary damages.
Were the majority of the Court of Appeal correct in their decision that the entries were trespasses, they were, in our respectful opinion, also correct in deciding that there should be no exemplary damages for such trespasses additional to the $3,500 awarded by the learned trial judge. After all the entries and the wrongful seizure of the respondent's goods were all part of one transaction which the learned trial judge regarded as highly reprehensible and for which he awarded a substantial sum as exemplary damages. However, we agree with Sugerman J.A. that the entries were not trespasses, and do not find it necessary to add to what that learned judge said on the question of so-called trespass pro tanto. The evidential material of breach of cl. 2, supra, is scanty, but as the respondent did have rights under the display plan agreements, e.g., options to purchase the goods covered thereby, and had admitted that a receiver and manager "of the property of Inglis Electrix" was appointed "under powers contained in the deed of charge", when upon the appointment of the receiver the encumbrance upon the respondent's rights in respect of the display plan goods crystallized there was therefore an encumbrance of its rights within the meaning of cl. 2 (e) of the display plan agreement. It was argued, however, that as the respondent had not itself appointed the receiver it did not encumber its rights in respect of the display plan goods. However, the execution of the deed at an earlier date which was capable of a double operation and which, operated at a later date and in accordance with its very terms and intendment operated as a fixed charge, effected an encumbrance at the later date as the act of the encumbrancer. In our opinion, therefore, the appellant was entitled to enter the respondent's shops and those entries did not constitute trespasses to land.
Having reached the conclusion that the price of the goods payable by the respondent to the appellant was correctly taken into account by the learned trial judge in assessing damages for conversion, the respondent's last point upon this appeal, viz., that it was entitled to interest upon the award of damages, really disappears. We do, however, agree fully with Sugerman J.A. when, in relation to argument that, pursuant to s. 141 (a) of the Common Law Procedure Act, 1899-1967 N.S.W., the damages awarded should bear interest, he said [1] :
The discretion conferred by the statute has to be exercised according to the requirements of justice in the circumstances of each particular case. In the present case, in my opinion, it would not be just as between the plaintiff and the defendant, to require the defendant to pay to the plaintiff interest on the value of the goods. The plaintiff has not lost anything beyond the value of the goods, and it remains liable to pay the price to the defendant from which it bought them and which it has not paid for them. The purchase price of the goods thus payable to the defendant does not carry interest. It appears to me that it would be unjust to require the defendant to pay interest to the plaintiff, as upon a forced sale of the goods to the defendant, when the plaintiff is not required to pay interest to the defendant in respect of its own earlier purchase of the same goods by which it acquired the title which has enabled it to maintain this present action. Therefore I am of opinion that damages in the nature of interest should not be awarded in this case.
1. (1967) 69 S.R. (N.S.W.), at p. 332.
For the foregoing reasons it is our opinion that the appeal should be allowed and the judgment of Macfarlan J. restored.
Kitto J.
The plaintiff bought certain goods of the defendant on terms that the property in the goods should pass to the plaintiff upon delivery and payment should be made within sixty days thereafter. The goods were delivered to the plaintiff. Within the sixty days and while the price was still unpaid the defendant entered the plaintiff's premises and wrongfully retook possession of the goods and disposed of them to other persons. The plaintiff sued the defendant for trespass to the goods and for conversion thereof and recovered a verdict upon these counts for $3,500 before a judge sitting under the Commercial Causes Act, 1903-1965 N.S.W., without a jury. The amount was awarded purely as exemplary damages, by reason of circumstances of aggravation in the taking of the goods. The judge refused to include in his award any damages for the plaintiff's loss of the goods, taking the view that the seizure of them by the defendant relieved the plaintiff of the obligation to pay the price, and therefore, it being agreed that the price and the value of the goods were equal in amount, the conversion caused the plaintiff no loss. If it be true that the seizure relieved the plaintiff of the obligation to pay the price his Honour's conclusion was plainly correct, for as is shown by such cases as Chinery v. Viall [1] and Butler v. Egg and Egg Pulp Marketing Board [2] , the compensatory damages recoverable for a deprivation of goods, whatever be the form of action employed, are only such as will restore to the plaintiff the amount of the net loss caused to him by the wrongful act. But it is equally clear that if the plaintiff still owes the defendant the price of the goods notwithstanding the defendant's retaking of them the plaintiff has lost the value of the goods and is entitled to the amount of the value as damages.
1. (1860) 5 H. & N. 288 [157 E.R. 1192].
2. (1966) 114 C.L.R. 185.
The view that the retaking of the goods relieved the plaintiff of his liability to pay the price obviously cannot be maintained upon the ground that the retaking worked a rescission ab initio of the contract of sale or was a breach of a condition to which the plaintiff's obligation to pay the price was subject. The defendant seeks to maintain it by pointing to the fact that the retaking was a breach of the warranty of quiet possession which was implied in the contract of sale (see the Sale of Goods Act, 1923 N.S.W., s. 17 (2)), and that as such it was capable of being set up by the plaintiff against the defendant in diminution or extinction of the price: ibid. s. 54 (1). But to say this is very different from saying that the conversion had the effect of reducing or extinguishing the price. What s. 54 (1) does (in its application to a breach of a warranty of quiet possession) is to give the buyer an option either to maintain an action against the seller for (and therefore to recover in full) the damages caused to him by the breach or to wait until he is sued for the price and then to set up the breach of warranty in diminution or extinction of the price. If he elects to sue the seller for damages, as he may do either in a separate action or by way of cross action when sued for the price, his damages must be measured by the loss directly and naturally resulting in the ordinary course of events from the breach; for s. 54 (2) so provides. There is nothing in the Act to entitle the seller to set up the price in diminution or extinction of the damages. By allowing the buyer, if he chooses, to defend an action for the price by proving how much less the goods were worth to him by reason of the plaintiff's breach of warranty and to have the verdict lessened on that account, s. 54 (1) merely allows a procedural concession, and one which, as the leading case of Mondel v. Steel [1] clearly shows, the law has come to concede for the sake of convenience. That the breach of warranty does not itself work a reduction or extinguishment of the buyer's liability for the price is necessarily involved in the proposition which s. 54 (1) establishes—indeed takes as its basic assumption—that if the buyer prefers to sue on the cause of action for breach of warranty and recover the full amount of his loss he is free to do so: Davis v. Hedges [2] ; Bow, McLachlan & Co. Ltd. v. The "Camosun" [3] .
1. (1841) 8 M. & W. 858 [151 E.R. 1288].
2. (1871) L.R. 6 Q.B. 687, at p. 690.
3. [1909] A.C. 597, at pp. 610, 611.
That is what the buyer in the present case did choose to do. It chose a course which exhausted its option, in the sense that if it recovers a verdict for compensatory damages its cause of action for the breach of warranty will be exhausted and its damages will no longer be capable of being set up against the defendant in diminution or extinction of the price. But the decision of the learned trial judge meant that the plaintiff was not at liberty to exercise its option in this way. It was refused a verdict for compensatory damages and was left with no right to recover its damages save by setting them up in diminution or extinction of the price if and when the defendant should sue for it. This seems to me completely inconsistent with s. 54 and unsustainable.
In the Supreme Court the Court of Appeal [1] reversed the trial judge's decision and held that the full value of the goods was recoverable as compensatory damages without any deduction by reason of the fact that the purchase price remained unpaid. The Court reached its conclusion, correctly as I think, after consideration of a number of authorities which we are invited to examine. First, there are the two cases to which the trial judge referred as supporting his decision, namely Chinery v. Viall [2] , and Butler v. Egg and Egg Pulp Marketing Board [3] . These cases illustrate one simple proposition, that the loss which a plaintiff has suffered by a conversion of goods which were not in his possession, and for which he would have had to pay the defendant a sum of money if he were to obtain possession of them, is a loss of no more than the difference between the value of the goods and the sum he would have had to pay; and therefore in any form of action in respect of the conversion he cannot recover as compensatory damages more than the amount of that difference. That is not a proposition which applies to the present case, for the conversion complained of was a deprivation of a possession which the plaintiff had and was entitled to retain as against all the world, including the defendant, whether paying the price or not.
1. (1968) 69 S.R. (N.S.W.) 311.
2. (1860) 5 H. & N. 288 [157 E.R. 1192].
3. (1966) 114 C.L.R. 185.
The plaintiff owed the price before the conversion and owed it no less thereafter. Even if the defendant had sued for the price and the plaintiff had elected to set up the breach of the covenant for quiet possession the set-off would have been the act of the Court, done upon the footing that the whole price was owing. The expression in s. 54, "in diminution or extinction of the price", means only, of course, "so as to reduce the verdict for the price either to a lower figure or to nil". The point is that not until the moment of verdict in the action for the price would there have been any diminution or extinction. The act of conversion did not itself diminish or extinguish the price.
Chinery v. Viall [1] is to be contrasted with Gillard v. Brittan [2] . A suggestion was made by Denman J. in Johnson v. Lancashire and Yorkshire Railway Co. [3] , that those two cases seemed difficult to reconcile and that perhaps the former should be taken to have overruled the latter. The difference on the facts is that in the former case the plaintiff had only a right to have the goods delivered to him under the contract of sale, the possession being retained meantime by the defendant, whereas in the latter case the goods had been delivered to the plaintiff under the contract. What the Court held in Chinery v. Viall [1] was that because the seller had not delivered the goods to the buyer and had disabled himself from ever delivering them [4] ,
he could not in any form of action recover the price; and it would be singular if the same act which saved the vendee the price of the sheep should vest in him a right of action for their full value without deducting the price.
The whole point of the case lay in the interest which the seller had in the goods by reason of being still in possession of them at the time he converted them—that is to say his interest as an unpaid seller, which had necessarily to be allowed for in valuing the loss by the buyer of his interest in the same goods: see the important discussion of this case in Attack v. Bramwell [5] . Gillard v. Brittan [2] provides a clear contrast, for the seller in that case had delivered the goods to the buyer and the conversion was by way of a retaking, so that the interest the buyer lost by the conversion extended to the whole right of possession of the goods untrammelled by his liability to pay the price. The decision was that for that reason his damages could not be reduced on the ground that the price was unpaid. There is no inconsistency between the two decisions, and the present case is covered precisely by Gillard v. Brittan [2] , which no one but Denman J. seems ever to have doubted and textwriters have generally approved: see Bullen & Leake, Precedents of Pleadings, 3rd ed. (1868), p. 242; Benjamin on Sale, 8th ed. (1950), p. 949; Mayne and McGregor on Damages, 12th ed. (1961), p. 609, par. 704, note (30); Halsbury's Laws of England, 3rd ed., vol. 38, p. 796, par. 1323, note (s). The Court which decided Gillard v. Brittan [2] was a strong one. Lord Abinger C.B. pointed out that the opposite view would allow a party to set off "a debt due in one case against damages in another"—which is precisely what the defendant in the present case seeks to do; and one may add that the departure from principle that would have been involved in so doing is underlined by Baron Parke's acknowledgment in Mondel v. Steel [1] , that the converse process, of setting off damages for a breach of warranty against the price payable, though allowed for convenience, was in truth a deviation from principle. Lord Abinger added an observation [2] which is much in point in the present case: "The verdict in this case does not at all affect the right of the defendant to recover the whole" (of the price) "due to him from the plaintiff." Baron Alderson emphasized the essential disconnexion between the cause of action for the retaking of the goods and the cause of action for the price by saying that while the jury might consider the whole of the circumstances really belonging to "the case", i.e., the action for taking of the goods, a direction which the trial judge had given that the circumstances included the plaintiff's debt to the defendant was a direction to consider "a circumstance which ought to be excluded"; "otherwise", he said, "it is equivalent to adding a set-off in trespass". Baron Gurney concurred. Baron Rolfe said that no authority had been cited which supported the contention that a party who wrongfully retakes possession of his own goods (i.e., which he has sold) thereby debars himself from suing for the price. He found it unnecessary to give any opinion on the point; but the absence of authority upon which he remarked has continued, so far as I can find, to the present day. The truth, as it seems to me, is that the rule of practice now contained in s. 54 (1), enabling a buyer, if he so chooses, to have his claim against the seller for breach of warranty treated as if it were a subject of set off though in principle it is a subject for a separate action (a cross action), provides no logical or legal justification for the proposition that the seller may require his claim against the buyer for unpaid purchase-money to be treated, over the objection of the buyer, as if it had been satisfied by being set off against his liability for breach of warranty.
1. (1860) 5 H. & N. 288 [157 E.R. 1192].
2. (1841) 8 M. & W. 575 [151 E.R. 1168].
3. (1878) 3 C.P.D. 499, at p. 507.
4. (1860) 5 H. & N. 288 [157 E.R. 1192].
5. (1860) 5 H. & N., at p. 294 [157 E.R., at p. 1195].
6. (1863) 3 B. & S. 520 [122 E.R. 196].
7. (1841) 8 M. & W. 575 [151 E.R. 1168].
8. (1841) 8 M. & W. 575 [151 E.R. 1168].
9. (1841) 8 M. & W. 575 [151 E.R. 1168].
10. (1841) 8 M. & W. 858 [151 E.R. 1288].
11. (1841) 8 M. & W., at p. 578 [151 E.R., at p. 1169].
Before leaving this part of the appeal I should add that I have not overlooked two submissions that were made in the course of the argument, namely first that the plaintiff has lost only the possession of the goods in question and not the title to them, and secondly that the covenant for quiet possession is to be construed as directed only against lawful acts. As to the first, it is sufficient to say that even if the assumption be made that the strangers to whom the defendant has purported to dispose of the goods have not acquired a valid title to them as against the plaintiff, in the circumstances of this case there seems to be no sound reason for assessing the plaintiff's loss of possession at less than the full value of the goods. As to the second submission I need say only that no relevant distinction suggests itself to me between the warranty of quiet possession in a contract of sale of goods and the familiar covenant for quiet enjoyment in a lease or conveyance of real property, and it seems clear on the authorities that such a covenant protects the covenantee against tortious acts of the covenantor or any person authorized by him: Sanderson v. Mayor of Berwick on Tweed [1] ; Harrison Ainslie & Co. v. Muncaster [2] ; Niblett v. Confectioners' Materials Co. [3] .
1. (1884) 13 Q.B.D. 547.
2. [1891] 2 Q.B. 680, at p. 684.
3. [1921] 3 K.B. 387, at p. 403.
For the foregoing reasons I am of opinion that the Court of Appeal was right in allowing the plaintiff compensatory damages for conversion and trespass to goods. In the action the plaintiff claimed also damages for trespass to land and relied upon the following circumstances. The goods referred to in the foregoing discussion were in the possession of the plaintiff, until they were taken by the defendant, in a number of shops in which the plaintiff was carrying on business as a retail seller of electrical appliances. In the shops there were also other goods, including some which belonged to the defendant and were the subject of hiring agreements called display plan agreements. By these agreements the defendant had hired the goods to the plaintiff for ninety days, and that period was still current at the material time. The agreements provided, however, that in certain classes of events it should be lawful for the defendant, immediately and without notice to the plaintiff, to determine the hiring and retake possession of the goods and for that purpose to enter upon any premises where the same might be. According to admissions made at the trial, prior to the acts of the defendant which are complained of as trespasses to land a receiver and manager of the plaintiff's property was appointed under a deed of charge which the plaintiff had given in favour of a third company, and apparently it was this appointment that led the defendant to seize and take both the goods covered by the display plan agreements and the goods which are the subject of the claims for conversion and trespass to goods. The appointment of the receiver and manager, however, was not proved to have been within the classes of events upon the occurrence of which the display plan agreements authorized the defendant to enter the plaintiff's premises. In particular, the appointment was not, in my opinion, a levying of execution or distress against the plaintiff, and since the deed of charge was not made evidence in the case there was no proof, though it may be the fact, that the crystallizing of the charge produced a breach by the plaintiff of any provision of the agreements. But the plaintiff's contention is that assuming the licence to enter which the agreements conferred took effect upon the appointment of the receiver and manager, the defendant was guilty of trespasses on the plaintiff's lands in so far as its servants or agents exceeded the limits of the licence by what they did with respect to goods which were not the subject of display plan agreements. The defendant did not, of course, become a trespasser ab initio by reason of this conduct, for the entry of its servants and agents upon the lands was not under an authority conferred by the general law; but the contention is that the defendant is guilty of trespasses pro tanto (as it was expressed in argument), that is to say to the extent of the use that they made of the plaintiff's lands otherwise than for the purpose of retaking possession of goods that were subject to display plan agreements. The Court of Appeal so held by a majority and in my opinion rightly. No doubt a person cannot be at the one moment of time both a trespasser and not a trespasser in respect of the same land. The initial entry of the defendant's servants and agents upon each of the relevant parcels of land and the acts they did thereon for the purpose of retaking possession of the goods which were subject to display plan agreements were all authorized (as I am here assuming), but the acts that they did for the purpose of taking possession of other goods were clearly not. Every step that they took on the plaintiff's lands for the latter purpose was an unlicensed step and therefore a trespass. Whether each such step be called a trespass pro tanto or a trespass quoad or just a plain trespass, the fact is that it was an unauthorized interference with the plaintiff's possession, and the plaintiff was entitled to a verdict for some damages in respect of it.
The Court of Appeal ordered that on each of the counts for trespass to land a verdict be entered for the plaintiff for nominal damages, but did not fix an amount. The defendant's notice of appeal to this Court sought verdicts on these counts for the defendant, but for the reasons indicated I am of opinion that in this respect, as in respect of the quantum of damages for conversion and trespass to goods, the appeal should be dismissed. The plaintiff by a cross appeal sought verdicts for substantial and not merely nominal damages for the trespasses to land, but the short answer is that these trespasses caused no damage to the plaintiff, and as the circumstances of aggravation were fully allowed for in the amount of damages awarded for conversion and trespass to goods the Court of Appeal was right to allow nominal damages only. If it were worth the plaintiff's while to have these damages assessed no doubt the Supreme Court could make appropriate orders; but with that we need not concern ourselves.
The plaintiff's cross appeal raised one other contention, namely that the Court of Appeal should have awarded interest on the amount of the verdict for compensatory damages for conversion and trespass to goods; but as Sugerman J. pointed out in the Court of Appeal, since interest has not been running on the unpaid price of the goods that were converted it would be unjust to use the power conferred by s. 141 (a) of the Common Law Procedure Act, 1899-1965 N.S.W., even if it be available to a judge sitting without a jury, to make interest run on any compensatory damages that may be awarded for the loss of them.
In my opinion both the appeal and the cross appeal should be dismissed with costs.
Windeyer J.
The respondent to this appeal was the appellant before the Supreme Court in its Court of Appeal Division. It was the plaintiff in the action. For convenience I shall refer to it as the plaintiff and to the present appellant as the defendant. This makes their respective positions clear throughout.
I may say at once that in my opinion the appeal and the cross appeal in this case fail and should both be dismissed. In particular I accept, as impressively correct on the main topics discussed, the learned judgment of Sugerman J. I would leave the matter at that were it not for the importance of the case, the care with which it was argued on both sides, and the differing opinions to which the facts give rise. My own view accords generally with what has been written by my brothers Kitto and Owen, whose judgments I have had the benefit of reading. But I am unable to concur in their Honours' view of one aspect of the matter. In all the circumstances I think therefore that I should state fully for myself my reasons for my conclusion.
The essential facts are simple. The way in which they arose is explained in the judgment of my brother Owen and in the judgments in the Supreme Court. As these relieve me of the need to give a detailed account a summary will suffice. The defendant had sold and delivered certain electrical goods to the plaintiff, a trader in goods of that kind. The price had not been paid. Under the terms of the contract of sale the time for payment had not arrived. But the property in the goods had passed to the plaintiff. The plaintiff was the owner of the goods, and in possession of them. The defendant had no lien or right in them. All that it had was a right to be paid the stipulated price when it should become due and payable. Yet it wrongfully seized the goods, carried them away from the plaintiff's premises, and by selling them converted them to its own use. The seizure occurred in the course of what can best be described as a planned raid by servants of the defendant. The main purpose of this was, it seems, to repossess certain goods of the defendant which were then in the possession of the plaintiff under a "floor-plan agreement". The defendant's action in thus retaking possession of goods of which it was the owner is not in question. This case arises from the unquestionably wrongful act of the defendant in seizing and taking the goods of which the plaintiff was the owner.
For that the plaintiff had a right of action for damages. Its cause of action could be either for the tort or for breach of the defendant's warranty of quiet possession, of which I shall say more later. The debt for the price was still owing by the plaintiff to the defendant. It would within a short time become due and payable. It was not extinguished by the fact that the plaintiff might assert a right to damages; for the defendant's conduct did not put an end to the sale. In 1866 the Privy Council said that, "There is no case to be found in the books where, after a sale and complete delivery of a chattel, and the price not paid, the vendor's taking the property out of the purchaser's possession has been held to amount to a rescission of the contract": Page v. Cowasjee Eduljee [1] . Indeed there were then cases to the contrary to be found in the books, the most noteworthy being Stephens v. Wilkinson [2] and Gillard v. Brittan [3] .
1. (1866) L.R. 1 P.C. 127, at p. 145; 3 Moore N.S. 499, at p. 524 [16 E.R. 189, at p. 198].
2. (1831) 2 B. & Ad. 320 [109 E.R. 1162].
3. (1841) 8 M. & W. 575 [151 E.R. 1168].
The plaintiff in fact sued in tort, for trespass to goods and for conversion. It is in this action that this appeal comes. Before the action came on for trial the time had arrived when under the contract of sale the price was payable. In arriving at the damages which the plaintiff was entitled to have from the defendant the learned trial judge held that the defendant could no longer claim the price because it had taken back the goods. But when a seller has sold goods, and they have become the property of the buyer, the seller cannot undo this by a tortious act. And the mere fact that a buyer is the seller's debtor cannot limit the damages he is entitled to recover against the seller in tort. It makes no difference in principle, it seems to me, that the price represents the value of the goods in the hands of the buyer. The defendant did not by a counterclaim seek to recover the price of the goods in the action; and, so far as appears, it has not so far sued for the price as a debt due to it. The plaintiff has not alleged that its debt for the price was thereby extinguished. Its case is simply that the damages to which it is entitled are to be measured in this action disregarding its debt to the defendant. The question is whether that proposition is correct. If it be correct, we are not concerned with the consequences which may follow in any proceedings which may occur in the future.
The answer to the question is to be sought in the law relating to the sale of goods. That is for present purposes to be found in the Sale of Goods Act, 1923-1953 N.S.W.. That Act is "an Act to codify and amend the law relating to the Sale of Goods". It is for the most part a copy of the Sale of Goods Act, 1893 of the United Kingdom (which I shall call the Act of 1893). The provisions of the New South Wales statute which bear upon this case are derived directly and in terms from the Act of 1893. They are thus professedly a codification of common law rules. Yet we were invited to consider numerous cases decided in England long before 1893, and to notice not only their facts but also to take the precise words, phrases and sentences of the judgments as definitive statements of law. I have some misgivings about this. It was of the Act of 1893 that Cozens-Hardy M.R. said:
I rather deprecate the citation of earlier decisions The object and intent of the statute was, no doubt, simply to codify the unwritten law applicable to the sale of goods, but in so far as there is an express statutory enactment, that alone must be looked at and must govern the rights of the parties, even though the section may to some extent have altered the prior common law: Bristol Tramways, &c., Carriage Co. Ltd. v. Fiat Motors, Ltd. [1] .
Alongside this I put Lord Esher's statement in Abbott & Co. v. Wolsey [2] :
Cases have been cited which were decided before the passing of the Sale of Goods Act, 1893. It may be that the decisions on the subject were not quite consistent; but, assuming that to be so, it is now immaterial, for the legislature have undertaken to determine which of the decisions was correct. The statute was passed to declare the law. We are bound by it, and can look to nothing else.
1. [1910] 2 K.B. 831, at p. 836.
2. [1895] 2 Q.B. 97, at pp. 99, 100.
Nevertheless we must recognize that courts frequently do look to nineteenth century decisions before 1893 as guides to the interpretation of the statute. The justification for doing this is, I think, twofold. First, it is possible to find in judgments the origin of the words of particular provisions of the statute, and thus illustrations of its operation. Secondly, we cannot in the seeking of its meaning ignore the common law on which it was founded. Sir Mackenzie Chalmers, its distinguished draftsman, expressed this, happily and wisely I venture to say, when he said: "Our common law is rich in the exposition of principles, and these expositions lose none of their value now that the law is codified. A rule can never be appreciated apart from the reasons on which it is founded": Introduction to the first (1894) edition of Chalmers on the Sale of Goods Act. I propose therefore, following what seem to me good examples to examine the provisions of the Act alongside the decisions of earlier date. In doing so I shall refer to the numbers of the sections of the New South Wales Act, sometimes adding for convenience the numbers of the provisions in the same terms in the Act of 1893 whence they were derived.
In the argument for the appellant, the defendant, great weight was put on those provisions of the Act headed "Remedies of the Buyer" which deal with remedies for a breach of warranty. It is convenient to set out the relevant parts.
Section 54 (1) of the New South Wales Act (in terms the same as s. 53 (1) of the Act of 1893) is as follows:
Where there is a breach of warranty by the seller, or where the buyer elects or is compelled to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods, but he may—
(a) set up against the seller the breach of warranty in diminution or extinction of the price; or
(b) maintain an action against the seller for damages for the breach of warranty.
This rule is generally taken to have been derived from, and to reproduce in effect, the judgment of Parke B. in Mondel v. Steel [1] . Perhaps its words reflect even more closely a passage from the judgment of Littledale J. in Poulton v. Lattimore [2] :
I am of opinion, that where goods are warranted, the vendee is entitled, although he do not return them to the vendor, or give notice of their defective quality, to bring an action for breach of the warranty; or if an action be brought against him by the vendor for the price, to prove the breach of the warranty, either in diminution of damages, or in answer to the action, if the goods be of no value.
1. (1841) 8 M. & W. 858 [151 E.R. 1288].
2. (1829) 9 B. & C. 259, at p. 265 [109 E.R. 96, at pp. 98-99].
The conduct of the defendant in taking the goods out of the possession of the plaintiff was a breach of the warranty implied by the Act that the buyer of goods shall "have and enjoy quiet possession of the goods": see s. 17 (2) (s. 12 (2) of the Act of 1893). The tort for which the plaintiff sued was thus also a breach of this warranty. This, it was argued for the defendant, means that it could have been set up by the plaintiff against the price. From this it was said that the price being unpaid the amount of it should be taken into account in measuring the damages recoverable by the plaintiff for conversion. The proposition demands a consideration of both s. 54 (1) and s. 17 (2). They are both concerned with warranties. I shall consider them in turn.
The Sale of Goods Act has stood the test of time since 1893. That is not to say that it has put its subject matter beyond debate. It has in fact produced its own crop of decisions. Its main provisions have been adopted in Australia—in New South Wales not until 1923. Some parts of it, in particular the provisions about conditions and warranties, still give rise to difficulties. The distinction between conditions and warranties, its terminology and its effect in particular cases have produced an enormous body of commentary in textbooks and articles, as may be seen by the numerous references in two learned articles: "Conditions, Warranties and Descriptions of Quality in Sale of Goods" by Mr. S. J. Stoljar, Modern Law Review, vol. 15, pp. 425-445; vol. 16, pp. 174-197; "Warranty, Condition and Fundamental Term" by Mr. F. M. B. Reynolds, Law Quarterly Review, vol. 79, pp. 534-555. I have read only a part of this mass of literature and of the case law referred to in it. In what I have read I have not discovered any recent judicial decision or any relevant academic pronouncement dealing with facts precisely similar to those of this case. We must, I think, decide it upon the words of the Act with such aid as it is legitimate to seek in earlier decisions. But before leaving the contributions of academic commentators, I may mention the article on "Codification of the Law of Contract" by Professor A. L. Diamond published in the July 1968 number of the Modern Law Review, vol. 31, pp. 361-385. I refer to it for two reasons. First, because it draws attention to the partial repeal of s. 11 (1) (c) of the 1893 Act by s. 4 of the Misrepresentation Act, 1967 of the United Kingdom. That section had embodied what the learned author of the article calls "a principle the application of which has anguished the academics". It is now buried for the United Kingdom, but is still well alive in New South Wales, where s. 16 (3) of the Act is in the same words as was s. 11 (1) (c) in the Act of 1893. And whatever anguish it may cause for academics, we must apply it; and I think it has indirectly a bearing on this case.
My second reason for referring to Professor Diamond's article is for his reminder that what Chalmers sought to do was "to codify the existing, but still developing, law. What started as the germ of a judicial idea, which might have been distinguished or overruled, became statute law, binding on all courts including the House of Lords". Chalmers stated what he took to be the effect of the case law ruling at the time.
The nineteenth century was a time when the common law of sales and warranties was indeed still in a stage of development. The phrase "the germ of a judicial idea" in the article I have quoted calls to mind that Sellers L.J. in Hanak v. Green [1] , said of Mondel v. Steel [2] , that it "reveals the germ of the law's development". That case in 1841 can be taken as the starting point for understanding the statutory provisions about warranties which are relevant in this case. But it is still necessary, especially if it be truly the start of a new doctrine in the common law, which I take to be the sense in which it can be called germinal, that it be seen against its immediate common law background: and to this I turn.
1. [1958] 2 Q.B. 9, at p. 29.
2. (1841) 8 M. & W. 858 [151 E.R. 1288].
From the fourteenth century until late in the eighteenth an action for the breach of a warranty given on a sale was in the nature of an action for misrepresentation and deceit. This was involved in an allegation that a defendant warrantizando vendidit: see Holdsworth, History of English Law, vol. 8, pp. 69, 70; Spencer Bower, Actionable Misrepresentation, 2nd ed., pp. 392-394. The turning point to the modern view that the cause of action was in contract, not in tort, is usually said to have been in 1778 in Stuart v. Wilkins [3] . This was firmly established in Williamson v. Allison [4] , where Lord Ellenborough C.J. remarked [5] :
The ancient method of declaring was in tort on the warranty broken, and that was just going out of general practice when the case of Stuart v. Wilkins [3] was discussed, because it was found more convenient to declare in assumpsit for the sake of adding the money counts. So general was the former method, that declarations in that form were familiar in every arrangement of precedents in tort. And the more modern practice of declaring in assumpsit in these cases has not prevailed generally above forty years.
There are some interesting observations on the same matter in the judgment of Lawrence J. in the same case. He said that he had himself, even since Stuart v. Wilkins [1] "drawn a hundred declarations on the same subject in tort" [2] . And traces of the earlier rule lingered. As late as 1869, in the thirteenth edition of Selwyn's Nisi Prius, vol. 1, pp. 565-580, the subject of warranty is dealt with in the chapter on Deceit. The learned author of that work observed that the form of a declaration on a warranty in Sch. B to the Common Law Procedure Act, 1852—which still appears in the Schedule to the New South Wales Common Law Procedure Act, 1899-1957—is "in accordance with the old and correct form of declaring, warrantizando vendidit". Although the count was in the Schedule placed amongst counts of contracts it was a reminder of the old action in tort; and not guilty could be pleaded to it: see Bullen & Leake, Precedents of Pleadings, 3rd ed. (1868).
1. (1778) 1 Dougl. 18 [99 E.R. 15].
2. (1802) 2 East 446 [102 E.R. 439].
3. (1802) 1 Dougl., at p. 451 [102 E.R., at p. 441].
4. (1778) 1 Dougl. 18 [99 E.R. 15].
5. (1778) 1 Dougl. 18 [99 E.R. 15].
6. (1802) 2 East, at p. 452 [102 E.R., at p. 441].
It is not surprising that in the early nineteenth century, although a breach of warranty had come to be actionable in contract, there was still a strong opinion that a buyer of goods sued by the seller for the price must bring a cross action if he wished to set up a breach of warranty. It is to be remembered that when in those days a cross action was spoken of, what was meant was a separate action, not a defence by way of cross action or counterclaim as we understand it today. A set off of a liquidated claim could be pleaded in an action for a debt under the statutes of set off: 2 Geo. II c. 22 and 8 Geo. II c. 24. But a claim for unliquidated damages could not be set up as a defence. In New South Wales this was permitted in 1857: Common Law Procedure Act, 1857, s. 17 (now s. 79 of the Act of 1899 enlarged in its operation by r. 10 of O. XXX of the Supreme Court Rules). From the terms of the statute this defence got the curious name of a set off by way of cross action. It is a counterclaim like that which in England is the creature of the Judicature Act, 1873, s. 24 (now s. 39 (1) (a) of the Act of 1925, 15 & 16 Geo. V c. 49).
With these matters in mind I return to s. 54. Baron Parke's judgment in Mondel v. Steel [3] , shews clearly that the practice which the statute now manifests and establishes had, in 1841, only fairly recently gained a place in the common law. It was allowed by the courts, because "attended with much practical convenience". A buyer sued for the price of a chattel was "permitted to shew that the chattel by reason of the non-compliance with the warranty [was] diminished in value". This course was allowed by the courts as an alternative to the older practice whereby the buyer brought an independent cross action. Now he might "simply defend himself by shewing how much less the subject matter of the action was worth, by reason of the breach of contract".
1. (1841) 8 M. & W. 858 [151 E.R. 1288].
This rule was introduced into the law at about the same time as another and related question was becoming settled. Could the buyer of a specific chattel under an express warranty when he found the warranty to be untrue return the article to the seller and claim a refund of the price he had paid? Must he return, or offer to return, the article if he would bring an action for breach of the warranty? Most of the numerous cases in the reports in which these questions were considered arose as a result of warranties that horses were sound, free from vice, etc. Fielder v. Starkin [1] , is an early illustration. Some of the cases turn upon nice distinctions of fact: but the law became more or less settled by the decision in Street v. Blay [2] . That case is noteworthy for another reason. A passage in Lord Tenterden's judgment anticipates Parke B. in Mondel v. Steel [3] , in recognizing that a breach of warranty might be set up as a defence in an action for the price due upon a sale "on the principle, as it should seem", his Lordship said, "of avoiding circuity of action; and there is no hardship in such a defence being allowed, as the plaintiff ought to be prepared to prove a compliance with his warranty, which is part of the consideration for the specific price agreed by the defendant is to be paid" [4] . "Circuity of action" was a phrase which had a special and technical meaning from the time of the Termes de la Ley: see Bullen & Leake, Precedents of Pleadings, 3rd ed. (1868), p. 558. The learned editor of Williams' Saunders Reports in his note (5th ed. (1845), vol. 2, p. 150 b) carefully said of Lord Tenterden's use of the phrase in the passage I have quoted:
But it is not to be inferred from this expression that a defendant, who exercises the option of setting up, in mitigation of damages, a counterclaim for breach of warranty or contract, according to the modern practice , is in the same situation as if he had brought a cross action, and consequently, that he cannot, after judgment in one action, bring another. For the rule simply is, that it is competent for the defendant to defend himself by shewing how much less the subject matter of the action was worth, by reason of the breach of contract, and not that he may set off, by a proceeding in the nature of a cross action, the amount of damages which he has sustained by breach of the contract.
For this Mondel v. Steel [1] , which is thus echoed, is cited. The reference there to the defendant's option is significant; and the effect of the earlier decisions was made quite clear in Davis v. Hedges [2] . A buyer sued for the price was not bound to set up a breach of warranty as a defence. He might do so, and if he did he would be "concluded to the extent to which he obtained, or was capable of obtaining, a reduction". But he need not thus defend the seller's claim. Instead he could himself sue the seller for all the damages he had suffered by the breach of warranty.
1. (1788) 1 H. Bl. 17 [126 E.R. 11].
2. (1831) 2 B. & Ad. 456 [109 E.R. 1212].
3. (1841) 8 M. & W. 858 [151 E.R. 1288].
4. (1831) 2 B. & Ad., at pp. 462, 463 [109 E.R., at p. 1214].
5. (1841) 8 M. & W. 858 [151 E.R. 1288].
6. (1871) L.R. 6 Q.B. 687.
Before the Common Law Procedure Acts, an action by a seller for the price of goods sold would have been brought either in debt or in indebitatus assumpsit. Afterwards, and until today in New South Wales, the declaration would be by a common indebitatus count, for goods sold and delivered or for goods bargained and sold. A claim by the buyer for breach of warranty would ordinarily be for unliquidated damages. To allow the buyer when sued for the price to set up the breach of warranty thus amounts to answering a claim for a debt by a set off of damages. Thus it can be said that the procedure, which began, as Parke B. said, as a rule of convenience, involves a departure from principle. But I would hesitate so to describe it. It occurred towards the end of the period when the principles of the law concerning warranties on the sale of goods were still in the making in the courts of common law in England. In an action by a seller for the price of goods sold, the buyer could, under a plea of never indebted, raise the defence that the goods were not as warranted: Bullen & Leake, Precedents of Pleadings, 3rd ed. (1868), p. 463; Moreland Metal Co. Ltd. v. Cowlishaw [3] . The reason behind this was that, as expressed in the passage I quoted above from Street v. Blay [4] , the plaintiff ought not to recover the price unless he could establish that the goods were as warranted: and see Cousins v. Paddon [5] ; Dawson v. Collis [6] .
1. (1919) 19 S.R. (N.S.W.) 231.
2. (1831) 2 B. & Ad., at pp. 462, 463 [109 E.R., at p. 1214].
3. (1835) 2 Cr. M. & R. 547 [150 E.R. 234].
4. (1851) 10 C.B. 523 [138 E.R. 208].
This then was the state of the common law when in 1893 the Sale of Goods Act was passed to codify it. The logic of it seems to me irrefutable. If a thing sold be not as warranted, but inferior, then, if the contract stands—and in the case of the sale of specific goods accepted by the buyer it does stand—the price should be reduced; for the buyer has not had for the price he promised to pay a thing having the qualities and character of the thing the seller promised to sell. Section 54 (1) of the New South Wales Act (s. 53 (1) of the Act of 1893) seems to me to do no more than reflect the common law as stated in the judgments in the cases to which I have referred. Of course if on its true construction the section goes further, then effect must be given to it. It is said that it does go further, and that a breach of the warranty of quiet possession under s. 17 (2) could be set up by the defendant in an action for the price. At this point I turn therefore to s. 17 (2) (which is s. 12 (2) of the Act of 1893).
Section 17 (1) provides that there is an implied condition on the part of the seller that he has a right to sell the goods. Section 17 (2) creates the warranty of quiet possession and enjoyment. The two provisions are related. The second can be read as ancillary to the first. As to the first it is arguable that it was not a doctrine of early common law. It is true that Blackstone said there was on a sale of goods an implied warranty of title: Commentaries , II, p. 452. He was not using the word "warranty" in the sense the statute gives it; and the references he gives do not really support his statement as a general proposition: see Tomlin's Law Dictionary (1835) under "warranty"; Williston on Contracts, 3rd ed., vol. 8, ss. 975, 976. But, whatever the position in early law, it was established in Eichholz v. Bannister [1] , after a very learned and instructive argument which is fully reported, that ordinarily the seller of goods impliedly warrants that he has a title to them.
1. (1864) 17 C.B. (N.S.) 708 [144 E.R. 284].
As to s. 17 (2)—I have not come upon any precise statement supporting it as a doctrine of common law, except, somewhat surprisingly, in an early case in New South Wales, Fitzgerald v. Luck [2] , where Dowling C.J. in the course of a judgment dealing mainly with another question said: "It is an implication of law, and of common sense, that if A sells to B for valuable consideration, A guarantees that B shall have undisturbed possession of the thing bought." In the result I think that s. 17 read as a whole does not match any explicit statement in the common law; and that seems to accord with views expressed by the editors of some editions of Benjamin on Sale.
1. (1839) 1 Legge 118, at p. 122.
It has been suggested that s. 17 (2) is founded upon an analogy with covenants for quiet enjoyment in sales of land. Apparently on the basis of this, it was argued that it would be broken only if there were a disturbance of possession by a stranger to the contract of sale who claimed a lawful right to the goods by virtue of a better title than the seller—in other words a lawful act. But, whatever the origin of the statutory provision, I do not think that its words are to be construed by analogies supposedly to be found in covenants for quiet enjoyment of land. These, whether express or implied, are ordinarily in different terms from it. Lord Greene, in Mason v. Burningham [1] , said that he saw no reason for importing into the statute any gloss or exception derived from the covenant for quiet enjoyment of land. We should, I think, agree. I realize that the application, scope and operation of s. 17 (2) may, in some circumstances, still be debatable, especially in relation to disturbance by title paramount. In Niblett v. Confectioners' Materials Co. [2] Atkin L.J. said that "probably this warranty resembles the covenant for quiet enjoyment of real property by a vendor and only purports to protect the purchaser against lawful acts of third persons and against breaches of the contract of sale and tortious acts of the vendor himself". But Bankes and Scrutton L.JJ. in the same case were more cautious. Whatever limits there may be to the statutory warranty of quiet possession upon a sale of goods, there can be no doubt that it protects the buyer against a tortious disturbance by the seller with possession of goods sold and delivered to the buyer. The actions of the defendant in forcibly carrying away the goods it had sold were thus a clear breach of its warranty that the plaintiff should have and enjoy quiet possession of them.
1. [1949] 2 K.B. 545, at pp. 562, 563.
2. [1921] 3 K.B. 387, at p. 403.
The question which then arises is whether the warranty under s. 17 (2) is one of those to which s. 54 (1) of the Act (s. 53 (1) of the 1893 Act) applies. That section no doubt applies to warranties arising out of the implied conditions of quality and fitness under s. 19 (s. 14 of the 1893 Act); and also I assume to warranties arising from the implied conditions of sales by sample under s. 20 (s. 15) and of sales by description: s. 18 (s. 13). Those are all cases in which pursuant to s. 16 (3) (which is the much discussed s. 11 (1) (c) of the Act of 1893) a breach of a condition is treated as a breach of warranty. In all of them the goods for which the buyer must pay are defective or inferior to the goods the seller had promised him. This in logic, and having regard to the common law before the statute, is an obvious justification for a reduction in the price which the seller may recover. The first alternative under s. 54 (1) is understandably applicable to a case of that kind. It fits well the expression in Davis v. Hedges [1] , of giving a "right to redress for the diminution in value". It allows for what the Privy Council has called a "breach of contract resulting in a diminution of value of the article"; and comprehends any damages which might be treated as "an abatement" of the price: Bow, McLachlan & Co. v. The "Camosun" [2] . Any defect in the character or quality or quantity of the goods delivered or in the performance of the contract, as for example a late delivery, goes directly to the amount of the price because it makes the goods less valuable to the buyer at the date he received them than if the related warranties had been performed.
1. (1871) L.R. 6 Q.B., at pp. 690-691.
2. [1909] A.C. 597, at pp. 610, 613.
But I do not think that a breach of the warranty of quiet possession is of the same kind. It could arise long after the delivery of the goods to the buyer. It causes harm to the buyer: but it does not affect the intrinsic value to him of the goods themselves in the same way as do defects arising from the breach of other warranties. It does not bear upon the price in the way which is illustrated by the common law cases on which the verbiage of s. 54 (1) is based. For these reasons it seems to me that a buyer if sued for the price could not set up the breach of the warranty of quiet enjoyment to diminish or extinguish the debt for it does not have that effect. He could maintain a separate action against the seller for damages. In New South Wales he could raise this today by way of a cross action. But it would not be an answer to the debt, but an independent claim. For that reason, if for no other, I would consider that the defendant's argument based on s. 54 (1) fails. I realize that in saying this I part company from the other members of the Court. However, there are other grounds on which I think that the defendant in this case cannot get any comfort from the provisions of s. 54 (1).
The plaintiff did not seek to set up the breach of warranty as an answer to a claim by the defendant for the price. It was not sued for the price. And, as Herring C.J. pointed out in the case of Newman v. Cook [3] :
It is only when a purchaser is sued for the price that he can set up the breach of warranty in diminution thereof under the section, which provides him not with a sword but merely with a shield.
What the plaintiff did was to take a sword. It sued the seller for trespass to goods and conversion. It might have framed its action as for a breach of the warranty of quiet possession. It preferred to sue in tort. The measure of compensatory damages would probably be the same. But I need not consider whether that is so or not. In tort the buyer could claim and was awarded a sum by way of exemplary damages. This must be regarded as an addition to whatever sum it be entitled to by way of compensatory damages. As I have said, the tort of the defendant did not of itself absolve the buyer from its liability for the price or preclude the seller from asserting its correlative right to be paid. The one thing might balance the other if they were thrown into the balance in an action. But they were not. A counter-attack may be an effective means of defence; but the mere ability to make a counter-attack does not defeat an attack.
1. [1963] V.R. 659, at p. 662.
In the United States the law concerning remedies for breach of warranty now differs from that in the Sale of Goods Act. It is stated and discussed in Williston on Sales, revised ed. (1948), vol. 3, s. 603 et seq. But at one period the development of the law in many jurisdictions in America ran parallel with developments in England. In particular it was held that a buyer might set up a breach of warranty in answer to an action by the seller. This conclusion was firmly reached in America at about the same time as it was firmly enunciated in England in Mondel v. Steel [1] . In both countries it was recognized then as a change in practice. In both it was justified on grounds of convenience and as avoiding circuity of action. It thus became established that, as the Supreme Court of the United States put it in the course of expounding "the modern doctrine" in Withers v. Greene [2] , "it is the duty of the jury to graduate the plaintiff's recovery by the injury which the defendant has sustained ". The opinion of the Court in that case, delivered by Daniel J., is noteworthy not only for its citation of authority but for its concurrence with English statements of the common law. There are many later cases in the United States. Their general effect seems to be reflected in, in some cases to be the result of, s. 69 of the Uniform Sales Act. This differs materially from s. 53 of the Act of 1893; but it resembles it in one respect. The buyer can set up against the seller a breach of warranty "by way of recoupment in diminution or extinction of the price"; or he can bring an action against the seller for damages for breach of warranty. The significance of the resemblance at this point is that a breach of warranty does not automatically reduce or extinguish the liability for the price. The buyer must set it up. In America this course, which among others is open to him if he keeps the goods, is described as recoupment. "Under the doctrine of recoupment", says Professor Williston, "the theory is that the defendant is not bound to perform the contract on his part, but he has received something of value for which he ought to pay." This is contrasted with the right to damages by way of counterclaim. "Under the statutes of counterclaim the defendant does not seek to avoid his obligation under the contract but seeks to enforce the plaintiff's obligation and to deduct his liability for breach of that obligation from the amount due from himself.": Williston on Sales, revised ed. (1948), vol. 3, s. 605, p. 334. This may not, for the purposes of our law, express the theory behind on the one hand setting up a breach of warranty in answer to a seller's claim and on the other a claim by the buyer for damages for breach of warranty. But, whatever be the background theory of the doctrine, it is the common law of England which we and America have inherited which is in the background. And, as I understand the principles of the Sale of Goods Act, a breach of warranty does not by the terms of that Act or by the common law on which it is based, of itself determine the buyer's liability for price of goods sold and delivered to him and accepted by him.
1. (1841) 8 M. & W. 858 [151 E.R. 1288].
2. (1849) 9 How. 213, at p. 227; 18 U.S. 104, at p. 111 [13 Law. Ed. 833].
So far as the question depends upon common law decisions before 1893, I agree in my brother Kitto's observations about them. The observations in Gillard v. Brittan [1] , are in point, and Chinery v. Viall [2] , does not compel a contrary conclusion. The comparison and reconciliation of the two cases in Benjamin on Sale, 8th ed. (1950), p. 949, accords with the view expressed by Kitto J.
1. (1841) 8 M. & W. 575 [151 E.R. 1168].
2. (1860) 5 H. & N. 288 [157 E.R. 1192].
I do not think that the decision in Butler v. Egg and Egg Pulp Marketing Board [3] , on which the defendant placed some reliance, has any direct application in this case. The appellants in that case were poultry farmers. Eggs laid by their hens became by statute the property of the Board as soon as they were laid. The appellants had an obligation to deliver them to the Board. If they had done so, they would have become entitled to share in the proceeds realized by the Board from selling those eggs and other eggs. If they failed to deliver them they were not entitled to any payment for them from the Board. They in fact did not deliver them to the Board, but sold them elsewhere. They thus became liable to the Board in damages for conversion. It was held by this Court that, in assessing the damages the Board had suffered by that conversion, a deduction must be made for the amount the Board would have had to pay if the eggs had been delivered to it. To disregard this in assessing the Board's damages would mean that, as Taylor and Owen JJ. said [1] ,
the Board would be in a better position financially than would have been the case had the appellants complied with the Act since it would have received the full value of the eggs, would have incurred no expense in handling and disposing of them and be under no obligation to make any payment for them.
That shews at once how far removed that case is from this.
1. (1966) 114 C.L.R. 185.
2. (1966) 114 C.L.R., at pp. 190, 191.
I do not wish to add anything to what has been said in the judgments of other members of the Court for dismissing the cross appeal.
I would therefore, as I have already said, dismiss both the appeal and the cross appeal.
Owen J.
The appellant before us was the defendant in an action brought by the plaintiff to recover damages for trespass to land and trespass to and conversion of its goods in the following circumstances.
At all material times the plaintiff carried on business as a retailer of electrical appliances in a number of shops in and around Sydney and the defendant was a manufacturer of electrical appliances which it supplied to the plaintiff. Some of the appliances were delivered by the defendant to the plaintiff under what were called display plan agreements under which the plaintiff became the hirer of the goods from the defendant for a period of ninety days at a nominal rental with an option of purchase. They provided (inter alia) that the plaintiff would not part with the possession of the goods except to a customer approved by the defendant and that if the goods were not returned by the plaintiff to the defendant within ninety days the plaintiff would pay the defendant the price thereof. By cl. 2 (e) of the agreements the plaintiff agreed not to "assign or encumber his rights in respect" of the goods except so far as might be necessary to put them into the possession of an approved customer and, by cl. 5, it was provided (inter alia) that,
if any execution or distress shall be levied against the dealer or if the dealer shall fail to observe or perform or commit any breach of any provision binding on him in respect of the goods then and in any such case it shall be lawful for the company immediately and without notice to the dealer to determine the hiring of the goods and retake possession of the goods and for that purpose to enter upon any premises where the same may be
In addition to goods supplied by the defendant to the plaintiff under the display plan agreements, other appliances were sold and delivered by the defendant to the plaintiff on sixty days' credit and at the time when the trespasses to land and the trespasses to and the conversion of the goods were said to have occurred there were substantial quantities of both classes of goods in the plaintiff's shops.
Prior to the trial admissions were made that in January 1963 the plaintiff had executed a deed of charge in favour of a finance company and that on 3rd June 1963 that company, pursuant to powers contained in the deed, had appointed a receiver and manager "of the property" of the plaintiff. It was not disputed that the interest of the plaintiff in the goods then in its possession under the display plan agreements was part of its "property" within the meaning of that admission. On 6th June 1963, following upon the appointment of the receiver and manager, a number of men employed by the defendant entered the plaintiff's shops and there seized and took away not only the appliances supplied under the display plan agreements but also a quantity of other appliances which had been sold and delivered to the plaintiff on sixty days' credit. At the time these were seized, the property in them had passed to the plaintiff but the period of credit had not expired and payment for them had therefore not been made. It was agreed that their value was $10,320.15, that being the amount which the plaintiff had agreed to pay the defendant for them on the expiry of the period of credit. Having taken the goods away the defendant proceeded to sell them and retained the proceeds.
At the conclusion of the evidence, counsel for the defendant admitted that his client had committed trespass to the plaintiff's goods and had converted them to its own use and one of the questions that then arose was as to the amount of damages to be awarded.
Macfarlan J., before whom the action was heard, took the view that the circumstances of the case were such that exemplary damages in the sum of $3,500 should be awarded for the trespasses to and the conversion of the goods. He was of opinion, however, that the plaintiff could not also recover the value of the goods by way of compensatory damages because he considered that the defendant's wrongful seizure of them had relieved the plaintiff of its obligation to pay the price. His Honour held that in these circumstances the plaintiff was entitled to nominal damages only in addition to the award of exemplary damages but he did not fix any nominal sum and, in the result, he entered a verdict and judgment for the plaintiff for $3,500 on the counts for the conversion of and trespass to goods.
On the claims for trespass to land the learned judge found for the defendant. He took the view that the appointment of the receiver was a levying of execution against the plaintiff within the meaning of cl. 5 of the display plan agreements and that the defendant had thereupon become lawfully entitled to enter the plaintiff's premises in order to repossess itself of the goods the subject of those agreements. It was true that, as his Honour found, the defendant, having entered lawfully, had abused its licence to enter in that it had seized goods which it had no right to touch as well as goods which it had a right to repossess. But that fact, his Honour held, did not make the entry a trespass ab initio. He rejected also a claim by the plaintiff for damages in the nature of interest upon the amount awarded upon the claim for trespass to and conversion of goods, a claim which was based upon s. 141 (a) of the Common Law Procedure Act which enables damages in the nature of interest to be awarded "over and above the value of the goods at the time of conversion in actions of trover or trespass concerning goods". He took this course because he was of opinion that interest could be awarded only on compensatory damages and these, as he held, were only nominal.
On appeal by the plaintiff and a cross appeal by the defendant to the Court of Appeal all their Honours were of opinion that the plaintiff was entitled to have the award of damages for trespass to and conversion of its goods increased by $10,320.15, representing the agreed value of the goods. On the claims for trespass to land, their Honours disagreed with the learned trial judge that the appointment of a receiver and manager constituted a levying of execution within cl. 5 of the display plan agreements but were of opinion that the effect of that appointment made, as it was, pursuant to the deed of charge executed by the plaintiff amounted to an encumbering by the plaintiff of his rights in respect of the display plan goods and that it had therefore committed a breach of cl. 2 (e) of the display plan agreements and that the defendant was for this reason entitled to enter the plaintiff's premises and take possession of the display plan goods. Herron C.J. and Jacobs J. were also of opinion that the plaintiff was entitled to a verdict on the claims for trespass to land but was entitled to nominal damages only since Macfarlan J., in awarding exemplary damages for the trespass to and conversion of the plaintiff's goods, had taken into consideration all the circumstances including those surrounding the entry upon the plaintiff's premises. Sugerman J. considered that the entry by the defendant into the plaintiff's premises was lawful and not rendered unlawful ab initio by the fact that, having entered, the defendant had wrongfully seized goods other than those which it had a right to seize. All their Honours rejected the claim for interest.
In the result, therefore, the Court of Appeal held that the plaintiff was entitled to recover $13,820.15 in all for the trespass to and conversion of the plaintiff's goods and to nominal damages on the claims for trespass to land but that the case was not one in which damages by way of interest should be allowed.
Before this Court the substantial point argued was whether the plaintiff was, on its claim for trespass to and conversion of its goods, entitled to have the value of those goods included in the damages awarded, as the Court of Appeal had held, or whether, as Macfarlan J. had held, it was entitled only to nominal damages in addition to the exemplary damages which had been awarded. If the value of the goods could not be recovered, it was not suggested that damages by way of interest should be awarded under s. 141 of the Common Law Procedure Act. As to the claims for trespass to land, while some discussion took place as to whether the entry upon the land was or was not lawful, it was made clear that the question was regarded by the parties as being of significance only if the case was one in which exemplary damages should be awarded for the trespasses to land. If no such damages are recoverable the parties, as I understand it, are content to allow the decision of the Court of Appeal to stand. For the reasons which that Court gave and with which, with respect, I agree, I think it plain that, assuming the defendant to have been guilty of trespasses to the plaintiff's premises, no award of exemplary damages should be made since, as Herron C.J. said, "the time and mode" of entry were taken into account by Macfarlan J. in awarding exemplary damages for the trespasses to and the conversion of the plaintiff's goods. In these circumstances I think it unnecessary to consider whether or not the claim that the defendant had trespassed upon the plaintiff's land was established.
I turn then to the question whether the plaintiff was entitled to have the value of its goods which the defendant had wrongfully seized and converted to its own use included in the damages awarded on the claims for trespass to and conversion of its goods.
It was not suggested by either party that the defendant's tortious acts had operated to put an end to the contracts of sale and it was rightly conceded by the defendant that if the plaintiff, not-withstanding the seizure and conversion of its goods, remained liable to pay the defendant the price for them, their value could be recovered by way of damages. For the defendant, however, it was submitted that notwithstanding the fact that the contracts remained on foot, the effect of ss. 17 (2) and 54 (1) of the Sale of Goods Act was, in the circumstances of the case, to extinguish the price payable by the plaintiff for the goods since it was agreed that the amount of that price was equivalent to the value of the goods. If so, then the plaintiff could not recover the value of the goods by way of damages.
It is necessary then to examine the relevant terms of these two sections in order to determine whether, in the circumstances of the present case, the plaintiff, if sued for the price, would be entitled to rely upon s. 54 (1) (a) of the Act in answer to that claim.
Section 17 (2) provides that:
In a contract of sale, unless the circumstances of the contract are such as to show a different intention, there is—
(2) an implied warranty that the buyer shall have and enjoy quiet possession of the goods.
And, by s. 54 (1),
Where there is a breach of warranty by the seller the buyer is not by reason only of such breach of warranty entitled to reject the goods, but he may—
(a) set up against the seller the breach of warranty in diminution or extinction of the price; or
(b) maintain an action against the seller for damages for the breach of warranty.
By s. 54 (4), the fact that the buyer has set up the breach of warranty in diminution or extinction of the price does not prevent him from maintaining an action for the same breach of warranty if he has suffered damage in excess of the amount of that price.
In the course of the argument before us it was suggested that ss. 17 (2) and 54 (1) could not in any event apply to the present case because, so it was said, the implied warranty of quiet possession for which s. 17 (2) provides is no more than an indemnity by the seller against interference with the buyer's possession by a third party claiming under title paramount and the warranty is not breached if the seller tortiously or in breach of contract interferes with the buyer's possession. I do not agree that this is so. I can see no reason why the words of the subsection should be limited in the way suggested and the proposition is opposed to what was said by Atkin L.J. in Niblett v. Confectioners' Materials Co. [1] , that "Probably this warranty only purports to protect the purchaser against lawful acts of third persons"—and no doubt his Lordship was there referring to the acts of third persons claiming by title paramount—"and against breaches of the contract of sale and tortious acts of the vendor himself". I have no doubt, therefore, that the defendant by its wrongful seizure and disposal of the plaintiff's goods committed breaches of the warranties of quiet possession implied by s. 17 (2) in the contracts of sale.
1. [1921] 3 K.B. 387, at p. 403.
The next step then must be to examine the terms of s. 54 (1) and apply them to the facts of this case. The subsection, as it seems to me, clearly provides that if the seller of goods commits a breach of his warranty of quiet possession, the buyer has an option to take one or other of two alternative courses. On the one hand, he may, if sued for the price, set up against the seller the breach of warranty in diminution or extinction of that price and, if the damage resulting from the breach of warranty exceeds the amount of the price, he may maintain an action to recover the amount of that excess by way of damages. On the other hand, he may take the alternative course for which s. 54 (1) (b) provides and sue for damages for the breach of warranty. If he adopts the second of these alternatives, he will recover whatever damage he has suffered and will remain liable for the price but, except to the extent which s. 54 (4) allows, he cannot pursue both the remedies for which the section provides. They are, as the learned editor of Benjamin on Sale, 8th ed. (1950), said, at p. 991, "not cumulative but alternative".
The position in this case is a somewhat curious one. It is the buyer, the plaintiff, which is claiming that it is still liable to pay the price and that it is for that reason entitled to recover the value of the goods as part of its damages, and it is the seller, the defendant, which is insisting that it would be unable to recover the price if it brought an action against the plaintiff for it. In the events that have happened I am of opinion that the plaintiff's contention must succeed. The defendant's seizure and conversion of the plaintiff's goods was a breach of the warranty for quiet enjoyment. The plaintiff thereupon became entitled to sue in conversion or, if it had thought fit, it could have framed its action in contract and sued to recover damages for breach of warranty. It chose to sue in conversion but it could not, of course, by suing in tort recover more by way of compensatory damages than could have been recovered had it sued for breach of contract. In each case those damages would be measured by the extent of its loss. The plaintiff here took what is, in substance, the course for which s. 54 (1) (b) provides and, having done so, it remains liable to pay the price. It is therefore entitled to recover in the present action compensatory damages representing the value of the goods. If at some future time the defendant sues it for the price, the plaintiff will not, by virtue of s. 54 (1) (a), be entitled to set up in diminution or extinction of that price the damages it recovers in this action. Whether it would be able to plead by way of set off to an action for the price that it had recovered judgment in the present action against the defendant, which judgment had not been satisfied, is not a matter which arises here and I express no opinion on the point.
For these reasons I am of opinion that the Court of Appeal was right in deciding that the plaintiff was entitled to recover the value of the goods by way of compensatory damages.
As to the claim that interest should be awarded under s. 141 of the Common Law Procedure Act I can see no good reason for differing from the decision of the Court of Appeal on the point.
I would therefore dismiss the appeal and the cross appeal. |
high_court_of_australia:/showbyHandle/1/10989 | decision | commonwealth | high_court_of_australia | text/html | null | RJ Brodie (Holdings) Pty Ltd v Pennell [1968] HCA 73 | https://eresources.hcourt.gov.au/showbyHandle/1/10989 | 2024-09-13T22:56:22.508931+10:00 | High Court of Australia
Kitto Taylor, Menzies, Windeyer and Owen JJ.
RJ Brodie (Holdings) Pty Ltd v Pennell
[1968] HCA 73
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
Nov. 7
Kitto, Taylor, Windeyer and Owen JJ.
On 6th November 1964 the respondent, as a "worker" within the meaning of the Workers' Compensation Act, 1926-1964 N.S.W., obtained an award which, inter alia, provided for compensation in respect of partial incapacity resulting from injuries arising out of or in the course of his employment with the appellant. Partial incapacity was found to exist from 1st September 1964 onwards and the weekly amount of compensation, assessed pursuant to s. 11 (1) of the Act, was £10, that being the difference between his average weekly earnings before the injury and the amount which the Commission found he would be able to earn after the injury and during the period of partial incapacity.
At the relevant time the material portion of s. 11 (1) of the Act was in the following terms:
(a) In the case of partial incapacity, the weekly payment shall in no case exceed the difference between the amount of the average weekly earnings of the worker before the injury, and the average weekly amount he is earning, or is able to earn, in some suitable employment or business, after the injury, but shall bear such relation to the amount of that difference as under the circumstances of the case may appear proper.
whilst s. 11 (2), to which it will be necessary to refer, was as follows:
An employer shall provide suitable employment for his injured worker during the worker's partial incapacity for his pre-injury employment.
Upon any failure by such employer to provide suitable employment as aforesaid the worker's incapacity for work shall be deemed to be total, and he shall be compensated accordingly.
It was with the provisions of s. 11 (2) in mind that on 28th November 1964 the respondent wrote to the appellant requesting it to "provide me with suitable employment" but on 4th December 1964 the appellant replied and regretted "that we are unable to offer you suitable light employment". Thereupon, on 23rd February 1965, the respondent, contending that in the circumstances his compensation should be assessed as for total incapacity, applied to the Commission for a variation of the existing award. In the result the application was successful and compensation payable to the respondent was re-assessed "on the basis of notional total incapacity".
Although it was conceded before the Commission that the respondent was a worker whose compensable injuries had resulted at all material times in partial incapacity for his pre-injury employment, his right to compensation pursuant to s. 11 (2) from 9th December 1964 onwards was contested on the ground that as and from that date he had been engaged in a business undertaking from which he had derived a profit. His actual participation in the work undertaken in the business was, as his profits were, comparatively small and after payment of his outgoings he was left with a sum of £35 or thereabouts from a venture which had extended over approximately six months.
It is apparent that before the Commission the appellant contested its liability to pay compensation as for total incapacity after 9th December 1964 simply on the authority of Chudleigh v. David Bros. Pty. Ltd. [1] . That is to say, that its argument asserted that the mere fact that the respondent had earned profits in a business between 9th December 1964 and the date of the hearing was fatal to his claim pursuant to s. 11 (2) in respect of that period. This contention failed and, pursuant to s. 37 of the Act, the matter came before the Court of Appeal upon a case stated which raised for determination the question whether the Commission erred in law in holding "that since 9th December 1964 the respondent was liable to pay the applicant compensation on the basis of a notional total incapacity in accordance with the provisions of s. 11 (2) of the Workers' Compensation Act, 1926-1964 ". The members of the Court of Appeal divided on the question, two being of the opinion that it should be answered in the negative and one being of the contrary opinion. It is from the order of that Court that this appeal is now brought.
1. (1961) 79 W.N. (N.S.W.) 517.
The majority in the Court of Appeal seems to have thought that Chudleigh's Case [1] did not support the wide proposition advanced by the appellant at the hearing. What was decided by that case, it was said by Jacobs J., "was that no worker was entitled even under s. 11 (2) to receive more by way of combination of actual earnings and compensation than his pre-injury average weekly earnings". "That was", he said, "the effect of the decision in Chudleigh's Case [1] and that was the intendment of its reasoning, despite the general statements which were made". Walsh J. did not agree with this view; he was satisfied that it was of the essence of the decision in Chudleigh's Case [1] that s. 11 (2) was "inapplicable in a case where the applicant for an award under it was earning money". Nevertheless he was not "entirely convinced" by the reasoning in the case but he was not prepared to say that it was manifestly wrong and to substitute some other view of the meaning of an admittedly difficult statutory provision.
1. (1961) 79 W.N. (N.S.W.) 517.
2. (1961) 79 W.N. (N.S.W.) 517.
3. (1961) 79 W.N. (N.S.W.) 517.
As we read Chudleigh's Case [1] we think it is clear enough that it adopts the view that a worker may not take advantage of s. 11 (2) when he is working and earning money whatever the amount of his earnings may be. This is manifest in the summation of the views of the Court at pp. 522, 523, where it is said: "In my view s. 11 (2) takes its stand only where the injured worker is not earning anything. He makes a claim for compensation. Section 11 (2) is designed to meet the case where the employer says to the injured worker "you are despite your injury able to earn something by working in a suitable job albeit at a reduced wage". At this point sub-s. (2) says to the employer you cannot be heard to say this. You have the onus of proving your statement and you can either provide that suitable job yourself or pay compensation on the basis of total incapacity. If the employer finds suitable employment at a lesser rate than the pre-accident earnings he must make up the difference under s. 11 (1). In my opinion such is the case here. The mandatory language of s. 11 (2) will only operate in Chudleigh's case if and when he claims that he cannot earn anything. Whilst he is earning a post-accident wage his rights are to be quantified under s. 11 (1). The collocation of s. 11 (2) with s. 11 (1) (a) in the same section affords ample warrant for construing s. 11 (2) as having no application to the case where the man "is earning". If this construction be adopted, any difficulty in giving to s. 11 as a whole a consistent and coherent meaning disappears, and furthermore s. 11 (2) becomes consistent with the whole doctrine of the compensation laws." To ignore the plain meaning of these passages would be, in our opinion, to disregard the very basis of the decision.
1. (1961) 79 W.N. (N.S.W.) 517.
But we also think that the qualification which that decision placed upon operation of s. 11 (2) does not satisfactorily resolve the problems to which the sub-section gives rise. A clue to the true solution may, perhaps, be found in the somewhat loose language of the sub-section itself for the "provision" of suitable employment involves an element of mutuality. Employment is not a commodity which can be provided merely by an offer; it can in strictness be provided only by the employer and employee entering into and performing their obligation under a contract of service and this involves the co-operation of both employer and employee. There can, of course, be no "failure" on the part of an employer to provide suitable employment if the employee refuses, and continues to refuse, to enter his employment, or, if the facts show that the employee's conduct is inconsistent with the necessary degree of co-operation on his part. Such would be the case where the employee has undertaken full-time employment with another employer so long as such employment continues, or, where the employee moves his residence to a place so remote from the employer's place of business as to be quite incompatible with employment by that employer. Likewise, it would seem, the position would be the same where after his partially incapacitating injury the worker suffers further injuries or sickness resulting in total incapacity for any form of work. It must be remembered that not only is the obligation to provide suitable employment a continuing one but there must also be a continuing failure to provide suitable employment in order to entitle a worker to continuing benefits pursuant to s. 11 (2) and, in our view, there cannot be a continuing failure where the circumstances are such that it can be seen that throughout any relevant period the employee is not ready, willing or able to enter the employ of the pre-injury employer.
Whether or not there has been any such failure in relation to any period during the continuance of the partial incapacity is, of course, a question of fact to be determined in the light of all the circumstances including the situation of the worker. If throughout any such period he is engaged in activities which would have made it impossible for him at the same time to have performed the duties of an employment with his former employer there cannot be said to be a failure on the latter's part to provide suitable employment. This being so the vital question of fact in the present case was allowed to go by default on the original hearing for the only ground upon which the appellant denied liability pursuant to s. 11 (2) was that since the respondent had earned money after 9th December 1964 that sub-section did not apply. The question now is whether in the circumstances of the case the matter should be remitted to enable the Commission to determine the material question of fact. The appellant has asked us to adopt this course but upon a perusal of the evidence in the case it seems to us that there is no real basis for asserting that the very minor activities in which the respondent engaged after 9th December 1964 were such as to preclude him from asserting that he was, during the period in question, ready willing and able to enter into "suitable employment" with the appellant. This being so we think it is appropriate simply to order that the appeal be dismissed.
Menzies J.
Special leave to appeal was granted to the appellant employer in order that it might contend that the decision of the Full Court of the Supreme Court of New South Wales in Chudleigh v. David Bros. Pty. Ltd. [1] , which was concerned with the construction of s. 11 (2) of the Workers' Compensation Act, 1926-1964 N.S.W., was correctly decided and governed this case. The majority of the Court of Appeal of the Supreme Court had, in answering in favour of the respondent worker a question stated by the Workers' Compensation Commission, distinguished the earlier decision in such a way as to cast doubt upon its correctness.
1. (1961) 79 W.N. (N.S.W.) 517.
As the argument upon this appeal proceeded it became apparent that the appellant relied upon Chudleigh's Case [1] only as a last resort and that the primary contention on its behalf was that the matter should be remitted to the Workers' Compensation Commission for reconsideration of its decision that there had been a failure on the part of the appellant to provide a worker partially incapacitated for his pre-injury employment with suitable employment as required by s. 11 (2) of the Workers' Compensation Act.
1. (1961) 79 W.N. (N.S.W.) 517.
In my opinion the appellant's primary submission should be rejected. The Workers' Compensation Commission found there was a failure to provide employment as required by s. 9. It is conceded that upon the evidence the Commission was right in so finding in respect of the period from 4th to 9th December, but the contention was that the Commission was in error in finding a failure to provide employment continuing beyond that date. I do not think that the question of law which the appellant now seeks to raise, i.e., the meaning of the phrase "failure to provide suitable employment", ever did arise before the Workers' Compensation Commission or the Supreme Court and I consider that the appellant is not at liberty to raise it in this Court. See Workers' Compensation Act, s. 37. Moreover, I consider that there was no evidence before the Workers' Compensation Commission upon which it could properly find that the failure, which it is conceded did take place, ceased on 9th December. All that happened was that the worker, having received a letter dated 4th December 1964 from the appellant stating "we regret that we are unable to offer you suitable light employment", bought two buildings for demolition and sale and employed two men under his part-time supervision to pull them down and reassemble them. The respondent over the period from 9th December 1964 to 22nd June 1965 made a profit of about £35 out of this enterprise. These circumstances afforded no basis for a conclusion that the respondent's "failure" came to an end on 9th December 1964.
The provision of employment imports, of course, mutuality between the employer and the worker and it is not difficult to see that where it is the worker who is responsible for a lack of mutuality there is no failure on the part of the employer to provide employment. How this principle should be applied to particular circumstances is not a matter to be dealt with now. It is sufficient to say that there was no evidence before the Commission upon which it could have found that the non-provision of employment which here occurred was in any sense the responsibility of the worker. It was wholly the responsibility of the appellant.
In Chudleigh's Case [1] it was decided, as the headnote accurately records, that "s. 11 (2) of the Workers' Compensation Act, 1926-1960, operates only when a partially incapacitated worker is not earning any remuneration at all, although able to earn some wage". With this I do not agree. There is no warrant in the section for denying its operation to a worker otherwise within its terms who earns some money while, for instance, waiting for his former employer to fulfil his obligation to provide suitable employment. The section is one of great difficulty which must give rise to many anomalies, but to deny its operation to a worker simply because he is earning some money is no solution of its problems and is unwarranted by its language.
1. (1961) 79 W.N. (N.S.W.) 517.
As, in my opinion, both submissions of the appellant fail, I think that what this Court should now do is simply to dismiss the appeal with costs. |
high_court_of_australia:/showbyHandle/1/10088 | decision | commonwealth | high_court_of_australia | text/html | null | Longworth v Emerton [1951] HCA 45 | https://eresources.hcourt.gov.au/showbyHandle/1/10088 | 2024-09-13T22:56:26.918990+10:00 | High Court of Australia
Dixon, McTiernan and Kitto JJ.
Longworth v Emerton
[1951] HCA 45
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The Court delivered the following written judgment.
Aug. 3
Dixon, McTiernan and Kitto JJ.
This is an appeal from a decree made by Roper C.J. in Eq. in a suit for infringement of a patent. His Honour dismissed the suit on the ground that before the application for the patent the plaintiff, that is the patentee, had made his invention public by user. The validity of the patent was put in issue on other grounds also. But the same patent had come before his Honour in a previous suit against another defendant and on that occasion his Honour had upheld the validity of the patent and given a certificate of validity. In that suit, however, publication of the invention by prior user had not been one of the objections to validity. His Honour, in accordance with his previous judgment, decided the objections to the validity of the patent other than the objection on the ground of prior user, in favour of the patentee. Upon the hearing of the appeal the question of prior user was fully argued before us and before entering upon the hearing of the argument concerning other objections to the validity of the patent, we took time to consider the correctness of his Honour's decision upon the question of prior user. We have reached the conclusion that his Honour's judgment was in this respect correct and that on that ground the appeal should be dismissed.
The invention is one for a machine for collecting seed, especially the seed of paspalum grass. The specification describes the purpose of the invention as being to provide a machine and an attendant contrivance for attachment to an operating vehicle for the rapid gathering of seed, especially of that of paspalum dilatatum grass, but also applicable to wheat or other similar crops. It is unnecessary for the purposes of our decision to describe the invention in detail. As the statement of its purpose shows, it is divided into two sections. One is what is called the "attendant contrivance" to be attached to an operating vehicle. That means nothing more than that the machine which collects the seed must in some way be suspended from the side of a lorry or truck or other vehicle by which the machine is propelled through the grass. One method which is fully described in the specification of so suspending the machine is by a hinged frame which can be lowered over the side of the vehicle by means of pulley blocks and windlass. Another is simply by means of horizontal beams extending over the side of the vehicle and affixed to the floor or deck of the vehicle. The other section consists of the machine itself, which is constructed so as to pass through the grass a contrivance which resembles a very large comb. Behind the points of the very broad horizontal teeth of the comb are troughs ending in a tray. The troughs and the tray catch the seed which the huge comb shakes out or otherwise detaches from the grass.
The date of the application for the patent was 4th October 1935. The patentee, who is the appellant, says that he first began to think of some such contrivance in the year 1912 and that he then dropped the idea and took it up again in 1933. He himself was not engaged in farming operations but lived in a district where there was a considerable quantity of paspalum grass and he had been born at Ghinni Ghinni on the Manning River. Early in 1934 he constructed a machine upon the general lines of the invention. He made it on the verandah of his own home. Having made the machine he proceeded to put it into practical use in order to test it. He had a brother who possessed a farm at Coopernook on the north coast of New South Wales. The brother also possessed a lorry. The appellant decided to try his machine with the aid of his brother's lorry on his brother's property. The machine was attached to the lorry by horizontal bars projecting over the side of the lorry. In April 1934 they tested the machine in the paspalum grass at Coopernook. It worked with some degree of success and the modifications or improvements which were afterwards made were not very considerable. They consisted in alterations of the height of the sides of the troughs and in some other matters and an alteration of the attendant contrivance for fastening the machine to the lorry or propelling vehicle. There were some other minor details which were afterwards changed. The attendant contrivance for affixing to the operating vehicle was of course a matter of considerable importance. In the end it took the form of a frame to which the machine was suspended at the side of the motor lorry or propelling vehicle. The frame was hinged to the outer side of the lorry or propelling vehicle in such a way that it might be lowered by a windlass. At some point which is not clearly fixed a second machine on the same large scale was constructed by the appellant. It was at all events in existence in March or April 1935. But in the meantime a third machine was constructed, one upon a smaller scale. The purpose of the reduced size was to test the possibility of the machine being drawn by animal power, with the aid of a sledge or slide. It was thought that an ordinary horse-drawn slide or sledge might be used to operate it and that thus the machine might be used without mechanical power. Experiments with the slide did not prove satisfactory and the smaller machine was put aside. In December 1934 the appellant put one of the larger machines into use for one day upon the farm of a man named Gregory. Then again in February 1935 he used the machine on the farm of one Gill. In his cross-examination he was asked "Did you do any more in March and April, 1935?". He answered "Yes, we continued. I continued to harvest and trying to harvest and trying" (scil. the machine) "and the second form of contrivance was developed during that period." He said that during this period he harvested in other places as well as Gill's and gave the names of three other farms. He said that he had left the machine with his brother-in-law, Elliott. He said that possibly in March 1935 the two large machines were working at the same time. They were both under his control. His brother worked the second large machine and it was in the same area as he himself was in, but there might have been two trucks in the area at the same time and the two machines might have been working in the same paddock but it was not constant, only occasional. In answer to a question whether at the beginning of 1935, in January or February, he went on using the machine, he said he went on trying it out. He offered the farmers a royalty upon the paspalum seed which he obtained. Some refused it, others took it. In his re-examination in reply to questions as to the object of the use he made of the machine in December and February, he said "Well, I had the machine and I wanted to see if the machine would be a commercial success. I knew it would harvest some seed, but the work I had done in 1934 would not have been on a profit basis. As I went along I tried improvements and alterations." He said that he tried putting a vertical rib on top of the ordinary rib in the troughs or boats at varying distances and that there was a fair amount of experimenting required round the toe of the machine to make it work satisfactorily because it tended to collect debris and force the stalks of the grass forward. The angle of the rib was found to be of importance. He tried the use of rubber bands along the line of the troughs or boats to bring the stalks together and shake them. He used chains and he used a flexible steel wire and made certain other adjustments. Finally, he said that in April 1935 he was satisfied. Whatever seed he won in the course of the use of the machine he sold. He said that when he took the machine to a farm for the most part he made arrangements beforehand. He might meet the farmer or write to him or go and see him. He had to drive into the farm with the machine on the lorry. There were various farms upon which he worked and he would estimate that about half the number of farmers concerned saw the machine.
With reference to these facts, Roper C.J. in Eq. said that on the face of the evidence he thought that it had established a prior user, but that the plaintiff, the appellant, contended that all he did was experimental. After discussing s. 124 of the Patents Act his Honour said "I find it impossible in this case to regard the 1935 user as experimental or as a test. It seems to me to go far beyond that and to be a user of a machine the utility of which had already been established, at all events in 1934, and in my opinion it is a user which invalidates the patent". His Honour said the plaintiff impressed him as a frank and reasonably reliable witness.
We think that it is impossible to displace his Honour's conclusion of fact. In the first place, it is quite plain that the nature and character of the invention was disclosed to the farmers and others who saw the machine in operation in December 1934, and February, March and April 1935. The use made of the machine was open. No relation of confidence was established between the inventor and those who saw the machine and an inspection of the machine would make apparent the character of the invention. Subject to the effect of s. 124, which must be considered independently, the question upon which the appeal depends is whether such a disclosure of the invention can be treated as not amounting to a publication by prior user on the ground that it was of an experimental character and made as a necessary or proper incident of the development of the invention itself. Although if an invention is practised openly or made known publicly before an application for a patent is made, the patent if granted will be void, the law has long made a qualification in favour of user which is experimental or secret. In his direction to the jury in Cornish v. Keene [1] Tindal C.J. said that it must not be such a practice of the invention as is only referable to mere experiments for the purpose of making a discovery or something secret or confined to the party who was making it at the time, but that it must be, in order to set aside the patent, a case where it was in public use and operation among persons in the trade and likely to know it. In the side note to this statement it is said—"The user which will vitiate must not be such as can be classified as experiment or secret, but must be public". An inventor is entitled to make experiments to test an invention and for that purpose to employ others, and if need be a large number, to assist in those experiments: per Kekewich J., Gadd and Mason v. Mayor &c. of Manchester [2] ; But the qualification in favour of experiment must be carefully applied and limited to acts which are reasonably necessary to produce the result embodied in the specification. In Croysdale v. Fisher [3] Pollock B. said that when it is said that a process has been disclosed or an invention has been disclosed by means of user, it is not necessary that the user should be a user by the public proper, provided only there is a user in public, that is to say, in such a way as is contra-distinguished from a mere experimental user with a view of patenting a thing which may or may not be existing.
1. (1835) 1 Web. Pat. Cas. 501, at p. 512.
2. (1892) 9 R.P.C. 249, at p. 258; affirmed (1892) 9 R.P.C. 516, at p. 528.
3. (1884) 1 R.P.C. 17, at p. 21.
The character of the invention itself may be important in considering what degree of disclosure is inevitable in the course of developing the invention. An example is provided by the case of Honiball v. Bloomer [1] , where the invention in question related to an anchor, a thing not easily made the subject of secret experiment or testing. Martin B. there said that he thought that if the inventor had put the anchor on board a steam boat for the purpose of trying whether it would answer and it did not answer and then it was returned, so that the user was really an experiment, that would not interfere with the patent.
1. (1854) 2 Web. Pat. Cas. 199; 10 Exch. 538.
There is perhaps no stronger decision that a disclosure in the course of testing an invention or employing it experimentally does not amount to prior public user than In re Newall and Elliot [2] , and upon that authority the appellant greatly relied. The invention in that case related to a device for use in laying submarine telegraph cables. As the cable was uncoiled it was passed round a cone or several cones for the purpose of preventing it kinking. Thence it passed through a pulley and so to the break wheel before going over the stern of the ship. Experiments made on land to test the invention were not found satisfactory. The plaintiff who became the patentee had a contract to lay a cable in the Black Sea. He determined to employ the invention in carrying out the work and so to test it. This involved fitting the device upon the cable-laying vessel. The first ship to sail with it met with an accident owing to bad weather and was forced to put into the Thames where the cable was transferred to another ship. Precautions were taken to prevent what was going on being known, but persons neither employed by the plaintiff nor by the Government visited the ships and had an opportunity of becoming acquainted with the apparatus, and when the second ship reached the Black Sea and the apparatus was set up for use its nature was necessarily seen by those aboard or connected with the work. An arbitrator decided that the patent was not invalid by reason of the publication of the invention during the operations of the ships or of the use by the plaintiff prior to the date of the letters patent of the apparatus in executing a contract for profit. But the arbitrator stated a case. Upon the case stated the Court of Common Pleas upheld the award. Byles J., who delivered the judgment, said: " a necessary and unavoidable disclosure to others, such as here appears, if it be only made in the course of mere experiments, is no publication; although the same disclosure, if made in the course of a profitable use of an invention previously ascertained to be useful, would be a publication". And later in the reasons the learned judge said:— "The true question, therefore—looking at the decision of the arbitrator—seems to be this: is an experiment performed in the presence of others, which not only turns out to be successful, but actually beneficial in the particular instance, necessarily a gift of the invention to the world? We think it is not. In the case under consideration, experiments on dry land are found to be indecisive. The decisive experiment still remains to be made on a large scale, and in deep water. An opportunity presents itself, in the course of a government contract,—not a contract for the use of this particular apparatus, but a contract for laying down the cable by any means the contractor may select. The experimentor is obliged either to experiment in a way that may turn out to be useful in the particular instance, or else not to make any efficient and decisive experiment at all. The coincidence of an experiment with actual immediate profit or advantage from it, if successful, is unavoidable" [1] .
1. (1858) 4 C.B. (N.S.) 269 [140 E.R. 1087].
2. (1858) 4 C.B. (N.S.), at pp. 294, 295 [140 E.R., at p. 1097].
It will be seen that the essential conditions of fact upon which this decision is based are (1) that an experiment at sea was necessary to determine the sufficiency or utility of the invention; (2) that to perform it the disclosure was unavoidable; (3) that the profit or advantage was an accidental though necessary concomitant; and (4) the use was in fact experimental. The decision cannot be pressed further and it is not in our opinion applicable to the facts of the present case.
On the facts of the present case it appears to be reasonably plain that the appellant used his invention freely in the district in which he and his brother and brother-in-law lived, taking no precautions to keep its character secret or to confine its use to those who were in confidential relations with him, and that he did so without any view to definite improvements or experiment of a specific character and not for the purpose of developing the actual invention applied for. The use was not experimental except in the possible but vague sense that the appellant might not have been quite satisfied that the qualities of the machine had been fully tested and might have remained uncertain whether some further improvements might not be effected to make it more efficient. This, in our opinion, was not enough to protect the disclosure which he made in the course of the use of the machine. The use seems to have been wide and unguarded and it could not be considered as reasonably necessary in order to bring the invention to such a condition that he might apply for a patent and describe his invention in a specification, whether complete or provisional. We cannot agree in the contention that it is for an inventor to judge what experimentation is required or how far it should be carried. The criticism made of the conclusion of Roper C.J. in Eq. that he substituted his view of what was necessary for that of the patentee has therefore no basis. Nor do we agree with the contention that his Honour concerned himself rather with commercial than with public user. Apart from the possible effect of s. 124 of the Patents Act 1903-1946, we think that there was public user which would invalidate the patent.
Section 124 is a provision peculiar to the patents legislation of the Commonwealth (see per Starke J., Paper Sacks Pty. Ltd. v. Cowper [1] ), although there is now a provision dealing with the same subject in s. 51 (3) of the English Patents Act 1949 (12, 13 & 14 Geo. VI. c. 87). Section 124 provides that the fact that an invention has been exhibited or tested either publicly or privately shall not in itself be deemed a ground for refusing a patent; provided that any public exhibition or testing must have been within one year of the date of the inventor lodging his application for a patent. This provision received much consideration from this Court in Paper Sacks Pty. Ltd. v. Cowper [2] , where, however, the basic question was whether the section applied at all to protect the validity of a patent granted or was confined in its operation to the application for a patent. In this Court the view was taken that if the section enabled an applicant to obtain a patent notwithstanding that he had publicly or privately exhibited or tested the invention it must follow that the patent when granted remained valid. But in the Privy Council doubts were thrown upon this view: see [3] .
1. (1934) A.L.R., at pp. 104, 105; 7 A.L.J. 463.
2. (1934) A.L.R. 102; 7 A.L.J. 463.
3. (1935) 53 R.P.C. 31; 9 A.L.J. 244.
In the present case it is not necessary for us to reconsider this question. It is enough to say that in our opinion what the appellant did on the facts went far beyond any exhibition or testing to which s. 124 relates. The word "exhibited" is of course of ambiguous import. But it is not synonymous with "disclosed" or "publicly disclosed". It means displayed in some more limited sense. Testing may not be co-extensive with experimenting. Some tests may be made which are not experiments and some experiments which are not tests. In the case of Paper Sacks Pty. Ltd. v. Cowper [4] , Starke J. said:—"The words "shall not in itself" mean, I think, "shall not alone" be deemed a ground for refusing a patent. The proviso then requires, in the case of a public exhibition, or testing, that it must have been within one year before the date of the lodging of the application. But I cannot think that private exhibitions or tests, fully disclosing the methods of manufacture or the nature of the process invented, without any confidence or injunction to secrecy, remain protected no matter how long an inventor delays an application for a patent; the words "shall not in itself" negative any such view. Consequently, in my opinion, if the exhibition or the test, whether public or private, fully and completely discloses the method of manufacture or the process of manufacture without any confidence or injunction to secrecy, then there is something more than the mere fact that the invention has been exhibited or tested, and the case falls outside the protection given by the section."
1. (1934) A.L.R., at p. 105.
In the Privy Council Lord Russell, who delivered the judgment of their Lordships, said:—"Their Lordships, however, are of opinion, upon an examination of the facts of the present case, that what in fact took place went far beyond the events contemplated by s. 124, and that accordingly no protection can on any view be afforded to the patent by the section. This was in substance the view taken by Mr. Justice Starke on the hearing of the appeal" [1] . In the present case the use which the appellant made of the machine in harvesting paspalum seed on the various farms to which reference has been made went far beyond testing the machine in any reasonable sense of the word "test".
1. (1935) 53 R.P.C., at p. 51.
For these reasons we are of opinion that the decision of the learned judge was right on the ground upon which he placed it and that it is unnecessary to go into the other ground upon which the respondent would propose to support the judgment. The appeal must be dismissed with costs. |
high_court_of_australia:/showbyHandle/1/9598 | decision | commonwealth | high_court_of_australia | text/html | null | Nelson v Nelson [1995] HCA 25 | https://eresources.hcourt.gov.au/showbyHandle/1/9598 | 2024-09-13T22:56:38.183656+10:00 | High Court of Australia
Deane, Dawson, Toohey, McHugh and Gummow JJ
Nelson v Nelson (FC95/046)
[1995] HCA 25
ORDER
1. Appeal allowed.
2. Orders of the Court of Appeal set aside and in place thereof order that:
(i) the appeal be allowed;
(ii) declarations 1, 2 and 3 made by Master Macready be set aside;
(iii) it be declared that if on or before 9 January 1996 the first appellant shall have paid to the Commonwealth of Australia the amount (the Benefit Sum) agreed by the solicitors for the first appellant and for the first respondent to be the present value, over the term of the loan agreement dated 30 August 1989 and for the advance by Westpac Banking Corporation (the Bank) to the first appellant of $25,000, of the difference between the subsidised rate which applied pursuant to the Defence Service Homes Act 1918 Cth and that rate which, upon its usual terms, the Bank would have charged the first appellant on an advance of $25,000 over the same period and for the same purpose, the second respondents then hold the whole of the balance of the proceeds of the sale of the property known as 5 Bent Street, Petersham, New South Wales, together with any interest earned thereon, upon trust for the first appellant;
(iv) moneys which become held by the second respondents upon trust for the first appellant as provided in the declaration in order (iii) be paid by the second respondents to the first appellant or as she may direct;
(v) it be declared that if the Benefit Sum has been ascertained as aforesaid but the first appellant has not paid it to the Commonwealth, as provided in order (iii) hereof, on or before 9 January 1996, the second respondents then hold the balance of the proceeds of the sale specified in that declaration, as to the Benefit Sum upon trust for the first respondent and as to the remainder (including interest earned upon the whole of the said balance) upon trust for the first appellant;
(vi) any moneys which become held by the second respondents upon trust for the first respondent and the first appellant respectively as provided in the declaration in order (v) be paid by the second respondents to those parties or as respectively directed;
(vii) the first respondent pay the costs of the appellants and the second respondents of the proceeding at first instance and in the Court of Appeal.
3. There be liberty to any party to apply to this Court if, on or before 30 November 1995, the solicitors for the first appellant and for the first respondent shall not have agreed the amount of the Benefit Sum as provided in order 2 hereof.
4. The first respondent pay the costs of the appeal of the appellants and the second respondents.
Cur adv vult
The following written judgments were delivered:—
9 November 1995
Deane and Gummow JJ.
The facts
The first appellant, Mrs B J Nelson, is the widow of Mr J W Nelson, who died on 4 November 1987 at the age of seventy-three. Mrs Nelson was then aged sixty-six. Mr Nelson was a retired master mariner and as a result of his war service he had been an "eligible person" within the meaning of the definition in s 4(1) in the Defence Service Homes Act 1918 Cth (the Act). As his widow, Mrs Nelson was also an "eligible person" within that definition.
There were two children of the marriage, the second appellant, Peter Nelson, and the first respondent, Elizabeth Nelson. At the time of their father's death, Peter was aged thirty-seven and his sister thirty-three years.
The property known as 5 Bent Street, Petersham, Sydney (the Bent Street property) is land under the provisions of the Real Property Act 1900 NSW. On 10 August 1987, Peter Nelson and Elizabeth Nelson entered into a contract to purchase as joint tenants the Bent Street property for $145,000. The purchase was completed on 4 November 1987 and a transfer registered on 18 November 1987. Peter Nelson and Elizabeth Nelson were registered as proprietors of the Bent Street property as joint tenants. Mrs Nelson did not appear on the title. Three years later, on 23 October 1990, Peter Nelson and Elizabeth Nelson entered into a contract to sell the Bent Street property for $400,000. In the meantime, and relevantly with effect from 19 December 1988, the Act had been considerably amended by the Defence Service Homes Amendment Act 1988 Cth (the Amendment Act).
The sale of Bent Street was completed on 29 November 1990. Of the settlement moneys, $127,302.24 was paid to Westpac Banking Corporation (the Bank) to discharge a mortgage over the Bent Street property. After allowing for adjustments, there was a balance of $232,509.83. This sum is invested in an interest bearing trust account in the name of the second respondents, who are Elizabeth Nelson's solicitors, to await the resolution of a dispute between the parties as to the ownership of that fund. It is this dispute which has led to the present appeal.
By proceeding commenced in the Equity Division of the Supreme Court of New South Wales on 24 December 1991, Mrs Nelson and Peter Nelson as plaintiffs sought a declaration that the second defendants held the balance of the proceeds of sale of the Bent Street property on trust for Mrs Nelson, and an order that those proceeds, together with interest, be paid to Mrs Nelson. By her cross-claim, Elizabeth Nelson sought various relief against her brother and mother, including a declaration that she had a beneficial interest in the proceeds of sale. The solicitors were joined as respondents so that they might be bound by any decision as to the ownership of the proceeds of sale. They have taken no active part in the litigation.
The issues in the Supreme Court extended to further matters arising from property dealings of the family, including the properties at 6 Yasmar Avenue, Haberfield, Sydney (the Yasmar Avenue property) and 129 Windsor Street, Paddington, Sydney (the Windsor Street property). It is necessary to refer briefly to these matters, and to retrace steps to the period before the death of Mr Nelson. The Yasmar Avenue property was sold in January 1986 for $165,000 and the Windsor Street property in August 1986 for $188,500. The registered proprietor of both properties had been Mr Nelson, although, in circumstances not presently material, in March 1986 he had transferred the Windsor Street property to Peter Nelson and a Mr Hans Bendler.
Of the proceeds of sale of the Windsor Street property in August 1986, $124,000 was paid into an account with Hambro Australia Ltd (Hambro) in the name of Mrs Nelson. The sum of $59,900 was paid into an account with Hambro held by Peter Nelson. These payments to the Hambro accounts were made in November 1986.
By this time, Mr Nelson had been diagnosed as suffering the disease which a year later caused his death. There were discussions between Mr and Mrs Nelson and their son as to the use of the proceeds of sale to buy a new property. This led to the exchange of contracts on 10 August 1987 to purchase the Bent Street property for $145,000. As we have indicated, the purchasers of the Bent Street property were Peter Nelson and Elizabeth Nelson. However, both the deposit and the balance of the purchase price were provided from a joint account of Mr and Mrs Nelson. A sum of $160,991.66 was transferred into that account from Mrs Nelson's account with Hambro. These funds, as to $124,000, represented the proceeds of sale of the Windsor Street property.
On 3 November 1987, in anticipation of settlement the next day, three cheques were drawn on the joint account in the total of $130,782.06. By then, Mr Nelson had been in hospital for a month. He died in the early hours of 4 November. Later that day, the purchase was completed with cheques drawn as described, and the transfer was taken in the names of Peter Nelson and Elizabeth Nelson, as joint tenants. Mrs Nelson was the sole executrix of and beneficiary under the will of her husband. Probate was granted to her on 5 November 1991. This was shortly before Mrs Nelson instituted the present litigation.
After settlement, Peter Nelson organised renovations of the Bent Street property. These were completed in June 1988. Some of the moneys for the renovations were supplied by Mrs Nelson and others came from the account of Peter Nelson with Hambro and thus were derived from the proceeds of sale of the Windsor Street property. In March or April 1988, Mrs Nelson and her son moved into occupation of the Bent Street property. Mrs Nelson thought that the property was too large for a family home. She then purchased in her name a property at 3 Kidman Lane, Paddington, Sydney (the Kidman Lane property). The Bent Street property subsequently was sold in the manner already outlined.
The issues on the appeal to this Court concern the ownership of the fund held by the second respondents, representing the remaining proceeds of sale of the Bent Street property. A claim by Mrs Nelson that Elizabeth was liable to compensate her for breach of trust was abandoned during oral submissions. No issue as to ownership arises with respect to the Kidman Lane property. However, some understanding of the interrelation of the dealings affecting both properties is necessary.
The purchase of the Kidman Lane property was completed on 31 August 1989. By loan agreement dated 30 August 1989 between Mrs Nelson, her two children and the Bank, an advance of $150,000 was made, subject to the provision of a mortgage by Peter Nelson and Elizabeth Nelson over the Bent Street property. This security was provided to the Bank. It was intended to demolish the house on the Kidman Lane property and to erect a new dwelling.
In addition to the advance of $150,000 raised from the Bank by loan agreement also dated 30 August 1989, Mrs Nelson obtained from the Bank $25,000 as a subsidised advance at a low rate of interest pursuant to the provisions of the Act as it by then stood. A form entitled "Subsidy Application" had been completed by Peter Nelson for his mother and lodged on 25 July 1989. In response to the question "Do you or your spouse own or have a financial interest in a house or dwelling other than the one for which a subsidy is sought?", a tick was placed in the box beside the word "No". Mrs Nelson completed a statutory declaration on the form, verifying the accuracy of the information supplied in it.
Elizabeth Nelson was the only one in the family with a regular income. The loan agreement with the Bank had provided that the advance of $150,000 be made into a joint account in the names of the three Nelsons. Elizabeth undertook to contribute her wages into the account to meet the cost of the finance. She commenced to do so on 7 September 1989. The relationship between the parties broke down. Elizabeth Nelson made no further deposits after May 1990, some six months before the Bent Street property was sold. Mrs Nelson still holds the Kidman Lane property.
The decisions in the Supreme Court
Various issues were dealt with by a Master in the Equity Division of the Supreme Court. The Master held that Mrs Nelson was the beneficial owner of the Kidman Lane property. The Master granted declaratory relief as to ownership of the proceeds of sale of Bent Street. Elizabeth Nelson had sought a declaration as to the extent of her beneficial interests in the proceeds. Declarations were made that: (i) Elizabeth Nelson was entitled to one-half of the net proceeds of sale, that one-half share at the time of completion being $195,500; and (ii) she also was entitled to the same proportion of the interest earned by the fund as that amount bore to $232,509.83. An appeal to the Court of Appeal was dismissed [1] .
1. Nelson v Nelson (1994) 33 NSWLR 740.
The Master also considered the state of accounting between Elizabeth Nelson and Mrs Nelson in respect of other family financial dealings. As we have indicated, Elizabeth made payments into the joint account from which the loan from the Bank for Kidman Lane was serviced. However, on the other side of the accounting, Elizabeth had drawn cheques on her father's account. The result was a balance of $408.93 in favour of Mrs Nelson and the Master ordered Elizabeth to pay that sum to her mother. This order has not been challenged.
By her cross-claim, Elizabeth Nelson had contended that the provision by her parents of funds to pay for the purchase of Bent Street was an advancement for herself and her brother and succeeded in obtaining relief. Before this Court, Mrs Nelson again presses the submission, which failed in both Courts below, that she should have a declaration that the proceeds of sale are held in trust for her, on the footing that there was a resulting trust in her favour of the Bent Street property. The resulting trust is said to arise by reason of the provision of all of the purchase moneys by Mrs Nelson on her own behalf or as executrix and sole beneficiary of the estate of her husband.
The Master held that the relationship between a mother, as well as a father, and adult children may give rise to a presumption of advancement. Evidence was led to rebut the presumption. The Master found that Mrs Nelson had no intention to confer any beneficial interest in Bent Street or in the proceeds of sale thereof on her children, and that Bent Street was purchased in the names of Peter and Elizabeth to preserve Mrs Nelson's entitlement as an "eligible person" under the Act, an entitlement which would have been lost or prejudiced if her name was on the legal title. He also held that Mrs Nelson and Peter Nelson had knowledge of the illegality involved in the application for subsidy in respect of the Kidman Lane property, and intentionally went ahead with that application.
The Master found that the purpose at the time of the acquisition of the Bent Street property of preserving Mrs Nelson's entitlement by keeping her name off the registered title "of itself is not illegal". However, he went on to conclude that, when the application for subsidy was made in respect of the Kidman Lane property and the subsidy was obtained, that purpose was achieved by concealment of the then subsisting beneficial ownership by Mrs Nelson of the Bent Street property. The making of the false statement was said to be sufficient for the purpose of showing illegality.
On this basis, the Master held that Mrs Nelson's case to rebut the presumption of advancement failed. It should be noted that the case failed not only as to the amount of the subsidy in respect of the loan for the Kidman Lane property but as to the whole of the fund representing the proceeds of sale of the Bent Street property. The result was the declaratory relief in favour of Elizabeth Nelson. She had been found to have had no part in applying for the subsidy.
In dismissing the appeal by Mrs Nelson, the Court of Appeal held that: (i) the presumption of advancement should be regarded as applying to the relationship of mother and adult child; (ii) if a party who has put property in the name of another for an illegal purpose seeks to rebut the presumption of advancement, once the illegal purpose has been carried out it is no answer that the intention not to benefit the donee could have been proved without reference to the illegal purpose; (iii) the obtaining of the subsidy on the purchase of the Kidman Lane property involved the carrying out by Mrs Nelson of an illegal purpose; and (iv) that illegal purpose could not be relied upon to rebut the presumption of advancement in respect of the Bent Street property.
The issues
The basic questions which arise on the appeal to this Court may now be stated. The fund in contention represents the proceeds of sale of real property, the registered title to which was in the names of Mrs Nelson's children, Peter and Elizabeth Nelson, as joint tenants. The issue then is whether equity requires the second respondents, who hold the fund, to account for a portion of it to Elizabeth Nelson on the footing that it derives from and represents a beneficial interest she had in the Bent Street property, even though the purchase moneys for that property had been provided by her mother.
There is an interplay of three doctrines or principles. They are that concerned with the imputation or presumption of a resulting trust in favour of Mrs Nelson as the source of the purchase moneys, the countervailing presumption of advancement which would leave the equitable title to Bent Street at home with the legal title, and the effect of what was classified as the illegal purpose in the later concealment by Mrs Nelson, to obtain the subsidy for the Kidman Lane property, of what she was found always to have intended to be her beneficial ownership of the Bent Street property. Do the circumstances of the case, as disclosed by the findings on the evidence, supply sufficient reason for concluding that the equitable title to Bent Street was not at home with the legal title when Bent Street was sold?
Where an express trust fails as a whole, or as to part only, the question arises whether a resulting trust as to the balance is to be enforced in favour of the settlor. This case is not concerned with the law of resulting trusts as it operates in that situation.
In the Court of Appeal [2] , it was said that "what matters" was "the actual intention" in having the Bent Street property transferred into the names of Peter and Elizabeth and that this involved the question of why it was not merely registered in the name of Mrs Nelson. The purpose was described as that of "obtaining a subsidised loan by concealment". The Court of Appeal held this to have been carried out by concealing the interest of Mrs Nelson in the Bent Street property when the Kidman Lane property was purchased. In this analysis, there appears to have been no consideration of the question whether public policy, deriving ultimately from the provisions of the Act, before and after the Amendment Act, required that transactions other than those provided for in the statute itself, should be impugned by denying the operation of the resulting trust that would otherwise arise in favour of Mrs Nelson as provider of the purchase moneys for the Bent Street property.
1. Nelson v Nelson (1994) 33 NSWLR 740 at 750.
We turn first to consider the role of the presumptions and then what was identified below as the "illegal purpose".
The presumptions
The presumptions operate to place the burden of proof, if there be a paucity of evidence bearing upon such a relevant matter as the intention of the party who provided the funds for the purchase. The first presumption is that where a person in the position of Mrs Nelson paid the purchase price for the Bent Street property and caused it to be transferred to other persons, they hold the property upon trust for the person who provided the purchase money. The other presumption, that of advancement, is perhaps not strictly a presumption at all. Rather, the position is that there are certain relationships from which equity infers that any benefit provided for one party at the cost of the other has been provided by way of "advancement". The consequence is that the equitable estate follows the legal estate and is at home with the legal title; there is an absence of any reason for assuming that a trust arose [3] .
1. Calverley v Green (1984) 155 CLR 242 at 255-256, 265, 267.
The operation of the presumption of advancement may be rebutted by evidence of the actual intention, at the time of the purchase, of the parent or other person who provided the purchase money [4] . Evidence also may be given to support the presumption of advancement [5] .
1. Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 364-365.
2. Davies v National Trustees Executors & Agency Co of Australasia Ltd [1912] VLR 397 at 401, per Cussen J, appd in Stewart Dawson & Co (Vict) Pty Ltd v Federal Commissioner of Taxation (1933) 48 CLR 683 at 690-691; Donaldson v Freeson (1934) 51 CLR 598 at 614-615.
Where the presumption of advancement is rebutted, the trust which then is enforced is a resulting trust, not an express trust. The trust thus is outside the operation of the requirement for writing in s 7 of the Statute of Frauds 1677 Eng and its modern Australian equivalents [6] . Accordingly, oral evidence is admissible to rebut the presumption of gift and thus to affirm the operation of the presumption of resulting trust. Professor Scott deals with the matter as follows [7] :
This reasoning is somewhat artificial; but trusts arising where the evidence shows an intention to create a trust when land is purchased in the name of a relative were considered to be resulting trusts before the enactment of the Statute of Frauds [8] , and that statute expressly excepts resulting trusts from its operation.
1. Conveyancing and Law of Property Act 1884 Tas, s 60; Conveyancing Act 1919 NSW, s 23C; Law of Property Act 1936 SA, s 29; Property Law Act 1958 Vict, s 53; Property Law Act 1969 WA, s 34; Property Law Act 1974 Q, s 11.
2. Scott and Fratcher, Law of Trusts, 4th ed (1989), par 443.
3. There is citation of the following authorities: Binion v Stone (1663) 2 Freeman 169 [ 22 ER 1135], Nels 68 [ 21 ER 791]; Scroope v Scroope (1663) 2 Freeman 171 [ 22 ER 1138], 1 Ch Cas 27 [22 ER 677]; Grey v Grey (1677) 2 Swanst 594 [36 ER 742], 1 Ch Cas 296 [22 ER 809]; Elliot v Elliot (1677) 2 Ch Cas 231 [22 ER 922]; Woodman v Morrel (1678) 2 Freeman 32 [ 22 ER 1040]; Clark v Danvers (1679) 1 Ch Cas 310 [22 ER 815].
The present case was determined in the Supreme Court on the footing that the presumption of advancement operated in respect of dealings by mothers in favour of children and was not limited to those by fathers in favour of children. In the last century, the view had been taken in England that, when a mother takes title in the name of a child, a resulting trust rather than a gift is to be presumed. In Bennet v Bennet [9] , Sir George Jessel MR pointed to the general law obligation of a father and one in loco parentis to provide for the child and to the absence of such a recognition in equity of a duty imposed upon a mother. Caution in accepting Bennet v Bennet was expressed by Isaacs J in Scott v Pauly [10] . In Brown v Brown [11] , Gleeson CJ (with whom Cripps JA agreed) was dealing in 1993 with a transaction that occurred in 1958 and his Honour preferred not to decide the case upon the basis that, Mrs Brown being a mother rather than a father, the presumption of advancement had not applied.
1. (1879) 10 Ch D 474 at 477-480.
2. (1917) 24 CLR 274 at 281-283.
3. (1993) 31 NSWLR 582 at 591.
The appellants submit that there is no compelling reason why the presumption of advancement should be extended to dealings by mothers in favour of children. They contend that, if anything, the presumption in the case of a father and child should be given a more restricted operation.
These presumptions are interrelated and entrenched "land-marks" in the law of property [12] . Many disputes have been resolved and transactions effected on that foundation. We prefer to approach this appeal on the footing that the existence of a presumption of advancement of her children by Mrs Nelson was properly accepted in the Supreme Court.
1. Calverley v Green (1984) 155 CLR 242 at 266, quoting Dyer v Dyer (1788) 2 Cox 92 at 99 [30 ER 42 at 43].
In a case such as the present, the presumption of advancement may be of practical importance only if the evidence, including that of the actual relationship between the parties, does not enable the court to make a positive finding of intention [13] . Here, such a finding of intention was made, namely that Mrs Nelson had no intention to confer on her children any beneficial interest in the Bent Street property or in the proceeds of sale. Yet Mrs Nelson failed to make good her claim to the sale proceeds held by the second respondents.
1. cf Calverley v Green (1984) 155 CLR 242 at 270-271.
It is here that it becomes crucial to consider the impact of what was classified as the "illegal purpose".
Illegality — the submissions
The claim of illegality in the present case presents two distinctive features. First, the rights which Mrs Nelson asserts and the remedies she seeks are equitable. Secondly, the source of the alleged illegal purpose is in statute.
This is not a case where, independently of statute, the creation or performance of a trust or the observance of any condition imposed by the terms of the trust is said to offend a head of public policy. Nor is it a case of a contract to create an express trust where it is contended that the constitution of the trust by the conveyance of the legal title from the settlor to the trustee would be illegal.
Rather, the question is whether a joint owner of the legal title to land is able to resist, by reason of illegality, the assertion of a beneficial title arising as a resulting trust.
The accounting by the second respondents to the first appellant, Mrs Nelson, of the proceeds of sale as Mrs Nelson's beneficial entitlement on its face does not involve the doing of any illegal act. Nevertheless, a source of "illegality" may be public policy as to acts associated with or in furtherance of illegal purposes. In turn, this may involve consideration of the purposes a statute seeks to serve. Accordingly, there is a large and miscellaneous class of trusts which are held invalid on the ground that their enforcement would be against public policy, even though enforcement would not involve any criminal act by the trustee; likewise, provisions contained in an express trust may be illegal on the same grounds even though the trust itself does not fail for illegality.
The first respondent, the joint holder of the legal title, submits that (i) a court of equity will never enforce an equitable proprietary interest at the suit of a party to an illegality, rather, it will let the loss lie where it falls; (ii) further, the claimant must fail if the making good of the claimant's case necessarily involves disclosure of the illegal purpose; (iii) in this case rebuttal of the presumption of advancement requires disclosure of an unlawful purpose, thus precluding the setting up by Mrs Nelson of the resulting trust in her favour; and (iv) the only relevant recognised exception to the operation of these principles applies where the claimant has not carried the illegal purpose into effect, whereas in the present case the purpose was carried into effect with the purchase of the Kidman Lane property. As we will endeavour to explain, these submissions should not be accepted.
Counsel for the appellants contends that the Act, both before and after the 1988 amendments, did not expressly or impliedly prohibit the transaction the subject of the present action, namely the purchase by Mrs Nelson of the Bent Street property in the names of her children. Still less did it expressly or impliedly prohibit the enforcement by Mrs Nelson of what she maintains is the trust in her favour over the proceeds of sale. Therefore, it is submitted, the issue of illegality must depend upon a refusal to enforce the resulting trust on a ground of public policy derived from the statute. The appellants deny there is such a policy which operates in this way.
Illegality and statute
In a case where principles of illegality operate, the result is to impugn the plaintiff's rights, legal and equitable. It is true that, on occasion, the courts, in refusing to order reconveyance to the plaintiff of property transferred to further a purpose forbidden by statute, have said that the plaintiff lacks clean hands. An example is Groves v Groves [14] where land had been so conveyed to give a property qualification to the transferee; but Alexander CB also said that the illegal object of the conveyance required refusal to interfere "consistently with law and equity". In some cases the doctrine as to parties in pari delicto has been treated as the common law "counterpart" to the equity maxim, so that the two concepts are interchangeable [15] .
1. (1829) 3 Y & J 163 at 174 [148 ER 1136 at 1141].
2. Byron v Clay (1989) 867 F 2d 1049 at 1052 (7th Cir); Dillon v Dean (1990) 551 NYS 2d 547 at 549; cf Tinsley v Milligan [1994] 1 AC 340 at 356-357.
However, in cases of illegality, it is not merely a question, as is involved with the operation of the maxim that he who comes to equity must come with clean hands, of denying the plaintiff equitable remedies, for example, specific performance of a contract, whilst leaving the plaintiff to the remedy at law, for example, damages for breach of contract. The distinction between the operation of the equity maxim, as a discretionary defence to a claim to equitable relief, and the notion of illegality has been drawn by Professor Pettit. Writing as contributor to the title "Equity" in Halsbury and with citation of much authority, he says [16] :
Where the transaction is itself unlawful it is not necessary to have recourse to this principle. In equity, just as at law, no suit lies in general in respect of an illegal transaction, but this is on the ground of its illegality, not by reason of the plaintiff's demerits.
In the United States, the same point is expressed by Professor Dobbs in his work Law of Remedies [17] :
The first step in analysis of a putative unclean hands defense is to determine whether the defense really appeals to (or seeks to generate) a rule of law grounded in legal policy and applicable to a describable class of cases. For example, the defense might really be the defense that the plaintiff is attempting to enforce an illegal contract. If this is the case, the term "unclean hands" should be dropped altogether and the analysis should proceed on the basis of the rule of law in issue.
In Loughran v Loughran [18] , Brandeis J distinguished between illegality, "a substantive defence", and the equitable "doctrine of clean hands" [19] .
1. Halsbury's Laws of England, 4th ed, vol 16 (Reissue), par 751. Professor Pettit also makes the point in his article, "He who comes into Equity must come with Clean Hands" The Conveyancer and Property Lawyer, vol 54 (1990) 416, at p 422.
2. 2nd ed (1993), vol 1, §2.4(2).
3. (1934) 292 US 216 at 228-229.
4. Other United States authorities which draw the distinction between illegality and unclean hands appear in In re Torrez (1987) 827 F 2d 1299 at 1301, fn 4 (9th Cir).
It is well settled that, in a case where the contention is that an express trust fails for illegality because performance of the trust or of a provision thereof involves commission of an act rendered illegal by statute, the extent of the illegality and its consequences turn upon construction of the statute.
In Orr v Ford [20] , ss 91 and 296 of the Land Act 1962 Q were interpreted as rendering certain selections held by a trustee liable to forfeiture by the Minister but as not touching the lawfulness or enforceability of the equitable interest of the beneficiary of a trust of the selection unless and until there was a forfeiture. That was not to deny that the policy of the statute was directed against the holding of selections on trust.
1. (1989) 167 CLR 316.
Difficult questions may arise in relating the alleged illegality in the constitution or performance of the trust to what, upon its true construction, is the operation of the statute in question. Authorities in contract law such as Vita Food Products Inc v Unus Shipping Co Ltd [21] and Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd [22] suggest the drawing of a distinction between (i) an express statutory provision against the making of a contract or creation or implication of a trust by fastening upon some act which is essential to its formation, whether or not the prohibition be absolute or subject to some qualification such as the issue of a licence; (ii) an express statutory prohibition, not of the formation of a contract or creation or implication of a trust, but of the doing of a particular act; an agreement that the act be done is treated as impliedly prohibited by the statute and illegal; and (iii) contracts and trusts not directly contrary to the provisions of the statute by reason of any express or implied prohibition in the statute but which are "associated with or in furtherance of illegal purposes". The phrase is that of Jacobs J in Yango [23] .
1. [1939] AC 277 at 293.
2. (1978) 139 CLR 410 at 429-430, 432-433. See also McCarthy Bros Pty Ltd v Dairy Farmers' Co-operative Milk Co Ltd (1945) 45 SR (NSW) 266; J C Scott Constructions v Mermaid Waters Tavern Pty Ltd [1984] 2 Qd R 413; Buckland v Massey [1985] 1 Qd R 502 at 507; Hurst v Vestcorp Ltd (1988) 12 NSWLR 394 at 445; Farrow Mortgage Services Pty Ltd (In liq) v Edgar (1993) 114 ALR 1.
3. (1978) 139 CLR 410 at 432; see also at 430, per Mason J.
Examples in the third category include cases where the mode of performance adopted by the party carrying out the contract contravenes statute, although the contract was capable of performance without such contravention [24] .
1. St John Shipping Corporation v Joseph Rank Ltd [1957] 1 QB 267 at 282; Ashmore, Benson, Pease & Co Ltd v Dawson Ltd [1973] 1 WLR 828 at 832-833; [1973] 2 All ER 856 at 859-860; cf North v Marra Developments Ltd (1981) 148 CLR 42 at 59-60.
In this last class of case, the courts act not in response to a direct legislative prohibition but, as it is said, from "the policy of the law". The finding of such policy involves consideration of the scope and purpose of the particular statute. The formulation of the appropriate public policy in this class of case may more readily accommodate equitable doctrines and remedies and restitutionary money claims than is possible where the making of the contract offends an express or implied statutory prohibition [25] .
1. Farrow Mortgage Services (1993) 114 ALR 1 at 13.
In earlier times, effect was given to what the courts perceived to be "the equity of the statute" [26] . This doctrine had the support of the common law judges led by Sir Edward Coke, who looked back to a time before the rise of the doctrine of parliamentary sovereignty and the subjection to it of the common law [27] . The notion of the equity of the statute operated in two ways. First, the policy of the statute, as so perceived, might operate upon additional facts, matters and circumstances beyond the apparent reach of the terms of the statute. In addition, cases within the terms of the statute but not within its mischief might be placed outside its operation. Bentham gave the following, ironical description of this development [28] :
The best-imagined provision might perhaps have done more mischief than good unless moulded into form by the prudence of the judge. On the one hand, the obligative part was not wide enough to embrace the mischief: on the other hand, the qualificative parts were not wide enough to yield shelter to innocence or to afford the necessary range to power.
1. Comyns, Digest of the Laws of England, 4th ed (1800), vol 5, Parliament, §R 13, R 15; Bacon, New Abridgement of the Law, 7th ed (1832), in Gwillim and Dodd (eds), vol 7, Statute, pp 458-459; Wilberforce, Statute Law (1881) pp 238-243; Thorne, The Equity of a Statute and Heydon's Case, Illinois Law Review, vol 31 (1936) 202.
2. Postema, Bentham and the Common Law Tradition (1986), p 17.
3. Bentham, Of Laws in General, Hart (ed) (1970), Ch 19, p 239 .
Further, it was said that, although courts of equity did not differ from those of law in the exposition of statutes, they did so in the remedies given and the manner of applying them [29] . Thus, as was pointed out in Fonblanque [30] , the Chancellors devised the principle (still familiar [31] ) that equity will not allow a statute made for the prevention of fraud to be converted into the instrument of fraud, and also developed the doctrine of part performance. Again, Chancery would order delivery up of a security given for a usurious and thus illegal consideration only upon terms that the plaintiff pay the defendant what was bona fide due to the defendant. It will be necessary to refer again to the usury cases later in these reasons.
1. Bosanquett v Dashwood (1734) Cas t Talbot 38 at 39-40 [ 25 ER 648 at 649].
2. A Treatise of Equity, 5th ed (1820), vol 1, pp 25-26.
3. See, eg, Cadd v Cadd (1909) 9 CLR 171 at 187; Organ v Sandwell [1921] VLR 622 at 630; Wratten v Hunter [1978] 2 NSWLR 367 at 369-370.
The doctrine of the equity of the statute has analogies in civil law systems. It is said that the search for the statute's equity "has become indispensable for civil code readers" [32] . However, the doctrine of the equity of the statute attracted the ire of Bentham. He described it as a further branch of customary law which struck its roots into the substance of the statute law and infected statute law "with its own characteristic obscurity, uncertainty and confusion" [33] . The doctrine fell deeply into disfavour in England and the United States, with the rise of legal positivism in the last century [34] . Nevertheless, the doctrines developed in equity survived. In the legal system as a whole there remained, and indeed entered the statute law itself, particular applications, developed by the eighteenth century judges, of the broader concept of the equity of the statute. One such instance in the modern law of bankruptcy is the avoidance of preferences. This was first devised by Lord Mansfield, as it was said, "without any positive enactment" [35] and as a protection or furtherance of the policy disclosed by the existing statute law.
1. Herman, The Equity of the Statute and Ratio Scripta: Legislative Interpretation among Legislative Agnostics and True Believers, Tulane Law Review, vol 69 (1994) 535, at p 538 .
2. Bentham, Of Laws in General, Hart (ed) (1970), Ch 19, p 240 . Other examples from Bentham's writings are collected in Sedgwick, A Treatise on the Rules which govern the Interpretation and Construction of Statutory and Constitutional Law, 2nd ed (1874), p 251.
3. Sedgwick, A Treatise on the Rules which govern the Interpretation and Construction of Statutory and Constitutional Law, 2nd ed (1874), pp 263-265; Hardcastle, A Treatise on the Construction and Effect of Statute Law, 3rd ed (1901), pp 113-115.
4. Humphery v McMullen (1868) 7 SCR (NSW) 84 at 89-90; Muntz v Smail (1909) 8 CLR 262 at 292-296; Weisberg, Commercial Morality, the Merchant Character, and the History of the Voidable Preference, Stanford Law Review, vol 39 (1986) 3, at pp 48-55 .
The third class of illegality, represented by many modern authorities, may be seen as a survival of an earlier school of statutory interpretation. Further, various decisions of Lord Mansfield and Lord Eldon [36] , to which reference is still made in contemporary authorities and to which it will be necessary to refer in these reasons, must be understood with this background in mind.
1. Holman v Johnson (1775) 1 Cowp 341 [98 ER 1120]; Muckleston v Brown (1801) 6 Ves Jun 52 [31 ER 934]; Curtis v Perry (1802) 6 Ves Jun 739 [31 ER 1285]; Ex parte Yallop (1808) 15 Ves Jun 60 [33 ER 677]; Ex parte Houghton (1810) 17 Ves Jun 251 [34 ER 97].
A fundamental principle of the common law has been said to be that a court will not lend its aid to a plaintiff who founds a course of action upon an immoral or illegal act, particularly where both parties are equally in fault. These propositions are generally treated as following from the judgment of Lord Mansfield in Holman v Johnson [37] . One issue which underlies various submissions in the present case is the extent to which those propositions, with the qualifications to them which have developed in the law of contract, apply to a plaintiff who comes to equity seeking to enforce a resulting trust.
1. (1775) 1 Cowp 341 [98 ER 1120].
It should be noted that Holman v Johnson was a case in which the making and performance of the contract in question appears not to have been directly contrary to the provisions of statute. The allegation was that the contract was associated with or in furtherance of illegal purposes in the sense of the phrase later used by Jacobs J in Yango. The case came before the King's Bench in banc on a rule to show cause why a new trial should not be granted. The rule was discharged. The buyer was sued for the price of tea under a contract made in France for sale and delivery in that country. The buyer's defence was that the tea was to be smuggled into England without payment of duty and that the seller had been aware of this. It was held that there had been no contravention of the relevant English revenue laws. The seller had no concern in the smuggling scheme and the circumstance that the seller had knowledge of the illegal purpose of the defendant in buying the tea from him did not render the contract sufficiently associated with or in furtherance of that illegal purpose [38] . What has largely gone unnoticed in the later decisions is that Lord Mansfield held that the facts of Holman v Johnson did not fall within the principles as to illegality which he propounded, so that recovery in fact was allowed to the seller [39] .
1. cf Neal v Ayers (1940) 63 CLR 524 at 528-529, 532.
2. As Professor Palmer points out in The Law of Restitution (1978), vol 2, par 8.4.
The importance in a case such as this of ascertaining what two Canadian scholars have called "the underlying purpose" of relevant legislation [40] is borne out by the course of authority dealing with both express and implied or resulting trusts. Brief mention should be made of express trusts.
1. Maddaugh and McCamus, The Law of Restitution (1990), p 345.
Upon its true construction a statute itself may prohibit the creation of an express trust. It may do so in direct terms or by forbidding the taking of a step necessary for the formation of such a trust, such as a transfer of the legal title. The prohibition may be absolute [41] , or subject to a condition or approval. An example of the latter [42] is provided by s 19 of the Aboriginal Land Rights (Northern Territory) Act 1976 Cth, which imposes special requirements upon dealings by a Land Trust with any estate or interest in land vested in it.
1. eg, Veterans' Entitlements Act 1986 Cth, s 125; Superannuation Act 1990 Cth, s 41; Social Security Act 1991 Cth, ss 66, 128, 170, 220, 280, 339, 387, 571, 654, 724, 757, 806, 870, 976, 1052, 1061W.
2. See also reg 41 of the former Banking (Foreign Exchange) Regulations made under the Banking Act 1945 Cth and continued under the Banking Act 1959 Cth. Regulation 41 was considered in Sykes v Stratton [1972] 1 NSWLR 145 at 157, 160.
Another example, closer to the present litigation whilst not involved in it, was provided by s 35 of the Act. This was included in Pt VI (ss 28-38B). Part VI, together with Pt III (ss 16A-18A), Pt IV (ss 19-19B) and Pt V (ss 20-27B), were repealed, with effect from 19 December 1988, by s 10 of the Amendment Act. These provisions thus were in force at the time of the acquisition of the Bent Street property in 1987. Section 25 forbade the making of advances by the Defence Service Homes Corporation (the Corporation) except upon the security of a mortgage to the Corporation of the interest in the property of the borrower. Section 35(1) provided that, so long as any land was subject to a mortgage in accordance with the statute, a transfer of the land "or of any estate or interest therein" would not "have any force or effect" unless made with the consent in writing of the Corporation.
It was held that the creation of an express trust was a transfer within the meaning of the provision [43] . However, in a series of decisions it also was held that, if the property in question had been sold and the rights of the Corporation fully satisfied, there was nothing in the statute which prevented the trust, the operation of which had been temporarily denied by it, attaching to the proceeds of sale [44] , and that upon discharge of the mortgage held by the Corporation a trust previously denied force and effect might bind the land itself [45] . These decisions were upon the old s 35, contravention of which was not alleged in this case. However, they also are consistent with the broader proposition that, as the statute then stood, the interest which it sought to protect was that of the Corporation in the moneys advanced. It will be necessary to return to that proposition later in these reasons when consideration has been given to other provisions of the Act.
1. Maurice v Lyons (1969) 89 WN () (NSW) 385 at 393-394; [1969] 1 NSWR 307 at 315.
2. Horton v Public Trustee [1977] 1 NSWLR 182.
3. Olsen v Olsen [1977] 1 NSWLR 189.
Contract and trust
Counsel for the first respondent, Elizabeth Nelson, contend that what they identified as the principles of property law applicable in the present case are not displaced or qualified by principles of illegality discerned from the underlying purpose or policy of the statute in question. Rather, counsel submits, the position as regards trusts was simpler than that in contract. Equity would never enforce an equitable proprietary interest at the suit of a party to an illegality, and Mrs Nelson was such a party. Further, the unlawful purpose had been carried into effect and Mrs Nelson could not displace the presumption of advancement in favour of her daughter unless that illegal purpose was disclosed. The result, on the submissions, would be that equity would leave the loss to lie where it fell, upon Mrs Nelson.
These submissions seek to draw a false line between the legal institutions of contract and trust. Lord Wilberforce observed that there was surely no difficulty in recognising the co-existence in the one transaction of legal and equitable rights and remedies [46] . In Gosper v Sawyer [47] , Mason and Deane JJ said:
The origins and nature of contract and trust are, of course, quite different. There is however no dichotomy between the two. The contractual relationship provides one of the most common bases for the establishment or implication and for the definition of a trust. Conversely, the trust, particularly the resulting and constructive trust, represents one of the most important means of protecting parties in a contractual relationship and of vindicating contractual rights.
Further, many express trusts, particularly those created or manifested in writing, contain conditions, precedent or subsequent, to which the same principles of public policy apply whether perceived through the lens of contract or trust. Thus, in Permanent Trustee Co Ltd v Dougall [48] , Harvey CJ in Eq held that a condition in a will aimed at preventing any beneficiary becoming a lessee or licensee of a hotel was invalid on the ground of public policy, being a condition absolutely in restraint of trade [49] .
1. Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 at 581.
2. (1985) 160 CLR 548 at 568-569.
3. (1931) 34 SR (NSW) 83 at 85.
4. See also Church Property Trustees, Diocese of Newcastle v Ebbeck (1960) 104 CLR 394.
However, that is not to say that the case is necessarily treated in the same fashion where, on the one hand, it is a question of recovery of moneys paid under, or damages for breach of, an illegal contract and, on the other, a particular equitable remedy is sought to give effect to an allegedly illegal trust.
The first respondent's submissions rely upon the apparently pervasive effect of the dictum of Lord Mansfield in Holman v Johnson [50] that: "[n]o Court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act." That dictum, as well as the proposition "let the estate lie where it falls", has been applied not only, for example, to actions in tort for damages for conversion as in Bowmakers Ltd v Barnet Instruments Ltd [51] , and for moneys had and received [52] , but also in suits to enforce resulting trusts, as in Palaniappa Chettiar v Arunasalam Chettiar [53] .
1. (1775) 1 Cowp 341 at 343 [98 ER 1120 at 1121].
2. [1945] KB 65 at 70; see also Thomas Brown & Sons Ltd v Fazal Deen (1962) 108 CLR 391 at 411.
3. Kiriri Cotton Co Ltd v Dewani [1960] AC 192.
4. [1962] AC 294 at 303. See also Singh v Ali [1960] AC 167 at 177; Blackburn v YV Properties Pty Ltd [1980] VR 290 at 291, 299-300; Tinsley v Milligan [1994] 1 AC 340 at 366, 367, 374-375; cf Payne v McDonald (1908) 6 CLR 208 at 211.
We turn to consider these propositions as the first respondent would have them apply to this appeal, commencing with that dealing with reliance upon illegality.
There are several difficulties with the acceptance of such a principle as determinative of a case such as the present. First, it has been held in England that the outcome turns upon whether what immediately is in issue is the rebuttal of a resulting trust by demonstrating that what was intended was a gift, or the rebuttal of a presumption of advancement by demonstrating that a gift was not intended. The distinction may be considered by an example where Blackacre is purchased with the money of A but transferred by the vendor on completion to B, who is the child of A. Authority in England, provided by Tinsley v Milligan [54] , is that A cannot rely on evidence of his own illegality to rebut the presumption that a gift in favour of B was intended. On the other hand, if A purchases Blackacre in the name of B, the relationship between them being such that there is no presumption of advancement, A may enforce the resulting trust in A's favour because there is no necessity to prove the reason for the conveyance into the name of B and thus no need to rely on A's illegality [55] .
1. [1994] 1 AC 340 at 366, 367, 374-375.
2. Tinsley v Milligan [1994] 1 AC 340 at 367, 368-369, 375-376. The distinction is discussed in various commentaries upon Tinsley v Milligan, including Goo, "Let the Estate Lie Where It Falls", Northern Ireland Legal Quarterly, vol 45 (1994) 378; Buckley, Social Security Fraud as Illegality, Law Quarterly Review, vol 110 (1994) 3; Cohen, The Quiet Revolution in the Enforcement of Illegal Contracts [1994] Lloyds Maritime and Commercial Law Quarterly 163; Stowe, The Unruly Horse has Bolted: Tinsley v Milligan, Modern Law Review, vol 57 (1994) 441; Berg, Illegality and Equitable Interests, [1993] Journal of Business Law 513. See also Enonchong, llegality: The Fading Flame of Public Policy, Oxford Journal of Legal Studies, vol 14 (1994) 295, at pp 299 .
These results depend on the form in which a particular legal proceeding is cast and, unusually for equity, are achieved at the expense of substance. Further, they may operate indiscriminately and thus lead to harsh consequences as between particular parties. It is true, as Lord Mansfield pointed out in Holman v Johnson [56] that "if the plaintiff and defendant were to change sides, and the defendant was to bring his action against the plaintiff, the latter would then have the advantage of it". But that consideration only heightens the lack of attraction of such a proposition in the court of equity. Furthermore, it in turn encourages a quest for mitigation by the drawing of further fine distinctions and exceptions whereby recovery will be permitted.
1. (1775) 1 Cowp 341 at 343 [98 ER 1120 at 1121].
A second approach to the matter is to let the loss lie where it falls, the policy being one to encourage observance of the law by threat of a sharp and broad sword. This view commended itself to the minority in Tinsley v Milligan. It was said, again with reference to Lord Mansfield in Holman v Johnson [57] , that:
[i]t is important to observe that, as Lord Mansfield made clear, the principle is not a principle of justice; it is a principle of policy, whose application is indiscriminate and so can lead to unfair consequences as between the parties to litigation. Moreover the principle allows no room for the exercise of any discretion by the court in favour of one party or the other.
Reliance also was placed by the minority [58] upon what was seen as the authoritative source of principle in equity provided by the decision of Lord Eldon LC in Muckleston v Brown [59] . It will be necessary further to consider this case, together with Cottington v Fletcher [60] .
1. [1994] 1 AC 340 at 355.
2. Holman v Johnson [1994] 1 AC 340 at 356.
3. (1801) 6 Ves Jun 52 [31 ER 934].
4. (1740) 2 Atk 155 [26 ER 498].
The outcome in Tinsley v Milligan indicates that adoption of one approach rather than the other may lead to opposite results. As we have indicated, on this appeal the first respondent relies upon both as operating in her favour. She submits (and the Court of Appeal so decided) that Mrs Nelson can only rebut the presumption of advancement by revealing her purpose of obtaining a subsidised loan by concealment and, further, that the loss should be left to fall upon Mrs Nelson.
In our view, neither of these approaches is to be adopted in the present case. Two factors are of paramount importance. First, as the appellants submit and we would accept, the question of illegality is bound up with the view taken of the underlying policy of the Act. To quote a United States scholar, "if illegality consists in the violation of a statute, courts will give or refuse relief depending upon the fundamental purpose of the statute" [61] . Secondly, what is sought are equitable remedies in aid of an alleged trust and equity is equipped to attain a result which eschews harsh extremes.
1. Clark, Equity, An Analysis and Discussion of Modern Equity Problems (1928 reprint), par 401.
The range and flexibility of equitable remedies assist in achieving an appropriate result in the particular case; this means, in the words of one commentator, "[t]he old common law idea of all or nothing will no longer have to apply" [62] . Accordingly, unlike the common law, equity may impose terms upon a party seeking administration of equitable remedies. Further, equity has not subscribed to any absolute proposition that the consequence of illegality, particularly where what is involved is contravention of public policy manifested by statute, is that neither side may obtain any relief, so that the matter lies where it falls. Rather, in various instances equity has taken the view that it may intervene, albeit with the attachment of conditions, lest there be "no redress at all against the fraud nor any body to ask it" [63] .
1. Wade, Restitution of Benefits Acquired Through Illegal Transactions, University of Pennsylvania Law Review, vol 95 (1945) 261, at p 304 .
2. Turton v Benson (1718) 1 P Wms 496 at 498 [24 ER 488 at 489].
Let the loss lie where it falls?
Cottington v Fletcher and Muckleston v Brown require attention, given the reliance placed upon them for a general proposition that, in a case of illegality, equity lets the loss lie where it falls. In particular, remarks of Lord Eldon in Muckleston have been treated as controlling authority as to the attitude of equity to illegality in trust law [64] .
1. Tinsley v Milligan [1994] 1 AC 340 at 356, 365, 372, following Gascoigne v Gascoigne [1918] 1 KB 223 at 226-227. See also Singh v Ali [1960] AC 167 at 177; Preston v Preston [1960] NZLR 385 at 404; Blackburn v YV Properties Pty Ltd [1980] VR 290 at 296; Munro v Morrison [1980] VR 83 at 88.
One must begin with the decision of Lord Hardwicke LC in Cottington v Fletcher . The litigation arose at a time when there was in force extensive legislation which imposed serious civil disabilities upon those professing the Roman Catholic faith. The plaintiff held an advowson as patron, that is to say, he held, as an incorporeal hereditament, the right to present a priest to a particular church and benefice in the Church of England [65] . However, the plaintiff was an adherent of the Roman Catholic faith. He assigned the advowson to the first defendant for the term of ninety-nine years intending that the defendant hold the advowson on trust for him so as to avoid the operation of legislation [66] which vested in the Universities of Oxford and Cambridge the presentation of livings otherwise in the gift of Roman Catholics. The plaintiff then conformed to the Church of England and brought a bill in Chancery seeking reassignment by the first defendant of the balance of the term. In the meantime, the first defendant, upon the recommendation of the plaintiff, had presented the second defendant to the living. To the bill, the first defendant pleaded the Statute of Frauds, saying that there was no written declaration of trust. The first defendant also admitted that he had held as express trustee, but only to make the appointment of the second defendant. The consequence was an admission that there was a resulting trust for the plaintiff after the performance of that presentment.
1. See Halsbury's Laws of England, 4th ed, vol 14, "Ecclesiastical Law", par 776.
2. Including the Presentation of Benefices Act 1605 Eng and the Presentation of Benefices Act 1713 UK.
Lord Hardwicke overruled the plea of the Statute of Frauds because it was coupled with these admissions. Furthermore, the trust which was so admitted was not rendered void by the legislation. This vested the interest in the two Universities only upon the purported presentment. The plaintiff had conformed to the Church of England before the presentment of the second defendant. The Lord Chancellor went on to say that the result might have been different if, rather than having made these admissions, the first defendant had demurred. For it would then simply have appeared from the bill itself that the plaintiff had assigned the advowson in trust for himself in order to avoid the operation of the legislation. The case thus turned upon the operation of statute upon express and resulting trusts.
In Muckleston v Brown Lord Eldon was dealing with an alleged testamentary secret trust of real estate for charitable purposes at a time when the Charitable Uses Act 1735 [67] assisted the interests of the heir at law by hampering, through a registration procedure, devises of land for charitable purposes. The heirs at law of the testator brought a bill contending that the testator had devised certain estates to the defendants on terms that they be held on an intended trust for charitable purposes. The defendants demurred to the discovery sought by the bill. Their objection was based upon the nature of the discovery sought, so that they were entitled to have the decision on the point in the first instance before the defendants were required to plead [68] . The Lord Chancellor held that the plaintiffs were claiming entitlement under a resulting trust upon failure of the trust of the land for charitable purposes, a trust "against the policy of the law", and that the trustees were required to answer. In particular, it was no answer for the trustees to resist discovery on the footing that it exposed them to penalty or forfeiture. Primacy had to be given to the proposition that that which was liable to be forfeited was a trust against a policy of the law manifested by the Mortmain legislation [69] .
1. 9 Geo II c 36, repealed by the Mortmain and Charitable Uses Act 1888 UK. The Mortmain Acts were never in force in Australia: Balfour v Public Trustee [1916] VLR 397 at 404-405.
2. Wigram, Points in the Law of Discovery, 2nd ed (1840), pp 20-32.
3. Muckleston v Brown (1801) 6 Ves Jun 52 at 69 [31 ER 934 at 942].
Cottington was cited. Lord Eldon appeared to prefer the view that, in Cottington , even though the trust was admitted, the better view would have been that equity should have declined to interfere. The plaintiff had stated in the bill that he had been guilty of "a fraud upon the law", namely "to evade, to disappoint, the provision of the Legislature, to which he is bound to submit". He had come to equity to be relieved against the consequences of his own act, and the defendants were implicated in that dishonesty. In such circumstances, equity should say, "Let the estate lie, where it falls". However, Lord Eldon went on, that was not the case before him.
These authorities, when so understood, appear as responses to certain statutory regimes which controlled the litigation. They do not provide authority for any general proposition as to the attitude taken by equity in any case where an issue of illegality in relation to a trust arises by reason of a contravention of the policy of a particular statute. As one might expect from such situations, equity eschews any broad generalisations in favour of concentrating upon the specific situation which has arisen, in the light of the relevant statutory provisions.
Equitable relief and illegality
In Smith v Jenkins [70] , Windeyer J declared that the maxim ex turpi causa non oritur actio should be confined to the law of contracts and conveyances. The decreasing significance of the maxim in the law of tort, especially negligence, may be traced in subsequent decisions of this Court [71] .
1. (1970) 119 CLR 397 at 411-414.
2. Jackson v Harrison (1978) 138 CLR 438; Gala v Preston (1991) 172 CLR 243; cf Thomas Brown & Sons Ltd v Fazal Deen (1962) 108 CLR 391 at 411. See also Hardy v Motor Insurers' Bureau [1964] 2 QB 745 at 767.
Story [72] stated that, in general, although not universally, equity followed the rule of law as to participants in a common crime where parties were concerned in illegal transactions. However, Story continued:
But in cases where the agreements or other transactions are repudiated on account of their being against public policy, the circumstance that the relief is asked by a party who is particeps criminis is not in equity material. The reason is that the public interest requires that relief should be given, and it is given to the public through the party.
1. Equity Jurisprudence, 13th ed (1908) Bigelow (ed), vol 1, Ch 7, par 298.
One such class of case, well recognised in this Court, [73] , was identified by Ashburner [74] as that of "repentance before anything done to carry out illegal purpose". Another concerns recovery of money or other property which, whilst tainted by illegality, was induced by fraud of one of the parties or was the product of a breach of fiduciary duty owed by one party to the other [75] .
1. The authorities in this Court are collected in Martin v Martin (1959) 110 CLR 297 at 305. The authorities include Payne v McDonald (1908) 6 CLR 208 and Perpetual Executors & Trustees Association of Australia Ltd v Wright (1917) 23 CLR 185, the reasoning in which was accepted by the English Court of Appeal in Tribe v Tribe [1996] Ch 107.
2. Ashburner's Principles of Equity, 2nd ed (1933), p 472.
3. George v Greater Adelaide Land Development Co Ltd (1929) 43 CLR 91 at 99-100; Abdurahman v Field (1987) 8 NSWLR 158 at 162-163; Weston v Beaufils [No 2] (1994) 50 FCR 476 at 499-500.
Ashburner also refers to a group of decisions identified as cases of public policy. He, like Pomeroy [76] , refers to marriage brokage contracts and to the decisions holding that money paid thereunder may be recovered. Pomeroy and Story [77] discuss cases of borrowers coming to equity seeking relief against contracts declared void by the old statutes against usury [78] , saying that equity would interfere but on terms that the plaintiff pay the defendant what was really and bona fide due, after deduction of the usurious interest; if the plaintiff did not make such an offer, the defendant might demur to the bill and it would be dismissed. Story goes on to say [79] :
The ground of this distinction is, that a Court of Equity is not positively bound to interfere in such cases by an active exertion of its powers; but it has a discretion on the subject, and may prescribe the terms of its interference, and he who seeks equity at its hands may well be required to do equity. And it is against conscience that the party should have full relief, and at the same time pocket the money loaned, which may have been granted at his own mere solicitation. For then a statute made to prevent fraud and oppression would be made the instrument of fraud.
1. Pomeroy's Equity Jurisprudence, 5th ed, vol 3, par 941. See also Wade, Restitution of Benefits Acquired Through Illegal Transactions, University of Pennsylvania Law Review, vol 95 (1945) 261, at pp 297-301; Maddaugh and McCamus, Law of Restitution (1990), pp 354-355, 366-374.
2. Equity Jurisprudence, 13th ed (1908) Bigelow (ed), vol 1, Ch 7, par 301.
3. Repealed in 1854 by 17 & 18 Vict c 90 (Usury Laws Repeal Act 1854 UK). This repealed 11 statutes in force in England commencing 37 Hen VIII c 9 (1545) and ending with 13 and 14 Vict c 56 (1850). Collectively known as the usury laws, these forbade the exaction of interest above statutory rates.
4. Equity Jurisprudence, 13th ed (1908) Bigelow (ed), vol 1, Ch 7, par 301.
Of course, the usury laws are gone, and marriage brokage cases little heard of. But much modern regulatory legislation concerns financial dealings, and, in any event, what is of present importance are the fundamental reasons for, not the occasions of, equitable intervention. In that regard, reference should be made to the decision of Jacobs J in Money v Money [No 2] [80] . His Honour referred [81] to the jurisdiction of equity to order delivery up of instruments, such as bonds, negotiable instruments or deeds, upon which a party otherwise could sue at law, where there was an illegal consideration and such consideration did not appear on the face of the document. Jacobs J went on to identify a further principle of equity that, even though a transaction might be tainted with illegality on the ground that its performance is contrary to public policy, equity will interfere on further grounds of public policy if the transaction ought not to be allowed to stand even where the plaintiff is particeps criminis. After referring to what is said on the subject by Story [82] , his Honour continued [83] :
It seems to me that it is only by such a principle that the cases in Equity on, for instance, marriage brokage contracts can be explained. In Hall v Potter [84] , the House of Lords granted relief even though the marriage had actually taken place. In Hermann v Charlesworth [85] , Collins MR referred [86] to the broader point of view of the Courts of Equity and dealt with many of the authorities. It would not seem that this approach is limited to marriage brokage contracts but it extends to other agreements such as those which involve a fraud upon the legislature: Vauxhall Bridge Co v Spencer (Earl) [87] .
1. [1966] 1 NSWR 348.
2. Money v Money [No 2] [1966] 1 NSWR 348 at 351. See also Snell's Equity, 29th ed (1990), Baker and Langan (eds), p 32.
3. Equity Jurisprudence, 13th ed (1908) Bigelow (ed), vol 1, Ch 7, par 301.
4. Money v Money [No 2] [1966] 1 NSWR 348 at 352.
5. (1695) Show Parl Cas 76 [ 1 ER 52].
6. [1905] 2 KB 123.
7. Hermann v Charlesworth [1905] 2 KB 123 at 133 et seq.
8. (1821) Jac 64 at 67 [ 37 ER 774 at 775].
But, in these cases, no doubt the operation of the particular statute will be critical. That is illustrated by the money lending legislation considered by the Privy Council in Kasumu v Baba-Egbe [88] and by this Court in Mayfair Trading Co Pty Ltd v Dreyer [89] . These are best understood as cases in which the legislation precluded the money lender from recovering any compensation for the loan which had been made by it, with the result that it was not open for such compensation to be recoverable by means of the imposition of a term upon equitable relief sought by the borrower [90] .
1. [1956] AC 539.
2. (1958) 101 CLR 428.
3. Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 226, 261-262, 269-270.
In Kasumu , the borrower brought an action seeking delivery under the mortgage documents and the Privy Council rejected the contention of the money lender that such relief, being equitable, should be granted only on terms that the principal amount of the mortgage be repaid. The money lender had failed to comply with the requirements of the relevant statute which had provided that, in those circumstances, the money lender "shall not be entitled to enforce any claim in respect of any transaction in relation to which the default shall have been made". Hence, the Privy Council held that the imposition of a requirement of repayment, as a condition of equitable relief, would constitute a claim in respect of a transaction within the very terms of the statutory prohibition.
As will become apparent, the scheme of the present Act is quite different. Its policy may be satisfied by the imposition of an appropriate term concerning the subsidy received by Mrs Nelson as the price for the relief she seeks to enforce by the resulting trust.
Resulting trusts and statutory illegality
The intersection between the institution of the resulting trust and the principles of illegality is identified by Scott as follows [91] :
Although a resulting trust ordinarily arises where A purchases property and takes title in the name of B, A may be precluded from enforcing the resulting trust because of the illegality of his purpose. If A cannot recover the property, B keeps it and is thereby enriched. The question in each case is whether the policy against the unjust enrichment of the grantee is outweighed by the policy against giving relief to the payor who has entered into an illegal transaction.
1. Scott and Fratcher, Law of Trusts, 4th ed (1989) par 444.
However, where the illegality flows from statute, the matter is not at large in the manner suggested above. Rather it is a question of the impact of the statute itself upon the institution of the resulting trust. As the matter is put by White and Tudor [92] in their notes to Dyer v Dyer [93] :
There will be no resulting trust if the policy of an Act of Parliament would be thereby defeated.
The position was further explained by Griffith CJ in Garrett v L'Estrange [94] , in giving the judgment of the Court:
It was laid down by Lord Eldon a long time ago that there can not be a resulting trust contrary to the provisions of an Act of Parliament. The suggestion of an implication of law contrary to a positive law is indeed a contradiction in terms. This contention is, therefore, negatived by the same considerations which negative the alleged express trust.
The decision of Lord Eldon to which the Chief Justice referred was Ex parte Houghton [95] . This case and Lord Eldon's earlier decision in Ex parte Yallop [96] concerned resulting trusts said to arise by payment of purchase money where there was a device to avoid ship registry laws. In Yallop [97] , the Lord Chancellor said:
These two Acts of Parliament (stat 26 Geo III c 60; stat 34 Geo III c 68) were drawn upon this policy; that it is for the public interest to secure evidence of the title to a ship from her origin to the moment, in which you look back to her history; how far throughout her existence she has been British-built, and British-owned; and it is obvious, that, if, where the title arises by act of the parties, the doctrine of implied trust in this Court is to be applied, the whole policy of these Acts may be defeated; as neutrals may have interests in a ship, partly British-owned; and the means of enforcing the Navigation Laws depend upon knowing from time to time, who are the owners, and, whether the ship is British-owned, and British-built. Upon that the Legislature will not be content with any other evidence than the registry; and requires the great variety of things, prescribed by these Acts. They go so far as to declare, that notwithstanding any transfer, any sale, or any contract, if the purpose is not executed in the mode and form, prescribed by the Act, it shall be void to all intents and purposes. The consequence, established by positive and repeated decisions, is, that upon a contract for the purchase of a ship, which it may be supposed, might have been executed without public mischief, though by force of that contract and by operation of Law the purchaser would be the owner in Equity from the moment of the purchase, and the vendor from that moment would be devested [sic] of all interest, yet it is decided, that these Acts are so imperative, that, if they rest upon the contract, it cannot be said of a ship, as of an estate, that by operation of Law, and by force of the contract, the ownership is changed; and if the money had been paid, the decision would be upon the same principle; and it must be recovered by another form of proceeding. (Emphasis added.)
1. Leading Cases in Equity, 9th ed (1928), vol 2, p 757.
2. (1788) 2 Cox 92 [30 ER 42].
3. (1911) 13 CLR 430 at 435. See also Preston v Preston [1960] NZLR 385 at 405; Orr v Ford (1989) 167 CLR 316 at 328.
4. (1810) 17 Ves Jun 251 [34 ER 97].
5. (1808) 15 Ves Jun 60 [33 ER 677].
6. (1808) 15 Ves Jun 60 at 66-67 [33 ER 677 at 680]. In Curtis v Perry (1802) 6 Ves Jun 739 at 746 [31 ER 1285 at 1288], Lord Eldon had left open the question of the effect of these statutes upon implied trusts.
In Worthington v Curtis [98] , a contract between a father and an insurance company for the issue of a policy on the life of his child was considered illegal and void under the Life Assurance Act 1774 UK. The child died and the insurer paid the money assured by the policy to the father as administrator of the child's estate. It was held that, although as between the insurer and the company the policy was illegal and void, as between the father and the estate the father was entitled to retain the money for his own benefit, the presumption of advancement being rebutted by the evidence that the policy was effected for the benefit of the parent. Accordingly, the administrator of the estate could not resist the claim of the beneficiary to money in his hands, on the footing that the money was the product of a contract rendered illegal and void by statute. The question of title to the proceeds of the policy was insufficiently connected with that to which the legislation had been directed.
1. (1875) 1 Ch D 419.
Recent United States decisions deal with legislation of a similar nature to that with which this appeal is concerned. They do so in a manner consistent with the older authorities. In re Torrez [99] concerned federal laws which limited the right to receipt of federally subsidised irrigation water to landowners of parcels not exceeding a particular acreage. If a farmer had a holding in excess of the acreage limitation, the result was loss of eligibility for irrigation water for the excess acreage. Mr and Mrs Torrez were already receiving their maximum allotment of subsidised water before they purchased additional land in the names of their son and daughter-in-law. The son and daughter-in-law wished to sell the property in order to finance a reorganisation of their affairs under Ch 11 of the federal bankruptcy law. The issue was whether they were at liberty to do so and, in particular, whether the illegality of the purpose of their parents in putting the property in their names was destructive of a resulting trust in favour of the parents. The Court of Appeals held that the resulting trust was enforceable. It referred to various relevant factors under the law of California, as follows [100] :
These factors include the completed nature of the transaction, such that the public can no longer be protected by invocation of the rule that illegal agreements are not to be enforced; the absence of serious moral turpitude on the part of the party against whom the defense is asserted; the likelihood that invocation of the rule will permit the party asserting the illegality to be unjustly enriched at the expense of the other party; and disproportionality of forfeiture as weighed against the nature of the illegality.
1. (1987) 827 F 2d 1299 (9th Cir).
2. In re Torrez (1987) 827 F 2d 1299 at 1301 (9th Cir).
Their Honours went on to refer to previous statements to the effect that one who takes title to land in the name of another "for the purpose of defrauding the government cannot enforce a resulting trust in his favour" [101] . The Court of Appeals then referred to the decision of the California Court of Appeal in Hainey v Narigon [102] . It had been held there that it was wrong to impose a resulting trust upon property purchased by the plaintiff in the name of the defendant pursuant to an agreement between them which permitted the plaintiff to subvert the loan requirements of the federal Veterans Administration legislation [103] . The California Court of Appeal held that, because the agreement violated the federal statute and regulations governing loans to veterans and was contrary to public policy, the plaintiff was not entitled to enforce the trust; a lien was imposed on the property in favour of the plaintiff but only for the net amount of his financial investment in it.
1. In re Torrez (1987) 827 F 2d 1299 at 1302 (9th Cir). Reference was made to the Restatement Trusts, 2d, §444, pp 405-406. See also Scott and Fratcher, Law of Trusts, 4th ed (1989), par 444.
2. (1966) 55 Cal Rptr 638.
3. 38 USCA §3704 as renumbered in 1991 by Pub L 102-83 par 5(a), (c)(1).
In In re Torrez the Court of Appeals distinguished Hainey in the following passage [104] :
Essential to Hainey was the fact that the applicable statutes and regulations explicitly prohibited assignment of benefits conferred upon a veteran in connection with the VA guarantee of home loans for veterans Here, no prohibitions exist against the acquisition of excess land; instead, federal regulations provide merely for the loss of eligibility for receipt of water upon such acquisition Similarly lacking in Hainey were the problems of disproportionality of forfeiture to illegality, given the court's grant of a lien to plaintiff in the amount of his investment in the property notwithstanding his illegal conduct.
The Court of Appeals then dealt with the public policy consideration that recognition of a resulting trust would give judicial sanction to a continuing fraudulent scheme against the federal government. The Court pointed out [105] that the government was entitled, under the legislation, to deny eligibility for subsidised water in respect of the excess acreage, saying that any public policy objections might adequately be addressed by administrative proceedings under those provisions.
1. In re Torrez (1987) 827 F 2d 1299 at 1302. See also as to resulting trusts and the Veterans Administration housing laws, Johnson v Johnson (1987) 237 Cal Rptr 644.
2. In re Torrez (1987) 827 F 2d 1299 at 1302.
Against the background traced above we accept the submission for the appellants that the crucial step is to identify the relevant public policy, beginning with the provisions of the Act, before and after the amendments made in 1988. The Bent Street property was purchased before the commencement of those amendments but it was after their commencement that the application for subsidy was lodged on 25 July 1989 and the subsidy towards the purchase of the Kidman Lane property was procured.
The scheme of the Act and the facts of the case
We have already referred to s 35 as it stood before its repeal. Nothing turns upon it directly for the purposes of this case. There was no "transfer", being the purported creation of a trust in respect of any property in which the Corporation already held an interest as described in the section.
As we have indicated, Pts III, IV, V and VI of the Act were repealed with effect from 19 December 1988. Part V (ss 20-27B) had been headed "Advances on mortgage for purposes of homes". Section 20 empowered the Corporation to make an advance to an eligible person on the prescribed security, to enable that person, among other things, to purchase a dwelling-house together with the land on which it was erected. The maximum advance was $25,000 (s 21). With an exception not presently relevant, no advance was to be made to any person unless the Corporation was satisfied that (i) the dwelling-house in question was intended to be used by the person as a home for himself and his dependants and (ii) neither the person nor the person's spouse was the owner of any other dwelling-house (s 23). If at any time, in the opinion of the Corporation, any money advanced had not been applied for the purpose for which it was advanced, the Corporation might, by notice in writing, call in the whole or part of that amount (s 27(1)) and remedies were given for the recovery of that amount by the Corporation (s 27(2)).
Section 32A empowered the Corporation to call up, by notice in writing, the whole of the moneys secured under the mortgage on the relevant property, making the moneys due and payable, if, at the time of the making of the advance, a person had declared "that the person was not the owner of any dwelling-house" or "that the wife or husband of the person was not the owner of any dwelling-house" other than the one to which the advance related and it subsequently had come to the knowledge of the Corporation that the declaration was untrue. In this way, ss 23 and 32A were linked.
The scheme of the Act changed in 1988 with the Amendment Act. This implemented an agreement (the Agreement) made 9 November 1988 between the Commonwealth of Australia and the Bank [106] . Section 16 of the Amendment Act inserted the Agreement as Sch 1 to the Act. Clause 11 of the Agreement provided for payment by the Commonwealth of an interest subsidy to the Bank upon "Subsidised Advances" made by the Bank. The term "Subsidised Advances" was defined in cl 1 of the Agreement as including an advance made by the Bank in accordance with a certificate of entitlement issued by the Commonwealth to an entitled applicant.
1. The agreement is analysed in Westpac Banking Corporation v Commissioner of Stamp Duties (Q) [1994] 2 Qd R 212 at 218-223.
These provisions were implemented by amendments to the Act. In place of Pts III, IV, V and VI, new Pts III (ss 15-23), IV (ss 24-30), V (ss 31-37) and VI (ss 38-38H) were inserted. Section 15(1)(b) provides that a person may apply to the Secretary for a certificate of entitlement in relation to a subsidy on a subsidised advance that the person may seek from the Bank. The certificate of entitlement shall specify the maximum amount determined under s 25, in respect of which subsidy is payable, and the rate of interest payable on the advance (s 17). The rate of interest upon an initial advance is 6.85 per cent per year (s 31). Section 18(1)(b) obliges the Secretary not to issue a certificate of entitlement unless satisfied that the person is not the owner of any dwelling-house other than the dwelling-house in respect of which the advance is payable. The $25,000 received upon the Kidman Lane purchase was the maximum amount for which subsidy was payable.
The Secretary may, by notice of cancellation, cancel the subsidy from the date specified in the notice if the Secretary is satisfied that a certificate of entitlement in relation to the advance was issued as a result of a false statement made by the person to whom it was issued, or where the person was not entitled to the certificate (s 26(1)).
Where a subsidy has ceased to be payable under s 26 for either of the above reasons, the Secretary may, by notice in writing, require payment to the Commonwealth of the amount specified in the notice in the manner and within the period specified in the notice (s 29(1)). The amount in the notice might be the whole or such part of the amount of subsidy as the Secretary determined to be reasonable (s 29(2)). Where a person has failed to comply with a notice, the amount specified in the notice may be recovered from the person in a court of competent jurisdiction as a debt due to the Commonwealth (s 29(4)). Section 30 states:
(1) The Secretary may, on behalf of the Commonwealth, by instrument in writing:
(a) write off an amount that a person has been required to pay to the Commonwealth under section 29;
(b) waive the right of the Commonwealth to recover from a person the whole or part of an amount that the person has been required to pay to the Commonwealth under that section; or
(c) allow a person who has been required to pay an amount to the Commonwealth under section 29 to pay that amount by such instalments as are specified in the instrument.
(2) A decision under subsection (1) takes effect:
(a) on the day specified in the notice, being the day on which the decision is made or any day before or after that day; or
(b) if no day is so specified — on the day on which the decision is made.
Decisions under s 26, and those requiring payment under s 29, are "reviewable decisions" within the meaning of the definition in s 4. The consequence is that they attract the operation of the system of internal review and review by the Administrative Appeals Tribunal pursuant to ss 43 and 44 of the Act.
Reference also should be made to certain provisions of the Crimes Act 1914 Cth which were in force at all material times. It is not suggested by counsel for the first respondent that any of the parties to the litigation had rendered themselves liable for prosecution under those provisions. Rather, he draws attention to them in connection with what he describes as the wide operation of the Act itself. He submits that these provisions showed that the legislature had not left the Act without attendant criminal sanctions for contravention.
The provisions in question are ss 29A, 29B, 29D and 86. Section 86 creates conspiracy offences, s 29A deals with false pretences and s 29D defrauding the Commonwealth or a public authority under the Commonwealth. Section 29B should be set out in full. It states:
Any person who imposes or endeavours to impose upon the Commonwealth or any public authority under the Commonwealth by any untrue representation, made in any manner whatsoever, with a view to obtain [sic] money or any other benefit or advantage, shall be guilty of an offence.
Penalty: Imprisonment for 2 years.
On the other hand, counsel for the appellants points to these provisions in support of the proposition that the purpose of the Act is sufficiently served by such penalties and that the denial of the resulting trust would cause prejudice to a person in the position of Mrs Nelson without furthering the objects of the legislation. Reference is made to the statement in Archbolds (Freightage) Ltd v S Spanglett Ltd [107] , adopted by Jacobs J in Yango [108] , that the purpose of a statute may sufficiently be served by the penalties prescribed for the offender [109] . It then is submitted that the imposition of the additional sanction, the inability of the first appellant to enjoy the proceeds of what otherwise is her beneficial ownership of the Bent Street property, would not be an appropriate adjunct to the scheme for which the Act provides.
1. [1961] 1 QB 374 at 390.
2. (1978) 139 CLR 410 at 432-433.
3. cf Bell, Conceptions of Public Policy in Cane and Stapleton (eds), Essays for Patrick Atiyah (1991) 87, at pp 94-97 .
That submission should be accepted. Further, the relevant provisions of the legislation, before and after the Amendment Act, show its purpose to be the provision of public moneys to facilitate the purchase of housing by eligible persons, but on the footing that the eligible person not own another dwelling. The means by which that purpose has been effected have changed from secured loan to interest subsidy in respect of an advance by the Bank. But it has consistently been the scheme of the legislation that, if the public moneys are misapplied, they are made recoverable by the Corporation or the Commonwealth. However, as the cases on the former s 35 demonstrate, the interest of the Corporation or the Commonwealth in the dwelling or proceeds of sale thereof is co-extensive with the funds provided by it; if they be restored then effect may be given to a trust in respect of the balance of the equitable interest in the dwelling or the proceeds of sale thereof.
A question in the present case thus arises as to whether the trust in respect of the proceeds of sale which Mrs Nelson asserts in her favour is tainted by illegality because of its association with or furtherance of a purpose which is contrary to the policy of the law as indicated by the scheme of the Act. If that be so, the question then is whether the consequence is that (i) no relief is available to Mrs Nelson, or (ii) relief may be granted but upon terms apt to make good the concern of the Commonwealth which was denied by the grant of the subsidy in respect of Kidman Lane whilst, as she always intended, Mrs Nelson was beneficial owner of the Bent Street property.
In our view, the answer to the first question is in the affirmative. The findings in the Supreme Court show that the title to Bent Street was taken in the name of the children, with the intention that Mrs Nelson be the beneficial owner so as to put her in an advantageous position later to obtain, if she so wished, financial assistance under the Act by concealing the true state of affairs.
It may have been that a change of heart upon which she had acted before she sought to enforce the resulting trust may have meant that the trust was never more than incipiently illegal. But that issue does not arise. The purpose was implemented with the obtaining of the subsidy for the Kidman Lane purchase. Mrs Nelson still holds this property. The litigation concerns ownership of the fund from the later sale of the Bent Street property. Given this state of affairs, the question remains as to what are the limitations upon the relief obtainable by Mrs Nelson.
In our view, as the price of obtaining the relief she seeks for the recognition and enforcement of a resulting trust in respect of the whole of the balance of the proceeds of sale of the Bent Street property, Mrs Nelson must be prepared to do equity according to the requirements of good conscience. That may involve consideration of more than the interests of the parties to the litigation. Here, good conscience calls for the taking by Mrs Nelson of steps sufficient to satisfy the demands of the underlying policy of the Act.
This requires denial to Mrs Nelson of the benefit in respect of the purchase of the Kidman Lane property which she has obtained by her unlawful conduct. This would appear to us to be a sum representing the present value of the difference, over the term of the loan agreement dated 30 August 1989, for the advance by the Bank to Mrs Nelson of $25,000, between the subsidised interest rate and that rate which, upon its usual terms, the Bank would have charged Mrs Nelson on an advance of $25,000 over the same period and for the same purpose.
That sum should be in the same amount as that which the Commonwealth might properly specify in a notice given to Mrs Nelson under s 29 of the Act.
If Mrs Nelson were to tender to the Commonwealth that amount which the Commonwealth might properly have specified in a notice given under s 29 of the Act, it is to be presumed that the Commonwealth would accept it. In particular, it is to be presumed that the amount would not be written off by the Commonwealth under par (a) of s 30(1) and that there would be no waiver under par (b) of the right of the Commonwealth to recover the amount of the subsidy.
The state of the record before this Court does not enable us to compute the sum we have mentioned (the Benefit Sum). The solicitors for the first appellant and for the first respondent should be given the opportunity to agree that amount, after such consultation with the Commonwealth and the Bank as they may be advised. If that agreement is not reached on or before 30 November 1995, any party should have liberty to apply to this Court. It would appear, in that event, to be necessary to refer the proceeding to the Equity Division of the Supreme Court for a finding as to the amount of the Benefit Sum. The Judge or Master dealing with the matter then might admit such further evidence as might be necessary to dispose of the matter.
If the agreement mentioned is reached, then declarations made in this Court should take effect finally to dispose of the case without further litigation in the Supreme Court.
What is required is the formulation of, and acceptance by Mrs Nelson of, a term upon the relief to which she is otherwise entitled which denies to her the benefit she obtained by her unlawful conduct and provides for the payment to the Commonwealth of the Benefit Sum.
Conclusions
The appeal should be allowed with costs. The orders of the Court of Appeal entered 21 September 1994 should be set aside. The declarations 1, 2 and 3 as made by the Master and entered 10 January 1994 should be set aside. The first respondent should pay the costs of the appellants of the proceeding at first instance and in the Court of Appeal.
There should be a declaration to the effect that, if on or before 9 January 1996 Mrs Nelson has paid to the Commonwealth an amount equal to the Benefit Sum received in respect of the purchase by her of the Kidman Lane property, the second respondents hold the whole of the balance of the proceeds of sale of the Bent Street property, together with any interest earned thereon, upon trust for the first appellant. This should be accompanied by an order that any moneys so held by the second respondents be paid to the first appellant.
The making by Mrs Nelson of this payment to the Commonwealth should have the effect of discharging any liability to the Commonwealth under s 29 of the Act.
There should be a further declaration to the effect that, if the Benefit Sum has been ascertained but shall not have been paid by Mrs Nelson as provided in the first declaration, the second respondents hold the balance of the proceeds of sale of the Bent Street property, as to the Benefit Sum, upon trust for the first respondent, and as to the remainder (including interest earned upon the whole of the said balance) upon trust for the first appellant. Such a trust of the Benefit Sum would do no more than reflect the unavailability of equity to obtain for the first appellant the actual fruits of her unlawful conduct. There should also be orders that the moneys so held by the second respondents be paid respectively to the first respondent and first appellant.
The parties should have liberty to apply to this Court if, on or before 30 November 1995, the first appellant and the first respondent shall not have agreed the amount of the Benefit Sum.
Dawson J.
This is a case in which a mother provided the purchase money for a house which was transferred into the names of her son and daughter, both of whom were adults. The purpose of this arrangement was to enable the mother, should she subsequently wish to purchase another house for herself, to obtain a subsidised advance upon favourable terms under the Defence Service Homes Act 1918 Cth. Under that Act, the mother would not have been eligible for the subsidised advance if she were the owner of another house.
More than a year and a half later the mother did purchase another house for herself. She applied for and received a subsidised advance under the Defence Service Homes Act, falsely declaring that she did not own or have a financial interest in a house other than the one for which the advance was sought. This declaration was false because the mother claimed, as she does in this litigation, that she was the beneficial owner of the house for which she had previously provided the purchase money.
In falsely declaring that she had no interest in another house, the mother may have committed offences under other legislation [110] , but the Defence Service Homes Act did not make it an offence. It merely provided that the Commonwealth might recover as a debt the amount of the subsidy paid as the result of a false statement (see s 29). It also provided that the Commonwealth might waive the debt or allow it to be paid by instalments (see s 30). However, the illegality involved was not a breach of the Defence Service Homes Act. It was the fraud involved in obtaining a subsidised advance upon a false basis. The illegality of that act was not dependent upon any policy revealed by the Defence Service Homes Act but arose from the nature of the act itself.
1. See Crimes Act 1914 Cth, ss 29A, 29B, 29D and 86; Statutory Declarations Act 1959 Cth, s 11.
The house which was in the names of the son and daughter was sold and the mother claims to be entitled to the proceeds. The son concedes his mother's entitlement, but the daughter, having fallen out with her mother, claims half of those proceeds.
Two questions arise. The first is whether the presumption of advancement applies to the payment of the purchase price and the transfer of the house to the son and daughter. If it does not, the son and daughter hold the proceeds of sale upon a resulting trust in favour of their mother because she provided the purchase price. The other question is whether the mother is precluded from recovering the proceeds because of the illegal purpose of the arrangement whereby the house was placed in the names of the son and daughter.
This appeal is from the New South Wales Court of Appeal which applied a recent decision of its own [111] and held that a presumption of advancement now applies to a gift made by a mother to her children as it has applied in the past in the case of a gift made by a father to his children. The effect of the presumption is to displace any resulting trust with the inference that a transfer of the beneficial, as well as legal, ownership was intended.
1. Brown v Brown (1993) 31 NSWLR 582.
The presumption of advancement can, like a resulting trust, be rebutted by evidence of actual intention, but in attempting to rebut the presumption in this case the mother was forced to reveal the true purpose of the arrangement between her and her children. That purpose, being to defraud the Commonwealth, was illegal and had been carried into effect. The Court of Appeal held that those circumstances precluded the mother from being granted relief.
In my view, the Court of Appeal was correct in concluding that, in accordance with its previous decision in Brown v Brown [112] , the presumption of advancement should now be regarded as applying in the case of gifts by a mother, as well as a father, to a child. In Scott v Pauly [113] , Isaacs J observed that the drawing of a distinction between a mother and a father in this regard had not been judicially doubted [114] . Even then, apparently, some text writers doubted whether the presumption should have been viewed so narrowly. But circumstances have changed since Isaacs J made his observation. He viewed the presumption as being founded upon "an obligation in conscience to provide for a child" [115] . Now, unlike then, the Family Law Act 1975 Cth imposes upon both parents "the primary duty to maintain the child", the object being to ensure "that parents share equitably in the support of their children" [116] . Those provisions reflect the changed responsibility as between parents for the maintenance of their children and hence in their relationship with their children.
1. (1993) 31 NSWLR 582.
2. (1917) 24 CLR 274 at 281-282.
3. See now Bennet v Bennet (1879) 10 Ch D 474; Re Orme; Evans v Maxwell (1883) 50 LT 51; Preston v Greene [1909] 1 IR 172; Pickens v Metcalf [1932] NZLR 1278; In re Lloyd [1960] NZLR 947.
4. Scott v Pauly (1917) 24 CLR 274 at 281.
5. See Family Law Act 1975 Cth, ss 66A(2)(b), 66B(1).
In Calverley v Green, Gibbs CJ said [117] :
The principle upon which the presumption of advancement rests does not seem to me to have been convincingly expounded in the earlier authorities, nor do the two presumptions, of a resulting trust and advancement, together always lead to a result which coincides with that which one would expect to occur in ordinary human experience In Wirth v Wirth [118] Dixon CJ put the law on a more rational basis.
1. Calverley v Green (1984) 155 CLR 242 at 248-249.
2. (1956) 98 CLR 228.
Wirth v Wirth was a case in which the presumption of advancement was extended in its application to a transfer of property by a prospective husband to his intended wife in contemplation of marriage. In that case Dixon CJ took a wider view of the basis for the presumption. He said [119] :
While the presumption of advancement doubtless in its inception was concerned with relationships affording "good" consideration, it has in the course of its growth obtained a foundation or justification in the greater prima facie probability of a beneficial interest being intended in the situations to which the presumption has been applied.
In modern society there is no reason to suppose that the probability of a parent intending to transfer a beneficial interest in property to a child is any the more or less in the case of a mother than in the case of a father.
1. Wirth v Wirth (1956) 98 CLR 228 at 237.
In Calverley v Green, Gibbs CJ thought that the presumption of advancement should be raised when the relationship between the parties is such that it is more probable than not that the transfer of a beneficial interest was intended, whether or not the purchaser owed the other a legal or moral duty of support. He was alone in this view, but not, I think, in the view that it would not be characteristic of the doctrines of equity "to treat established categories as frozen in time" [120] . As Deane J pointed out [121] the categories of relationships giving rise to the presumption of advancement "are not finally settled or closed, at least in this Court" [122] .
1. Calverley v Green (1984) 155 CLR 242 at 250, per Gibbs CJ; see Wirth v Wirth (1956) 98 CLR 228 at 238, per Dixon CJ.
2. Calverley v Green (1984) 155 CLR 242 at 268.
3. See also Calverley v Green (1984) 155 CLR 242 at 260, per Mason and Brennan JJ.
In my view, whether the basis for the presumption is a moral obligation to provide for a child or the reflection of actual probabilities, there is no longer any justification for maintaining the distinction between a father and a mother. In the United States the presumption of advancement applies alike to a mother as well as a father [123] and that should now be the situation in this country.
1. See Scott and Fratcher, Law of Trusts, 4th ed (1989), vol 5, pp 181-182.
The mother in this case must, therefore, rebut the presumption of advancement to establish a beneficial entitlement to the proceeds of sale of the house. That is to say, in order for there to be a resulting trust in her favour, she must rebut the presumption of advancement, which is in reality an exception to the basic presumption that a resulting trust occurs where the legal title to property is vested in a person other than the person who provided the purchase price. In doing so she must, of necessity, explain why she did not intend to make a gift to her son and daughter and so reveal her illegal purpose.
The attitude of the common law towards illegality is contained in the principle that a court will not lend its aid in enforcing a cause of action which is founded upon an immoral or illegal act [124] . It is expressed in the maxim ex turpi causa non oritur actio and is based upon public policy. Although a party to litigation cannot succeed if he has to rely upon his own illegality, the mere fact that a transaction is illegal does not prevent property from passing under it [125] . As Lord Denning said in Singh v Ali [126] :
The reason is because the transferor, having fully achieved his unworthy end, cannot be allowed to turn round and repudiate the means by which he did it — he cannot throw over the transfer. And the transferee, having obtained the property, can assert his title to it against all the world, not because he has any merit of his own, but because there is no one who can assert a better title to it. [127]
Thus in Bowmakers Ltd v Barnet Instruments Ltd the Court of Appeal said [128] :
In our opinion, a man's right to possess his own chattels will as a general rule be enforced against one who, without any claim of right, is detaining them, or has converted them to his own use, even though it may appear either from the pleadings, or in the course of the trial, that the chattels in question came into the defendant's possession by reason of an illegal contract between himself and the plaintiff, provided that the plaintiff does not seek, and is not forced, either to found his claim on the illegal contract or to plead its illegality in order to support his claim.
1. See Holman v Johnson (1775) 1 Cowp 341 at 343 [98 ER 1120 at 1121].
2. See Muckleston v Brown (1801) 6 Ves Jun 52 at 69 [31 ER 934 at 942].
3. [1960] AC 167 at 176-177.
4. See Muckleston v Brown (1801) 6 Ves Jun 52 at 69 [31 ER 934 at 942].
5. Bowmakers [1945] KB 65 at 71.
In equity, however, the relevant principle is to be found, not in the common law maxim ex turpi causa, but in the maxim that he who comes to equity must come with clean hands [129] . The related equitable principle has had a wider application than the common law maxim because, notwithstanding the existence of an equitable interest, equity has refused to lend its aid in enforcing it if it is the result of an illegal transaction or has been acquired for an illegal purpose. It has been considered that it is a sufficient bar to equitable relief that the person claiming the relief is tainted with the illegality. The principle was expressed by Lord Eldon in Muckleston v Brown [130] :
the plaintiff stating, he had been guilty of a fraud upon the law, to evade, to disappoint, the provision of the legislature, to which he is bound to submit, and coming to equity to be relieved against his own act, and the defence being dishonest, between the two species of dishonesty the Court would not act; but would say, "Let the estate lie, where it falls."
1. See Snell's Equity, 29th ed (1990), pp 31-32; Tinker v Tinker [1970] P 136 at 143.
2. (1801) 6 Ves Jun 52 at 69 [31 ER 934 at 942]. See also Curtis v Perry (1802) 6 Ves Jun 739 at 747 [31 ER 1285 at 1288]; Cottington v Fletcher (1740) 2 Atk 155 [26 ER 498].
However, an illegal purpose will not prevent an equitable interest from arising, because the law recognises a locus poenitentiae and, if the illegal purpose has not been carried out, a court will uphold the interest [131] . But there are cases which decide that if the illegal purpose has been carried out, a claimant will not be heard to assert a claim to the equitable interest notwithstanding that, because of the existence of a locus poenitentiae, that interest must have arisen.
1. See Perpetual Executors & Trustees Association of Australia Ltd v Wright (1917) 23 CLR 185; Martin v Martin (1959) 110 CLR 297; Donaldson v Freeson (1934) 51 CLR 598 at 611, 616-617; Payne v McDonald (1908) 6 CLR 208 at 211; Symes v Hughes (1870) LR 9 Eq 475; Taylor v Bowers (1876) 1 QBD 291; cf In re Great Berlin Steamboat Co (1884) 26 Ch D 616.
That principle has been applied in a number of cases to defeat a claim of a resulting trust where the claimant has, in attempting to rebut the presumption of advancement, been forced to reveal an illegal purpose to the transaction. More recent examples are to be seen in Gascoigne v Gascoigne [132] , In re Emery's Investments Trusts [133] and Palaniappa Chettiar v Arunasalam Chettiar [134] .
1. [1918] 1 KB 223.
2. [1959] Ch 410.
3. [1962] AC 294. See also Tinker v Tinker [1970] P 136; Cantor v Cox [1976] 2 EG 105.
In Tinsley v Milligan [135] a house was purchased by two single women using their joint funds. The house was placed in the name of one of the women, the plaintiff, to assist in the perpetration of frauds on the Department of Social Security. The plaintiff claimed beneficial ownership of the house. The other woman, the defendant, counterclaimed for a declaration that the house was held on trust for both of them in equal shares. The relationship between the two women raised no presumption of advancement and the only question was whether a resulting trust of the Gissing v Gissing [136] type arose because of the manner in which the purchase price was provided. The plaintiff, in answer to the defendant's counterclaim, revealed the illegal purpose for which the house was transferred to her alone.
1. [1994] 1 AC 340.
2. [1971] AC 886.
The Court of Appeal held [137] by a majority (Nicholls and Lloyd LJJ; Ralph Gibson LJ dissenting) that even if there were in the past a rule of equity requiring a court to refuse relief where it appeared that property was transferred for an illegal purpose — a rule that the estate should lie where it fell — by analogy with cases at common law involving the maxim ex turpi causa, a more flexible approach should now be adopted. In several cases [138] there had evolved what became known as "the public conscience" test which required a court in the application of the maxim to balance the adverse consequences of granting relief against the adverse consequences of refusing relief. Applying that test in the case before them, the Court of Appeal held that there was no bar to a declaration of a resulting trust notwithstanding the revelation of the illegal purpose of the arrangement between the plaintiff and the defendant.
1. Tinsley v Milligan [1992] Ch 310.
2. See Saunders v Edwards [1987] 1 WLR 1116; [1987] 2 All ER 651; Euro-Diam Ltd v Bathurst [1990] 1 QB 1; Pitts v Hunt [1991] 1 QB 24.
An appeal to the House of Lords was dismissed (Lord Keith of Kinkel and Lord Goff of Chieveley dissenting), but Lord Browne-Wilkinson, with whom Lord Jauncey of Tullichettle and Lord Lowry agreed, rejected a test depending "on such an imponderable factor as the extent to which the public conscience would be affronted by recognising rights created by illegal transactions" [139] . He accepted, however, that the same rule ought to apply both at common law and in equity in relation to a property right acquired under an illegal transaction.
1. Tinsley v Milligan [1994] 1 AC 340 at 369.
He concluded that at common law, property in chattels and land can pass under a contract that is illegal and therefore unenforceable; that a plaintiff can at law enforce property rights so acquired provided that he does not need to rely on the illegal contract for any purpose other than providing the basis of his claim to a property right; and that it is irrelevant that the illegality of the underlying agreement was either pleaded or emerged in evidence: if the plaintiff has acquired legal title under the illegal contract that is enough [140] .
1. Tinsley v Milligan [1994] 1 AC 340 at 370, per Lord Browne-Wilkinson.
In order that the same rule should apply whether a claim is founded upon a legal or equitable title, the correct principle was said to be that a claimant is entitled to recover if he is not forced to plead or rely on the illegality, even if it emerges that the title on which he relies was acquired in the course of carrying out an illegal transaction [141] . The recent cases which appeared to apply the wide principle laid down by Lord Eldon were explained as being in truth cases in which the presumption of advancement could not be rebutted without reliance upon the illegality.
1. Tinsley v Milligan [1994] 1 AC 340 at 376, per Lord Browne-Wilkinson.
Agreeing, as I do, that disconformity is undesirable in the rules relating to illegality at law and in equity, I find difficulty in accepting the distinction drawn in Tinsley v Milligan between a resulting trust established without the need to rebut the presumption of advancement and a resulting trust that can only be established by rebutting that presumption. In the former case, according to the decision, an illegal purpose does not preclude relief because the resulting trust will be presumed upon proof that the purchase price was paid by the party asserting the trust without any need for that party to place reliance upon the illegal purpose. In the latter case, however, where the presumption of advancement cannot be rebutted without revealing the illegal purpose, there can be no assertion of a resulting trust. The distinction can hardly be based upon a policy of discouraging the transfer of property for an illegal purpose because a knowledgable transferor would choose a transferee other than one who could take advantage of the presumption of advancement. Moreover, where a presumption of advancement applied, the distinction would be such as to lead the transferee to encourage the carrying out of the illegal purpose so as to acquire a benefit for himself. And, if the presumption of advancement cannot be rebutted because of the revelation of an illegal purpose, the result is a windfall gain to the transferee who may in fact share the illegal purpose.
Once it is recognised that Lord Eldon's broad rule exceeds the true scope of the equitable maxim that he who comes to equity must come with clean hands and that a party who the evidence reveals is tainted with illegality may nevertheless succeed, as in Tinsley v Milligan, in establishing a resulting trust, it seems to me to be unacceptable that a party, tainted by a similar illegality, cannot establish a resulting trust merely because evidence advanced to rebut the presumption of advancement reveals the illegality. The different result is entirely fortuitous being dependent upon the relationship between the parties and is wholly unjustifiable upon any policy ground. That the transfer of property by a husband to his wife for an illegal purpose and not intended as a gift should not give rise to a resulting trust whereas a similar transfer of property by a man to his de facto wife [142] for a similar illegal purpose should do so, because in the former instance the husband is required to rebut the presumption of advancement and cannot do so merely because he would reveal the illegal purpose, cannot, in my view, have any basis in principle. If, as it does, a locus poenitentiae exists, then there is an existing equitable interest in each instance [143] . It is simply that in the former instance the husband will not be heard to assert its existence. In the words of Lord Browne-Wilkinson in Tinsley v Milligan [144] in each instance:
The effect of illegality is not substantive but procedural. The question therefore is, "In what circumstances will equity refuse to enforce equitable rights which undoubtedly exist."
1. See Calverley v Green (1984) 155 CLR 242.
2. See Tinsley v Milligan [1994] 1 AC 340 at 374.
3. [1994] 1 AC 340 at 374.
Nor, in my view, can it be said that a party seeking to rebut the presumption of advancement in the case of a transaction for an illegal purpose is forced to rely upon his own illegality. What must be established in order to rebut the presumption is that no gift was intended. There may be an illegal purpose for the transfer of the property and that may bear upon the question of intention [145] , but it is the absence of any intention to make a gift upon which reliance must be placed to rebut the presumption of advancement. Intention is something different from a reason or motive. The illegal purpose may thus be evidentiary, but it is not the foundation of a claim to rebut the presumption of advancement [146] . Both the presumption of a resulting trust and the presumption of advancement may be rebutted by showing the actual intention of the parties [147] . Each presumption dictates where the evidentiary burden of doing so lies. But that affords no basis for drawing a distinction between the effect of an illegal purpose where the presumption of advancement applies and where it does not. Reliance is placed in each case upon the intention of the parties, whether aided by a presumption or not, and not upon the illegality.
1. See Martin v Martin (1959) 110 CLR 297 at 305.
2. See Donaldson v Freeson (1934) 51 CLR 598 at 617, per McTiernan J.
3. See Martin v Martin (1959) 110 CLR 297 at 303-304.
Justification for the view that the presumption of advancement may be rebutted so as to allow a resulting trust to arise, notwithstanding that the rebuttal reveals that the transaction involved was for an illegal purpose, is to be found in the principle that illegal conduct on the part of a person claiming equitable relief does not in every instance disentitle that person to the relief. The illegality must have "an immediate and necessary relation to the equity sued for" [148] . Where reliance is not placed upon the illegality — where the court is not asked to effectuate the illegal purpose but merely to recognise an interest admittedly in existence — there is not, in my view, an immediate and necessary relation between the illegality and the claim. The illegal purpose in those circumstances has been effectuated without any intervention by the court and the property right has passed. If there is to be a correspondence between the rules at common law and in equity, then the property right ought to be recognised notwithstanding that it is the result of an illegal transaction. The relevance of the illegal transaction is confined to explaining how the property right arose; to "providing the basis of [a] claim to a property right" [149] .
1. See Dering v Earl of Winchelsea (1787) 1 Cox Eq 318 at 319 [ 29 ER 1184 at 1185].
2. See Tinsley v Milligan [1994] 1 AC 340 at 370, per Lord Browne-Wilkinson.
In the present case, the purchase of the first house by the mother and the placing of it in the names of the son and daughter took place a considerable time before the failure of the mother to disclose her interest in her application for an advance. During the whole of that time the mother was in a position to rebut the presumption of advancement and to claim the beneficial interest in the house which had passed to her. Given the existence of that interest and the fact that, had it been a legal interest, it would have been recoverable withstanding the maxim ex turpi causa, I do not think that it should be concluded that the mother in her claim for equitable relief placed reliance upon her fraudulent conduct in any direct or necessary way. The purchase of the house did not of itself involve any fraud and the relevance of the illegal purpose, which was at the time of the purchase yet to be carried into effect, was at most to explain why the purchase did not constitute a gift to the children. The amount of the subsidy paid as a result of the mother's fraud is recoverable by the Commonwealth so that the mother cannot, without qualification, be said to be entitled to the benefit of having carried out her illegal purpose.
I would allow the appeal and make the declarations and order sought by the mother and son. The mother is, on the view which I have expressed, entitled to the relief which she seeks and I see no reason to place conditions upon granting it. The Commonwealth may or may not wish to recover the amount of the subsidy from the mother and to do so wholly or in part or upon terms. That is a matter for the Commonwealth and I do not think that it is any part of the Court's function to assist it in these proceedings to which it is not a party. As I have said, the illegality in this case arose from the fraudulent conduct of the mother upon which any policy revealed by the Defence Service Homes Act throws no light. It is not, in my view, a case which is comparable with cases such as Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd [150] where the policy of the Banking Act 1959 Cth, in making it illegal to carry on business as a banker without an authority, gave the answer to the question whether transactions carried out in the course of conducting an unauthorised banking business should or should not be viewed as illegal and void.
1. (1978) 139 CLR 410.
Toohey J.
The circumstances giving rise to this appeal are detailed in the reasons for judgment of Deane and Gummow JJ. I shall avoid unnecessary duplication.
The judgment upheld by the Court of Appeal was of Master Macready who found as follows:
1. Elizabeth Nelson was entitled to one half of the proceeds of the sale of the Bent Street property after deduction of any selling expenses and agent's commission.
2. Her half share of the proceeds of sale was $195,500.
3. She was entitled to the same proportion of the interest earned from the proceeds as the amount of $195,500 bore to $232,509.38.
4. Mrs Nelson was the beneficial owner of the Kidman Lane property.
The background
The appellants, Mrs Nelson and her son Peter Nelson, contend that Elizabeth Nelson had no beneficial interest in the Bent Street property (Bent Street) or in the proceeds of its sale. They seek a declaration that Peter Nelson and his sister Elizabeth held Bent Street in trust for Mrs Nelson and that the second respondents, who are Elizabeth's solicitors, hold the proceeds of sale upon trust for Mrs Nelson. It is apparent from Peter Nelson's role as an appellant that he supports his mother's claim.
On 10 August 1987, Peter and Elizabeth Nelson entered into a contract to buy Bent Street for $145,000. The deposit and balance of the purchase price came from a joint banking account held by Mrs Nelson and her late husband. Mr Nelson died on 4 November 1987; Mrs Nelson was the beneficiary of his estate. The purchase of Bent Street was completed that day.
Although there is no issue between the parties as to Mrs Nelson's beneficial ownership of the Kidman Lane property (Kidman Lane), the circumstances surrounding the purchase of that property are germane to the dispute over Bent Street. The connection between the two arises in the following way. In order to effect the purchase of Kidman Lane, Mrs Nelson obtained a loan from her bank and as well a subsidised advance under the provisions of the Defence Service Homes Act 1918 Cth (the Act) as it then stood. This required completion of a subsidy application. The form itself was completed by Peter Nelson on behalf of his mother. One question asked on the form was:
Do you or your spouse own or have a financial interest in a house or dwelling other than the one for which a subsidy is sought?
The box on the form beside the word "No" was ticked, presumably by Peter Nelson. Thereafter Mrs Nelson completed a statutory declaration on the form, verifying the accuracy of the information contained in it. The answer was false in that Mrs Nelson claimed to have the beneficial interest in Bent Street at the time. After an unsuccessful auction in April 1990, Bent Street was sold in October that year.
The first question which arises is whether a presumption of advancement operated in respect of Bent Street. If it did, a further question is whether that presumption was rebutted by the evidence. If no presumption of advancement applies to the relationship of a mother and her children, in this case adult children, the situation would be that Peter and Elizabeth Nelson held Bent Street upon trust for Mrs Nelson because she provided the purchase price. In that event Mrs Nelson would be entitled to the proceeds of the sale of Bent Street unless the defence of illegality raised by Elizabeth Nelson is upheld.
Presumption of advancement
Master Macready held that the relationship between the parties gave rise to a presumption of advancement. Before the Court of Appeal the appellants contended that there was no presumption of advancement between mother and adult children. But as there was a recent decision of that Court directly against them on the point [151] , the appellants concentrated on the argument that the presumption had been rebutted. The Court of Appeal proceeded "on the basis that the relationship between Mrs Nelson and Elizabeth was such as could give rise to the presumption of advancement" [152] .
1. Brown v Brown (1993) 31 NSWLR 582.
2. Nelson v Nelson (1994) 33 NSWLR 740 at 745, per Sheller JA.
In Calverley v Green [153] Murphy J was of the view that the presumptions of resulting trusts "are inappropriate to our times, and are opposed to a rational evaluation of property cases arising out of personal relationships" and that the presumption of advancement "has always been a misuse of the term presumption, and is unnecessary". In this appeal it is the existence of a presumption of advancement in the particular relationship that is under challenge, not presumptions of resulting trusts at large. Those presumptions are well entrenched [154] .
1. (1984) 155 CLR 242 at 264-265.
2. Calverley v Green (1984) 155 CLR 242 at 266; Dullow v Dullow (1985) 3 NSWLR 531 at 536. See also Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 364.
The relationship between a resulting trust and a presumption of advancement was explained by Gibbs CJ in Calverley v Green [155] by reference to what had been said in Martin v Martin [156] :
It is called a presumption of advancement but it is rather the absence of any reason for assuming that a trust arose or in other words that the equitable right is not at home with the legal title.
Or, as was said in Pettitt v Pettitt [157] :
it is no more than a circumstance of evidence which may rebut the presumption of resulting trust.
1. (1984) 155 CLR 242 at 247.
2. (1959) 110 CLR 297 at 303.
3. [1970] AC 777 at 814, per Lord Upjohn.
While the presumption of advancement between father and child remains intact, its existence in the case of mother and child and particularly in the case of mother and adult child has been questioned over many years. In Scott v Pauly [158] Isaacs J assumed the correctness of the decision in Bennet v Bennet [159] that when a mother makes a purchase in the name of her child that does not of itself afford the presumption of advancement; in such a case, it was said, the intention to advance is a question of evidence. Underlying the decision was the notion that, according to the rules of equity, there was no obligation on a mother to make provision for her child. Isaacs J observed [160] :
That case, drawing a distinction between father and mother, has not, so far as I am aware, been judicially doubted.
1. (1917) 24 CLR 274.
2. (1879) 10 Ch D 474.
3. Scott v Pauly (1917) 24 CLR 274 at 282.
In Calverley v Green, Gibbs CJ said of these and other authorities [161] :
The principle upon which the presumption of advancement rests does not seem to me to have been convincingly expounded in the earlier authorities.
Referring to the categories of relationships which have given rise to a presumption of advancement, Deane J said [162] :
It is arguable that they should be adjusted to reflect modern concepts of the equality in status and obligations of a mother vis-à-vis a father.
In Dullow v Dullow [163] , Hope JA, with whom Kirby P and McHugh JA agreed, found it unnecessary to consider what the correct principle is as to any presumption of advancement when a mother places property in the name of a child. But his Honour continued [164] :
as at present advised, I think that if the law is to be left constrained by presumptions, the same presumption should apply to gifts to children by both mother and father.
In Brown v Brown [165] , Gleeson CJ thought that at the present time the drawing of any rigid distinction between parents "may be accepted to be inappropriate". And Kirby P supported the principle that the presumption of advancement, if it is still to be applied, "must be applied equally to gifts by mothers as by fathers" [166] .
1. Calverley v Green (1984) 155 CLR 242 at 248.
2. Calverley v Green (1984) 155 CLR 242 at 268.
3. (1985) 3 NSWLR 531.
4. Dullow v Dullow (1985) 3 NSWLR 531 at 541.
5. (1993) 31 NSWLR 582 at 591.
6. Brown v Brown (1993) 31 NSWLR 582 at 599.
It is possible to determine this appeal on the footing that there is no applicable presumption of advancement or that there is such a presumption but that it is rebutted by the circumstances. In either case the result would be to uphold Mrs Nelson's claim to beneficial ownership of Bent Street and the proceeds of its sale, subject of course to the argument of Elizabeth Nelson based on illegality. Given the somewhat uncertain state of the authorities, it is desirable that this Court resolve the issue of advancement. But if it does so, it is in the context that it is neither necessary nor desirable to review the law relating to resulting trusts generally.
So long as the presumption of advancement has a part to play, there is no compelling reason for making a distinction between mothers and fathers in relation to their children and every reason, in the present social context, for treating the situations alike. The rationale underlying the presumption of advancement has varied. Some have expressed it in terms of the obligation of the grantor to support the grantee [167] . Others have seen it as arising from established categories of lifetime relationships [168] . In Calverley v Green, Gibbs CJ said that the presumption should be raised "when the relationship between the parties is such that it is more probable than not that a beneficial interest was intended to be conferred, whether or not the purchaser owed the other a legal or moral duty of support" [169] . Such an approach tends to be open ended as the Chief Justice recognised when he said that to regard reconsideration of the correctness of the actual results reached in earlier cases as a barrier to acceptance of the principle he enunciated "would be to treat the established categories as frozen in time". That, he added, citing Dixon CJ, "would not be characteristic of the doctrines of equity". At the same time the approach taken by Gibbs CJ does have a question begging aspect and the uncertainty it generates is perhaps evidenced by the fact that in Calverley v Green only the Chief Justice held that the presumption of advancement applied to a de facto relationship.
1. Scott v Pauly (1917) 24 CLR 274 at 282, per Isaacs J; Calverley v Green (1984) 155 CLR 242 at 268, per Deane J.
2. Calverley v Green (1984) 155 CLR 242 at 259, per Mason and Brennan JJ; Nelson v Nelson (1994) 33 NSWLR 740 at 745.
3. Calverley v Green (1984) 155 CLR 242 at 250.
But again, it should be stressed that what the Court is concerned with in the present appeal is the very clear relationship of mother and children, albeit adult children. And whether the governing consideration is said to be a duty to support or a lifetime relationship, the result is that the presumption of advancement should apply. Section 66B(1) of the Family Law Act 1975 Cth imposes on the parents of a child "the primary duty to maintain the child". No distinction is made between father and mother; the particular objects of Div 6 of Pt VII of that Act, in which s 66B appears, include ensuring "that parents share equitably in the support of their children" (s 66A(2)). In Pt VII the definition of "child" is not geared to any particular age (see s 60), though "the income, earning capacity, property and financial resources of the child" must be taken into account (s 66D(1)).
While, in the case of many adult children, the statutory obligation cast on parents may have no practical consequences, the obligation is there. In so far as the presumption of advancement derives from an obligation of support, its application to mothers who fund the purchase of property by their children is logical. In so far as the presumption operating in the case of a father and his children derives from their lifetime relationship, the same is no less true of a mother and her children. The "egalitarian nature of modern Australian society, including as between the sexes" [170] demands no less. The point is highlighted in the present case by the fact that the cheques for the purchase price of Bent Street were drawn on the joint account of Mr and Mrs Nelson just before the former's death and were presented just after his death. To draw a distinction between them in terms of the presumption would be quite unreal.
1. Brown v Brown (1993) 31 NSWLR 582 at 600, per Kirby P. And see Re Dagle (1990) 70 DLR (4th) 201.
The presumption rebutted
However, the presumption of advancement, in whatever circumstances it arises, can be rebutted by evidence of the actual intention of the grantor at the time of the grant. Master Macready made an express finding that "there was no intention of Mrs Nelson to confer any beneficial interest on Elizabeth". Of course, Peter Nelson made no claim of beneficial interest for himself. The Master further concluded that "a purpose for putting the property in the name of the children was to preserve entitlement of Mrs Nelson to apply for a Defence Service's home loan". While these findings, which were not disturbed by the Court of Appeal, are more than sufficient to rebut the presumption of advancement, they shift the focus of attention to the implications of putting the property in the names of Peter and Elizabeth Nelson so as to make it possible for their mother to obtain such a loan.
Illegality
What then is the illegality which is said to preclude Mrs Nelson from asserting beneficial ownership of Bent Street? Master Macready set out in his judgment "the broad basis of the claims made by each of the parties and the defences raised in respect of those claims". As to Mrs Nelson's claim that there was a resulting trust in her favour in respect of Bent Street and the proceeds of its sale, the Master identified the relevant defence as follows:
There was an illegal purpose namely an intention to acquire a subsidy under the Defence Service Homes Act Cth in breach of s 18 of that Act.
Thus the purpose which is said to preclude Mrs Nelson's claim was identified, and necessarily had to be identified, as a purpose existing at the time Bent Street was acquired [171] . Clearly enough, in order to affect the ownership of Bent Street, any illegal purpose must relate to the circumstances in which that property was acquired. The acquisition by Mrs Nelson of Kidman Lane and the completion of the subsidy application have relevance only in so far as they throw light on the purchase of Bent Street in the name of someone other than Mrs Nelson. To put it in terms of the approach taken by the courts below, once the illegal purpose was carried out, was Mrs Nelson's equitable interest thereby destroyed?
1. As a matter of terminology, the purpose could not have been to acquire a "subsidy" because subsidy is the language of the Defence Service Homes Amendment Act 1988 Cth which did not come into operation until after the purchase of Bent Street. This matter is discussed later in this judgment.
But it is necessary to identify with some precision the "illegality" said to attach to the transaction in which the parties were involved. This in turn involves trying to get a clear picture of what took place, including the timing of events. At the time of the purchase of Bent Street there had been no application by Mrs Nelson for a Defence Service Home loan. The purchase of that property was completed on 4 November 1987 and a transfer registered on 18 November. The Subsidy Application in connection with the purchase of Kidman Street was lodged on 25 July 1989. The purchase of Kidman Street was completed on 31 August 1989.
Master Macready's judgment contains the following passage:
It is notable that at the time of purchase of Bent Street there was no application for a subsidy. Mrs Nelson concedes that she was aware at that stage that she was entitled to the subsidy and it was also her understanding that she might be precluded from getting a War Service Loan in due course if she already owned a house, in her name. It was also Mr Peter Nelson's intention at the time that Bent Street was purchased that in due course an application would be made for a War Service Loan.
It is not clear beyond argument what exactly was in contemplation so far as a Defence Service Home loan was concerned. Master Macready said:
It seems tolerably clear from the affidavits that Mrs Nelson, Peter Nelson and the deceased knew that a person cannot apply for a Defence Services Homes subsidy if they were the owner of a house.
Apparently Mr Nelson had earlier missed out on a loan under the Act for this reason. He told Elizabeth Nelson that her name would appear on the title to Bent Street because Mrs Nelson, in order to obtain such a loan, "was not meant to have a home". Mrs Nelson was eligible for a loan but did not seek one in respect of the purchase of Bent Street. It seems that the family had in mind that Bent Street would be sold at a later date and a permanent home found for Mrs Nelson. Bent Street might be sold before the purchase of another home. If a home was found before Bent Street could be sold, the existence of a title to that property in the names of Peter and Elizabeth Nelson would ensure that there was no impediment to Mrs Nelson obtaining a Defence Service Home loan in connection with the purchase of the new home. Since the maximum benefit was a loan of $25,000 on beneficial terms [172] , one might question the extent of the advantage hoped to be gained by this artificial arrangement. But the evidence referred to in the judgments admits of no other conclusion than that Bent Street was put in the names of Peter and Elizabeth Nelson so that Mrs Nelson might benefit from the Act at some later time if the need arose.
1. At the time Bent Street was purchased, the interest rate on a loan of $25,000 was on a sliding scale, culminating in 10 per cent on the last $10,000: s 30(1) and (2)(b).
Referring to the purpose of putting Bent Street in the names of the children, Master Macready said:
That proposed purpose of itself is not illegal but when the application was made for the certificate of entitlement [that is, entitlement to a loan under the Act] it was consummated.
This emphasis on consummation of purpose appears also in the judgment of Sheller JA, where his Honour said [173] :
In my opinion the appellants' claim fails because the unlawful purpose of obtaining a loan under the War Service Loan legislation for the purchase of Kidman Lane by concealing Mrs Nelson's interest in Bent Street was carried out. I do not think this result is avoided by the appellants' attempt to show that the intention of Mr and Mrs Nelson not to benefit Peter and Elizabeth by the transfer of Bent Street into their names could have been proved without the need to refer to the illegal purpose. This matters not, once the illegal purpose is carried into effect.
1. Nelson v Nelson (1994) 33 NSWLR 740 at 750.
Although the "unlawful purpose" related only to the obtaining of a Defence Service Home loan, the consequence of the judgments below was that Mrs Nelson failed to make good any part of her claim to the proceeds of the sale of Bent Street.
Defence Services Homes Act
The Act was substantially amended by the Defence Service Homes Amendment Act 1988 Cth (the Amendment Act). The Amendment Act took effect from 19 December 1988 so that the purchase of Bent Street preceded it. The purchase of Kidman Lane and the completion of the Subsidy Application took place after the Amendment Act came into force.
The Amendment Act repealed Pts III, IV, V and VI of the Act. Part V was headed: "Advances on mortgage for purposes of homes." It empowered the Defence Service Homes Corporation (the Corporation) to make an advance to an "eligible person" for the purpose inter alia of purchasing a dwelling-house (s 20(1)(c)). Mrs Nelson qualified as an eligible person. The maximum advance was $25,000 (s 21(1)). No advance was to be made unless the Corporation was satisfied that the dwelling-house was intended to be used by the applicant as a home for himself and his dependants and that neither the applicant nor the wife or husband (if any) of that person was the owner of any other dwelling-house (s 23). The term "owner" was defined in s 4 of the Act to include, in the case of a dwelling-house, "any person who has purchased or contracted to purchase a dwelling-house". Because the definition was inclusive, "owner" would include equitable as well as legal ownership. The sanction for a false declaration as to ownership lay in the power of the Corporation to call up the whole of the moneys secured by mortgage to give effect to the advance (s 32A). No penalty was prescribed for a breach of the Act.
The Amendment Act
The Amendment Act introduced the language of subsidy. It did so in the context of an agreement made between the Commonwealth of Australia and Westpac Banking Corporation (Westpac) whereby the Commonwealth agreed to pay to Westpac an interest subsidy in connection with a subsidised advance by Westpac to an eligible person [174] . Under Pt III of the Act as amended by the Amendment Act: "Notices of Eligibility and Certificates of Entitlement", a person may apply to the Secretary of the Department of Veterans' Affairs for a notice of eligibility and certificate of entitlement (s 15). Mrs Nelson qualified as an "eligible person" under the revised definition in s 4(1). The Secretary shall not issue a certificate of entitlement unless satisfied inter alia that the person is not the owner of any dwelling-house "other than the dwelling-house in respect of which the advance is payable" (s 18(1)(b)).
1. At the time of the purchase of Kidman Street, the interest payable on a subsidised advance of $25,000 was 6.85 per cent: s 31. There is a discussion of the arrangement between the Commonwealth and Westpac in Westpac Banking Corporation v Commissioner of Stamp Duties (Q) [1994] 2 Qd R 212.
Where the Secretary is satisfied that a certificate of entitlement was issued as a result of a false statement by the person or that the person was not entitled to the certificate, the Secretary may cancel the subsidy (s 26(1)). The Secretary may then require payment to the Commonwealth of the subsidy or part thereof "as the Secretary determines to be reasonable" (s 29(1), (2)). The amount specified may be recovered as a debt due to the Commonwealth (s 29(4)) but the Secretary may write off the amount, waive the right of recovery or allow the person to pay the amount by instalments (s 30(1)). Again, there is no penalty imposed for a breach of the Act.
Whether any of the provisions of the Crimes Act 1914 Cth would be applicable in the circumstances it is unnecessary to determine. It is enough to note the existence of various sections in that Act dealing with false pretences, defrauding the Commonwealth or a public authority under the Commonwealth and conspiracy [175] . The point is that the Crimes Act itself contains sanctions against conduct aimed at securing a financial advantage at the expense of the Commonwealth. Reference may also be made to s 11 of the Statutory Declarations Act 1959 Cth which makes it an offence wilfully to make a false statement in a statutory declaration. There is no compulsion to look for an additional sanction arising from the Act, other than the right of recovery of the subsidy for which express provision is made. This is an echo of what was said by Mason J (with whom Aickin J agreed) in Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd [176] :
There is much to be said for the view that once a statutory penalty has been provided for an offence the rule [sic] of the common law in determining the legal consequences of commission of the offence is thereby diminished.
It is true that the Act itself carries no penalty; nevertheless there is a range of provisions apt to catch conduct aimed at defrauding the Commonwealth and making false declarations.
1. See ss 29A, 29B, 29D and 86 of the Crimes Act.
2. (1978) 139 CLR 410 at 429.
Tinsley v Milligan
The appellants submitted that the question of illegality did not truly arise because Mrs Nelson did not need to rely on any illegal purpose in order to rebut the presumption of advancement. The decision of the House of Lords in Tinsley v Milligan [177] was urged in support of this view. The approach of the majority (Lord Jauncey of Tullichettle, Lord Lowry and Lord Browne-Wilkinson, Lord Keith of Kinkel and Lord Goff of Chieveley dissenting) was that a claimant to an interest in property was entitled to recover if not forced to plead or rely on an illegal transaction in the course of which the property was acquired; that, in the circumstances, by showing that she had contributed to the purchase price of the property and that there was a common understanding between the parties that they owned the property equally, the defendant had established a resulting trust; and that there was no necessity to prove the reason for the conveyance into the sole name of the plaintiff. The reason was to assist in the perpetration of frauds on the Department of Social Security.
1. [1994] 1 AC 340.
Master Macready distinguished Tinsley v Milligan on the ground that in the present case a presumption of advancement applied and that it was necessary for the appellants to rebut that presumption. While Handley JA in the Court of Appeal did not refer to Tinsley v Milligan (as mentioned earlier, his Honour agreed generally with Sheller JA), he did say [178] :
Any attempt by a disponor to rebut the presumption [of advancement] involves an inquiry as to his or her real intention before and at the time of the disposition. This cannot be a limited or artificial inquiry. The court must determine what the real intention of the disponor was in the light of the whole of the evidence which is admissible for that purpose.
Sheller JA referred to Tinsley v Milligan but said that even on the approach taken there it was still necessary to consider why Bent Street was not registered in the name of Mrs Nelson and "[a]t that point the purpose of obtaining a subsidised loan by concealment is revealed" [179] .
1. Nelson v Nelson (1994) 33 NSWLR 740 at 741-742.
2. Nelson v Nelson (1994) 33 NSWLR 740 at 750.
The approach taken by the Master and by the Court of Appeal must be considered in the light of what was said by Lord Lowry in Tinsley v Milligan [180] :
The advancement cases belong to a class in relation to which the rule seems to me to conform with equitable principles. The ostensible donor makes a gift with a fraudulent purpose in view; when he tries to assert his equitable title, he is obliged to rely on his own fraud in order to rebut the presumption of advancement. Equity, through the mouth of the court, then says, "We will not assist you to recover your property, because you have to give evidence of your own wrongdoing in order to succeed." On the other hand, under the wide principle, someone in the position of Miss Milligan, who has only to show a trust, resulting from the fact (which he must prove or which may be admitted) that the property was acquired wholly or partly by the use of his money, is said to be defeated by the maxim that he who comes into equity must come with clean hands, on the ground that the original transaction was undertaken for a fraudulent purpose. But in the latter case the claimant is not relying on his own fraud in order to succeed and is merely said to be defeated by a rule of policy, despite the fact that he already has an equitable interest, as the locus poenitentiae rule confirms.
In putting the matter that way his Lordship was impliedly accepting the distinction made expressly by Lord Jauncey [181] "between the enforcement of executory provisions arising under an illegal contract or other transaction and the enforcement of rights already acquired under the completed provisions of such a contract or transaction".
1. [1994] 1 AC 340 at 367-368.
2. Tinsley v Milligan [1994] 1 AC 340 at 366; see also at 369, per Lord Browne-Wilkinson.
The distinction is well recognised in the authorities. At the same time there is an artificiality in the view taken by the majority in Tinsley v Milligan that, in cases where the presumption of advancement does not apply, a plaintiff can establish his or her equitable interest "without relying in any way on the underlying illegal transaction" [182] . This approach follows that taken in Alexander v Rayson [183] and in Bowmakers Ltd v Barnet Instruments Ltd [184] which allows a party to an illegality to recover by reason of a legal or equitable interest in property if he can establish the claim without relying on his own illegality. Thus, in Tinsley v Milligan the respondent had to do no more than establish a resulting trust without proving why the house was conveyed into the name of the appellant alone, namely, to defraud the Department of Social Security. This approach is open to the criticism that it represents a triumph of procedure over substance. It pays no regard to the nature or seriousness of the illegality.
1. Tinsley v Milligan [1994] 1 AC 340 at 371, per Lord Browne-Wilkinson.
2. [1936] 1 KB 169.
3. [1945] KB 65.
A different view was taken by Lord Goff (with whom Lord Keith agreed) that [185] :
once it comes to the attention of a court of equity that the claimant has not come to the court with clean hands, the court will refuse to assist the claimant, even though the claimant can prima facie establish his claim without recourse to the underlying fraudulent or illegal purpose.
This approach too is open to criticism. It carries automatic refusal of relief and therefore, as Lord Goff recognised [186] , its "application is indiscriminate and so can lead to unfair consequences as between the parties to litigation".
1. Tinsley v Milligan [1994] 1 AC 340 at 358.
2. Tinsley v Milligan [1994] 1 AC 340 at 355.
Illegality and public policy
The illegality upon which Elizabeth Nelson relies is contravention of a statutory provision. A statute may contain an express prohibition against the making of a contract. Or it may prohibit the doing of a particular act. An agreement that the act be done may, in the circumstances, be impliedly prohibited. On the other hand, a contract in furtherance of an illegal purpose may not be directly contrary to the provisions of the statute by reason of any prohibition, express or implied [187] . In asking where is the illegality that precludes Mrs Nelson from asserting beneficial ownership of Bent Street, it is necessary to identify the policy which underlies the relevant provisions of the Act, bearing in mind the amendments made to the Act and the chronology of events.
1. See the discussion by the Full Court of the Federal Court in Farrow Mortgage Services Pty Ltd (In liq) v Edgar (1993) 114 ALR 1 at 10-13.
The policy of the Act may be discerned from its long title: "An Act relating to the provision of assistance to members of the Defence Force and certain other persons to acquire homes." It is clear from the sections already mentioned that assistance, whether in the form of secured loan as before or a subsidy as now, is to be given to those who do not own another dwelling-house. Ownership of another dwelling-house precluded eligibility for a loan and now precludes eligibility for a subsidy. No penalty is imposed for a breach of the Act, in its original or amended form. The remedy of the Commonwealth is recovery of the subsidy obtained by reason of a false statement regarding ownership of another dwelling-house. That is the consequence of a false statement. There is nothing in the Act which in any way purports to affect the ownership of a dwelling-house wrongly obtained through the use of a subsidy; the Act has nothing to say about that matter. There was no statutory bar to the transaction whereby Mrs Nelson acquired the beneficial ownership of Bent Street; there was nothing in that transaction which offended against any provision of the Act.
In those circumstances the approach to be taken was indicated by Mason J in Yango when he said [188] :
It is perhaps more accurate to say that the question whether a contract prohibited by statute is void is, like the associated question whether the statute prohibits the contract, a question of statutory construction and that the principle to which I have referred does no more than enunciate the ordinary rule which will be applied when the statute itself is silent upon the question. Primarily, then, it is a matter of construing the statute and in construing the statute the court will have regard not only to its language, which may or may not touch upon the question, but also to the scope and purpose of the statute from which inferences may be drawn as to the legislative intention regarding the extent and the effect of the prohibition which the statute contains.
1. Yango (1978) 139 CLR 410 at 423.
The Act expressly prohibits the making of a false declaration as to ownership of another dwelling-house. It provides for the recovery of a subsidy obtained through such a false declaration. But the Act does not prohibit the purchase of a dwelling-house with the aid of a subsidy obtained by making a false statutory declaration. It says nothing about such a purchase. If there is any such prohibition, "that prohibition must be ascertained or identified by a process of implication" [189] . But no such implication can be drawn. And it would be an extraordinary consequence if the implication were drawn. Take the case of a purchaser of a dwelling-house, taking the title in his or her own name, who makes a false declaration under the Act as to ownership of another dwelling-house. Could the seller refuse to complete the sale if the existence of the false declaration became known? The answer must surely be no. There is nothing "illegal" in the transaction between the parties. The source of a purchase price is a matter between the purchaser and anyone who provides assistance for the purchaser. When one of those persons is the Corporation, the Corporation's remedies are to be found in the Act. Thus in Orr v Ford [190] liability to forfeiture of leasehold acquired in breach of the Land Act 1962 Q was held not to render illegal a trust of land so acquired.
1. Yango (1978) 139 CLR 410 at 423.
2. (1989) 167 CLR 316.
It is true that there is a distinction between statutory prohibition of a contract and consequential invalidity, on the one hand, and the court's refusal to enforce the contract, on the other hand. "The former is a matter of statutory construction the latter is a matter of public policy" [191] . It was therefore argued that even if the Act does not expressly or impliedly prohibit the arrangement by which Bent Street was acquired in the names of Peter and Elizabeth Nelson, nevertheless the court will not permit the parties to give effect to that arrangement.
1. PT Ltd v Maradona Pty Ltd (1992) 25 NSWLR 643 at 654, per Giles J.
If that argument is upheld, it means that the court will not permit Mrs Nelson to assert beneficial ownership of Bent Street because the parties contemplated that the legal estate in her name would constitute a barrier to obtaining a Defence Service Home loan. The Court of Appeal did not say that the arrangement was thereby illegal and unenforceable. Those attributes were held to attach once "the unlawful purpose was carried out".
When a contract is not itself the subject of an express or implied statutory prohibition but is associated with or is in furtherance of an illegal purpose, the "refusal of the courts to regard such contracts as enforceable stems not from a legislative prohibition but from the policy of the law, commonly called public policy" [192] . Even then it is necessary to ask what public policy of the law would be served by declining to enforce the contract. The rule of law expressed in the maxim ex turpi causa non oritur actio is one of public policy to discourage breaking the law. The underlying policy is that "[n]o court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act" [193] . But a universal application of this rigid rule will often lead to unjust and capricious results. As was said by Nicholls LJ in Saunders v Edwards [194] , "public policy is not a blunt, inflexible instrument".
1. Yango (1978) 139 CLR 410 at 432, per Jacobs J.
2. Holman v Johnson (1775) 1 Cowp 341 at 343 [98 ER 1120 at 1121].
3. [1987] 1 WLR 1116 at 1132; [1987] 2 All ER 651 at 664.
Once we are in the realm of public policy we are in a rather shadowy world. It is perhaps the more shadowy here because Mrs Nelson is not asking the court to enforce a contract but rather to give effect to the resulting trust which would ordinarily arise once the presumption of advancement has been rebutted. The rule of law expressed in the Latin maxim is, as Diplock LJ said in Hardy v Motor Insurers' Bureau [195] :
concerned not specifically with the lawfulness of contracts but generally with the enforcement of rights by the courts, whether or not such rights arise under contract. All that the rule means is that the courts will not enforce a right which would otherwise be enforceable if the right arises out of an act committed by the person asserting the right which is regarded by the court as sufficiently anti-social to justify the court's refusing to enforce that right.
1. [1964] 2 QB 745 at 767.
From this formulation of the rule, certain consequences follow. Relevantly, in the view of his Lordship [196] :
The court's refusal to assert a right, even against the person who has committed the anti-social act, will depend not only on the nature of the anti-social act but also on the nature of the right asserted. The court has to weigh the gravity of the anti-social act and the extent to which it will be encouraged by enforcing the right sought to be asserted against the social harm which will be caused if the right is not enforced.
1. Hardy [1964] 2 QB 745 at 767-768.
This in effect was the approach taken by Nicholls LJ in the Court of Appeal in Tinsley v Milligan [197] . Nicholls LJ and Lloyd LJ were in the majority; Ralph Gibson LJ dissented. It was an approach which did not find favour with the minority in the House of Lords or indeed with the majority [198] .
1. [1992] Ch 310.
2. Tinsley v Milligan [1994] 1 AC 340 at 363, per Lord Goff; at 369, per Lord Browne-Wilkinson.
Referring to recent decisions of the Court of Appeal [199] , Nicholls LJ said that these authorities established that "the underlying principle is the so-called public conscience test" [200] . That test required the court to weigh the adverse consequences of granting relief against the adverse consequences of refusing relief. It called for a value judgment. In answer to the contention that the public conscience test had no place where property was conveyed into the name of one party for a fraudulent purpose, Nicholls LJ examined a line of authority that begins with the decision of Lord Eldon LC in Cottington v Fletcher [201] . But, as he observed, these cases lie uneasily with the notion of public policy which eschews an inflexible approach. And as has been pointed out [202] , in Bowmakers the Court of Appeal allowed the plaintiff's claim only because it was "satisfied that no rule of law, and no considerations of public policy, compel the court to dismiss the plaintiff's claim in the case before us" [203] .
1. Saunders v Edwards [1987] 1 WLR 1116; [1987] 2 All ER 651; Euro-Diam Ltd v Bathurst [1990] 1 QB 1; Howard v Shirlstar Ltd [1990] 1 WLR 1292; [1990] 3 All ER 366; Pitts v Hunt [1991] 1 QB 24.
2. Tinsley v Milligan [1992] Ch 310 at 319.
3. (1740) 2 Atk 155 [26 ER 498].
4. Enonchong, Illegality: The Fading Flame of Public Policy, Oxford Journal of Legal Studies, vol 14 (1994) 295, at p 301 .
5. Bowmakers [1945] KB 65 at 72.
To inquire into the circumstances in which the illegality occurred is not at odds with the courts' approach to questions of public policy. In Vita Food Products Inc v Unus Shipping Co Ltd, Lord Wright, delivering the judgment of the Privy Council, said [204] :
Nor must it be forgotten that the rule by which contracts not expressly forbidden by statute or declared to be void are in proper cases nullified for disobedience to a statute is a rule of public policy only, and public policy understood in a wider sense may at times be better served by refusing to nullify a bargain save on serious and sufficient grounds.
To allow the result in such a situation to be determined by the procedural aspects of a claim for relief is at odds with the broad considerations necessarily involved in questions of public policy.
1. Vita Food Products [1939] AC 277 at 293.
Although the public policy in discouraging unlawful acts and refusing them judicial approval is important, it is not the only relevant policy consideration. There is also the consideration of preventing injustice and the enrichment of one party at the expense of the other [205] . In the present case there was an arrangement, to which the members of the family were party, that Bent Street be acquired in the names of Peter and Elizabeth Nelson. Their purpose was to enable Mrs Nelson to obtain a Defence Service Home loan if the occasion arose. Such a loan involved favourable terms to the borrower; the loan itself of course was in any event repayable. To that limited extent there would be a benefit to Mrs Nelson at some later date by making a false statement as to ownership of another dwelling. On the other hand, to refuse Mrs Nelson's claim is to give Elizabeth Nelson a "windfall gain" [206] of nearly $200,000 with a corresponding detriment to Mrs Nelson. In those circumstances there is no rule of public policy that demands that relief to Mrs Nelson must be refused [207] . In particular there is no such rule that precludes giving effect to a resulting trust in her favour.
1. St John Shipping Corporation v Joseph Rank Ltd [1957] 1 QB 267 at 288-289, per Devlin J.
2. See Yango (1978) 139 CLR 410 at 428.
3. It has been suggested that as a result of Tinsley v Milligan : "The "unruly horse" of public policy continues its blind gallop through the doctrinal forests of illegality.": Stowe, The Unruly Horse has Bolted: Tinsley v Milligan, Modern Law Review, vol 57 (1994) 441, at p 449 .
Conclusion
The appeal should therefore be allowed. In so far as there has been a breach of the Act, the remedy is in the hands of the Commonwealth. The Secretary may cancel the subsidy and thereafter require payment of the subsidy or part thereof or may write off the amount, waive the right of recovery or allow Mrs Nelson to pay the amount by instalments. There is no obvious reason why the Secretary would not cancel the subsidy and require its repayment. But that is a matter for the Secretary. Once it appears that any illegality or unlawful purpose associated with the purchase of Bent Street does not preclude Mrs Nelson from asserting a beneficial interest in that property, her position vis-à-vis the Corporation is a matter between her and that body. To require Mrs Nelson, as a condition of obtaining a declaration of beneficial interest in the property or the proceeds of its sale, to pay to the Commonwealth an amount equal to the subsidy is to require more than that a plaintiff do equity between the parties. Clearly though the Corporation should be told, if it has not already been told, of the situation at the time Mrs Nelson made her statutory declaration.
I would allow the appeal, set aside the orders of the Court of Appeal, allow the appeal to that Court and set aside declarations 1, 2 and 3 made by the Master on 10 January 1994. There should be declarations to the effect that Peter and Elizabeth Nelson held Bent Street in trust for Mrs Nelson and to the further effect that the second respondents hold the balance of the proceeds of the sale of Bent Street in trust for Mrs Nelson. The parties should have an opportunity to file an agreed minute of orders to give effect to this judgment including the question of costs. In the event of disagreement they should file written submissions as to the appropriate orders to be made.
McHugh J.
This appeal is brought by Mrs Bettie June Nelson (Mrs Nelson) and her son, Peter John Nelson (Peter), against an order of the New South Wales Court of Appeal. That Court dismissed an appeal against an order made in the Equity Division of the Supreme Court by Master Macready. The Master held that Mrs Nelson had intended to retain the beneficial ownership of property that she purchased in the name of her children. However, he held that she was unable to rebut the presumption of advancement in favour of the children because the property was put in their names to facilitate a claim for a subsidy under the Defence Service Homes Act 1918 Cth (the Act), a subsidy which her ownership of the property prevented her from obtaining.
The appeal raises four questions:
(1) Does the presumption of advancement apply when a mother conveys property to one of her children or when she provides the purchase price for a property that is conveyed to one of her children?
(2) Does the law permit a presumption of advancement to be rebutted when it is established that property was transferred to or money paid on behalf of another to further an illegal purpose or object?
(3) If so, upon what principles does a court act in determining whether the presumption can be rebutted?
(4) Does the law permit a presumption of advancement to be rebutted and a resulting trust enforced when it is established that property was transferred to or bought in the name of another person for the purpose of obtaining a subsidy contrary to the provisions of the Act?
In my opinion, the appeal should be allowed. Although the presumption of advancement applies to transfers of property by a parent of either sex, the presumption is rebuttable. It may be rebutted even where the transfer was made for an illegal purpose unless the circumstances of the transfer are so injurious to the public interest that public policy requires otherwise. Nothing in the Act or its objects nor in the circumstances of this case provided any sound reason in public policy for the Supreme Court refusing to allow Mrs Nelson to rebut the presumption in this case. Consequently, her proven intention to retain the beneficial ownership of the property rebutted the presumption of advancement and gave rise to a resulting trust of the property in her favour.
The factual background
Mrs Nelson is the widow of John Wallace Nelson (Mr Nelson). They had two children, Elizabeth Nelson (Elizabeth) and Peter. Prior to 1985 Mr and Mrs Nelson had lived in a property in Yasmar Avenue, Haberfield. In 1985 Mr Nelson bought a property in Windsor Street, Paddington with the intention of renovating and selling it. The Yasmar Avenue property was sold in early 1986 for $165,000. The Windsor Street property was sold in August 1986 for $188,500.
In August 1987, Peter and Elizabeth became the nominal purchasers as joint tenants of a property at 5 Bent Street, Petersham for $145,000. The purchase was completed on the day that Mr Nelson died, 4 November 1987, and the change of title was registered in their names on 18 November. The money for the deposit and the balance of the purchase price was drawn from the joint account of Mr and Mrs Nelson. The majority of this money came from proceeds of the sale of the Windsor Street property.
After the purchase of Bent Street, Peter arranged for the house to be renovated. Renovation was completed in June 1988. In about March or April of that year Mrs Nelson and Peter began to live in the house, but Mrs Nelson thought that the property was too large for a family home. In August 1989 she bought a property at Kidman Lane, Paddington in her own name. She intended to demolish the house on this land and build a new one. To fund the purchase, a loan of $150,000 was obtained. In addition, Mrs Nelson obtained another $25,000 as a subsidised loan pursuant to the provisions of the Act. To obtain that loan, Peter completed a form entitled "Subsidy Application" on his mother's behalf. In response to the question: "Do you or your spouse own or have a financial interest in a house or dwelling other than the one for which a subsidy is sought?", a tick was placed in the box beside the word "No".
In October 1990, the Bent Street property was sold for $400,000. Upon settlement and after discharging the mortgage, an amount of $232,509.83 remained. This money is invested in an interest bearing trust account in the name of the second respondents, who are Elizabeth's solicitors.
Mrs Nelson is the executrix of and sole beneficiary of Mr Nelson's estate. Probate was granted to her on 5 November 1991. In December 1991, she commenced proceedings in the Supreme Court of New South Wales seeking a declaration that Peter and Elizabeth held the proceeds of the sale of Bent Street in trust for her. She claimed a resulting trust on the basis that she and Mr Nelson had provided all the money for its purchase. In her cross-claim, Elizabeth alleged that her parents provided the funds by way of advancement for Peter and herself. In the Supreme Court, Master Macready held that the relationship of mother and adult child gave rise to a presumption of advancement. The Master also found: (1) Mrs Nelson had no intention to confer any beneficial interest in Bent Street or the proceeds of its sale upon Elizabeth or Peter; (2) one of the purposes of purchasing Bent Street in the names of Peter and Elizabeth was to preserve Mrs Nelson's entitlement to apply for a defence service home loan which would have been jeopardised if she had retained the legal interest in Bent Street; (3) the grant of a certificate of entitlement for the defence service home loan in respect of the Kidman Lane property was achieved by concealing Mrs Nelson's interest in the Bent Street property; (4) as a result, Mrs Nelson could not lawfully rebut the presumption of advancement and Elizabeth was entitled to a declaration that she was entitled to one half of the proceeds of the sale of the Bent Street property plus interest.
The presumptions of resulting trust and advancement
When a person (the transferor) transfers property without consideration or purchases property and directs the vendor to transfer the title to another person, equity presumes that the transferee holds the property on a resulting trust for the transferor [10] . The presumption may be rebutted by evidence that the transferee received the property as a gift [11] . A different presumption arises where the relationship between the parties falls into a class where dependency, past, present or future, commonly exists or, at all events, commonly existed in the nineteenth and earlier centuries. If such a relationship exists, the transfer is presumed to be made for the benefit of the transferee [12] although the transferor may rebut the presumption by direct evidence or by inferences drawn from the circumstances [13] . Thus, a transfer of property without consideration by a father to a child [14] , a husband to a wife [15] , or an intending husband to an intending wife [16] is presumed to be made to advance the interests of the transferee. Until recently, however, the weight of authority favoured the conclusion that the presumption of advancement did not apply to transfers of property made without consideration by a mother to her child [17] . Sir George Jessel MR once said [18] that the presumption of advancement "arises from the moral obligation to give". He explained [19] the reason for the distinction between a voluntary transfer by a father to a child and one by a mother to a child as resting on the lack of any moral obligation on the part of "a mother to provide for her child". This explanation for the distinction must seem strange to most persons living in the late twentieth century, but it accords with the then widely held conception of the role of a wife in a late nineteenth century household and with the then legal rule that, upon marriage, the property of the wife became the property of her husband.
1. Dyer v Dyer (1788) 2 Cox 92 at 93 [30 ER 42 at 43]; Napier v Public Trustee (WA) (1980) 55 ALJR 1 at 3; Calverley v Green (1984) 155 CLR 242 at 246-247, 255, 266.
2. Russell v Scott (1936) 55 CLR 440 at 449, 451-453; Calverley (1984) 155 CLR 242 at 246, 255.
3. Calverley (1984) 155 CLR 242 at 267.
4. Martin v Martin (1959) 110 CLR 297 at 304.
5. Shephard v Cartwright [1955] AC 431; Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353.
6. In re Eykyn's Trusts (1877) 6 Ch D 115.
7. Wirth v Wirth (1956) 98 CLR 228.
8. Bennet v Bennet (1879) 10 Ch D 474; In re Ashton, Ingram v Papillon [1897] 2 Ch 574; Scott v Pauly (1917) 24 CLR 274 at 281-283.
9. Bennet (1879) 10 Ch D 474 at 477.
10. Bennet (1879) 10 Ch D 474 at 478.
While the presumption of advancement continues to apply to transfers of property between father and child, consistency of doctrine requires that the presumption should also apply to transfers of property by a mother to her child. If the presumption of advancement arises, as Sir George Jessel thought, from the obligation of a father to provide for his child, the mother as well as the father now has a legal obligation to support their child [20] . But independently of any legal obligation of a mother, it would not accord with the reality of society today for the law to presume that only a father has a moral obligation to support or is in a position to advance the interests of a child of the marriage [21] . Consequently, the New South Wales Court of Appeal was right to hold in Brown v Brown [22] that the presumption of advancement applied as between mother and child as well as between father and child. The real question is whether the courts should continue to hold that the presumption applies to either parent.
1. Family Law Act 1975 Cth, s 66B.
2. 1. As a factual matter women are income earners to a much greater extent now than when the rule was developed. Participation rates of women in the workforce are around 50 per cent (in contrast to around 75 per cent for men): Castles, Year Book Australia 1995, pp 145-147. 2. The rule as traditionally formulated ignores the unpaid work of women in the home as being a contribution to "providing for" children. 3. More importantly, the values of society have changed so that there is no longer a uniform expectation that only fathers will contribute financially to the assets of a marriage or de facto marriage or provide for the advancement of the children of the relationship. Such an expectation may still exist in some social groupings and relationships, but it is no longer the common expectation of Australian society.
3. (1993) 31 NSWLR 582.
The presumption of advancement is a consequence of the equitable rule that, when a person transfers property without consideration or purchases property and directs the vendor to transfer the property into the name of another, the transferee is presumed to hold the property on a resulting trust for the transferor. No doubt in earlier centuries, the practices and modes of thought of the property owning classes made it more probable than not that, when a person transferred property in such circumstances, the transferor did not intend the transferee to have the beneficial as well as the legal interest in the property. But times change. To my mind — and, I think, to the minds of most people — it seems much more likely that, in the absence of an express declaration or special circumstances, the transfer of property without consideration was intended as a gift to the transferee. That being so, there is a strong case for examining whether the presumption of a resulting trust accords with the effect of contemporaneous practices and modes of thought. If that presumption goes, there is no compelling reason for a presumption of advancement in the case of transfers of property by parents to children. Indeed, the presumption of advancement itself may not accord with contemporaneous practices and modes of thought.
A presumption is a useful aid to decision making only when it accurately reflects the probability that a fact or state of affairs exists or has occurred. As Murphy J said in Calverley v Green [23] "[p]resumptions arise from common experience As standards of behaviour alter, so should presumptions". If the presumptions do not reflect common experience today, they may defeat the expectations of those who are unaware of them. Nevertheless, as Deane J pointed out in Calverley [24] , the presumptions are "too well entrenched as "landmarks" in the law of property to be simply discarded by judicial decision". Although the operation of the presumptions may sometimes defeat the expectations of transferors and transferees, it may be that many transfers of property have been made on the basis of the presumptions. If evidence was no longer available to confirm that property had been transferred to achieve a result in accord with the presumptions, serious injustice might be done to those who have dealt in the property. In the absence of knowledge as to what effect the abolition of the presumptions would have on existing entitlements, the better course is to leave reform of this branch of the law to the legislature which can, if it thinks fit, abolish or amend the presumptions prospectively.
1. (1984) 155 CLR 242 at 264.
2. (1984) 155 CLR 242 at 266.
The appellant contends that, if the presumption of advancement continues as a legal principle, it should be restricted to cases in which the inference of advancement would be drawn in the absence of evidence of intention. This is another way of suggesting that the presumption does not arise unless the circumstances surrounding the bare relationship of the parties are consistent with the presumption. It would mean that where, for example, "a widowed mother, of modest means, makes a payment of substantially the whole of her assets to contribute to the purchase of real estate, and legal title is vested in her adult, able-bodied sons" [3] , no presumption of advancement would arise because the mother had no moral obligation to give her assets to her adult and able-bodied sons.
1. Brown (1993) 31 NSWLR 582 at 591.
If the presumption of advancement could be displaced by the objective circumstances of the relationship, the appellant might be able to succeed without disclosing her illegal purpose, for the facts of her case closely resemble the facts of the above example. But to accept the appellant's contention would seriously undermine the operation of the presumption of advancement. It would allow it to operate only where the surrounding circumstances were consistent with the presumption. It would also substitute an inquiry into the circumstances of the case for the automatic operation of the rule, thus increasing the uncertainty of property titles and promoting litigation. As long as the presumption of advancement continues to apply to property dealings, it should apply whenever the parties stand in a relationship that has been held to give rise to the presumption. The circumstances surrounding a relationship may be used to rebut the presumption, but they cannot be used to prevent it from arising.
Master Macready and the Court of Appeal proceeded on the basis that the presumption of advancement applied to the acquisition of the Bent Street property and was not rebutted by inferences from the circumstances of the relationship between Mrs Nelson and her children. However, the Master found that "there was no intention of Mrs Nelson to confer any beneficial interest on Elizabeth". Later in his judgment, he said "it seems fairly clear that a purpose for putting the property in the name of the children was to preserve [the] entitlement of Mrs Nelson to apply for a Defence Service's home loan on the basis that she would not be shown on the title deed". Both Master Macready and the Court of Appeal found that this purpose was unlawful and that, because her intention arose out of that purpose, a court, exercising equitable jurisdiction, could not allow her to prove her intention for the purpose of rebutting the presumption of advancement. It is this unlawful purpose of Mrs Nelson which raises the remaining questions in this case. To those questions I now turn.
Equitable relief and the consequences of statutory illegality
Mr Coles QC, counsel for Elizabeth, contends that the Supreme Court was correct in refusing to declare that Mrs Nelson was the beneficial owner of the property because equity will not permit a person to rebut the presumption of advancement and set up a resulting trust in respect of property that was transferred to effectuate an illegal purpose [4] . He asserts that this equitable rule is merely a particular application of a wider principle that a court of equity will not enforce an equitable proprietary interest arising from a transaction that had an illegal purpose and to which the claimant was a party [5] . In my opinion, these contentions are erroneous.
1. Donaldson v Freeson (1934) 51 CLR 598 at 610-611, 616-618; Martin (1959) 110 CLR 297 at 305; Palaniappa Chettiar v Arunasalam Chettiar [1962] AC 294 at 301-303; Tinsley v Milligan [1994] 1 AC 340 at 357-358, 366, 367, 371-375.
2. Cottington v Fletcher (1740) 2 Atk 155 [26 ER 498]; Birch v Blagrave (1755) Amb 264 [ 27 ER 176]; Muckleston v Brown (1801) 6 Ves Jun 52 [31 ER 934]; Ex parte Yallop (1808) 15 Ves Jun 60 [33 ER 677]; Groves v Groves (1829) 3 Y & J 163 [148 ER 1136]; In re Great Berlin Steamboat Co (1884) 26 Ch D 616; Garrett v L'Estrange (1911) 13 CLR 430 at 435; Tinsley [1994] 1 AC 340 at 354-355, 367.
The courts, including courts exercising equitable jurisdiction, will not enforce an unlawful agreement or trust and, frequently will not enforce an agreement or trust that has been entered into for an unlawful purpose. But these propositions do not lead to the conclusion that a person who participated in the making or execution of such an agreement or trust never has a curial remedy. A court that finds that an agreement is unlawful or has an unlawful purpose has merely set the stage for a further inquiry: are the circumstances surrounding the agreement such that the court should deny a relevant remedy to the party seeking the assistance of the court? Certainly, many cases contain statements that, stripped of their factual context and read in ignorance of other decisions, support the contentions of Mr Coles. But I doubt that the common law or equity ever maintained a doctrine of illegality as disabling as that for which he contends.
The argument for Elizabeth naturally relied on the famous dictum [6] of Lord Mansfield that "[n]o Court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act" [7] . The principle contained in this dictum applies in both law and equity [8] . But it is subject to exceptions which allow relief to be granted despite the presence of illegality [9] . First, the courts will not refuse relief where the claimant was ignorant or mistaken as to the factual circumstances which render an agreement or arrangement illegal [10] . Second, the courts will not refuse relief where the statutory scheme rendering a contract or arrangement illegal was enacted for the benefit of a class of which the claimant is a member [11] . Third, the courts will not refuse relief where an illegal agreement was induced by the defendant's fraud, oppression or undue influence [12] . Fourth, the courts will not refuse relief where the illegal purpose has not been carried into effect [13] . But Mr Coles claims that, whatever the scope of these exceptions in the courts of common law, they do not apply where a claimant seeks an equitable remedy to recover property that he or she has transferred to effectuate an illegal purpose. In this area, says Mr Coles, the general principle formulated in Holman v Johnson [14] has hardened into a fixed rule "that he who has committed iniquity shall not have equity; and what is required to invoke the maxim is no more than that the alleged misconduct has "an immediate and necessary relation to the equity sued for" " [15] . Alternatively, Mr Coles contends that neither the common law courts nor the equity courts will assist a claimant who must rely on his or her unlawful purpose to make out a cause of action.
1. Holman v Johnson (1775) 1 Cowp 341 at 343 [98 ER 1120 at 1121].
2. See also Tinsley [1994] 1 AC 340 at 372-376 and cases cited therein.
3. See notes to Roberts v Roberts (1818) Dan 143 at 150 [ 159 ER 862 at 865]; Ayerst v Jenkins (1873) LR 16 Eq 275 at 283; Chettiar [1962] AC 294 at 303; Tinsley [1994] 1 AC 340 at 354-355, 375-376.
4. See McCamus, Restitutionary recovery of benefits conferred under contracts in conflict with statutory policy — the new golden rule, Osgoode Hall Law Journal, vol 25 (1987) 787, at pp 797-800; Wade, Restitution of benefits acquired through illegal transactions, University of Pennsylvania Law Review, vol 95 (1947) 261.
5. Oom v Bruce (1810) 12 East 225 [104 ER 87]; Cowan v Milbourn (1867) LR 2 Ex 230; Branigan v Saba [1924] NZLR 481.
6. Kiriri Cotton Co Ltd v Dewani [1960] AC 192.
7. Clarke v Shee (1774) Cowp 197 [ 98 ER 1041]; Smith v Cuff (1817) 6 M & S 160 [105 ER 1203]; Williams v Bayley (1866) LR 1 HL 200; Goodfriend v Goodfriend [1972] SCR 640; Weston v Beaufils [No 2] (1994) 50 FCR 476 at 499.
8. Payne v McDonald (1908) 6 CLR 208 at 211-212; Perpetual Executors & Trustees Association of Australia Ltd v Wright (1917) 23 CLR 185 at 193-194; Martin (1959) 110 CLR 297 at 305.
9. (1775) 1 Cowp 341 [98 ER 1120].
10. Tinsley [1994] 1 AC 340 at 362, per Lord Goff of Chieveley, citing Dering v Earl of Winchelsea (1787) 1 Cox Eq 318 at 319-320 [ 29 ER 1184 at 1185-1186] and Snell's Equity, 29th ed (1990), p 32.
The wide principle
In Tinsley v Milligan [16] , all members of the House of Lords accepted that in the nineteenth century there was a "wide principle" that a court exercising equitable jurisdiction would not assist a claimant to recover property that had been transferred to another person for an unlawful purpose. At the very beginning of the nineteenth century, Lord Eldon LC said [17] in a well known passage that "the Plaintiff stating, he had been guilty of a fraud upon the law, to evade, to disappoint, the provision of the Legislature, to which he is bound to submit, and coming to equity to be relieved against his own act, and the defence being dishonest, between the two species of dishonesty the Court would not act; but would say, "Let the estate lie where it falls"." Lord Eldon went on to say [18] that "the law will not permit secret agreements to evade what upon grounds of public policy is established". Courts exercising equitable jurisdiction have frequently applied this principle [19] . Thus, in Curtis v Perry [20] Lord Eldon refused to enforce a trust where partners had agreed that the ownership of certain ships should remain registered in the name of one partner to conceal the interest of the other partner who was a member of Parliament and liable to statutory penalties if the ships were employed under contracts with the government. The Lord Chancellor said [21] :
[T]he object of keeping the ships registered in the name of Nantes, was, that a profit might be made by the employment of them in contracts with Government; and Chiswell was a Member of Parliament; who, the law says, shall not be a contractor. The moment the purpose to defeat the policy of the law by fraudulently concealing, that this was his property, is admitted, it is very clear, he ought not to be heard in this Court to say, that is his property.
In Gascoigne v Gascoigne [22] , the Divisional Court refused to enforce a trust where a husband had expended money in building a house on land under a lease of land taken in his wife's name for the purpose of protecting his assets from his creditors. Similarly, in Palaniappa Chettiar v Arunasalam Chettiar [23] , the Privy Council held that equity would not enforce a trust in respect of land transferred by a father to his son in order to defeat the operation of regulations governing the ownership of land on which rubber was grown. In giving the advice of the Judicial Committee, Lord Denning applied Lord Mansfield's dictum.
1. [1994] 1 AC 340.
2. Muckleston (1801) 6 Ves Jun 52 at 69 [31 ER 934 at 942]. Lord Eldon did not purport to lay down any new principle. The quoted passage is a summary of the view of Lord Hardwicke in Cottington (1740) 2 Atk 155 [26 ER 498] as to how the Court of Chancery should approach the enforcement of a trust for an illegal purpose where the trust was not admitted and the illegality was established.
3. Muckleston (1801) 6 Ves Jun 52 at 69 [31 ER 934 at 942].
4. See, eg, Curtis v Perry (1802) 6 Ves Jun 739 [31 ER 1285]; Ex parte Yallop (1808) 15 Ves Jun 60 [33 ER 677]; Groves (1829) 3 Y & J 163 [148 ER 1136]; In re Great Berlin Steamboat Co (1884) 26 Ch D 616.
5. (1802) 6 Ves Jun 739 [31 ER 1285].
6. Curtis v Perry (1802) 6 Ves Jun 739 at 747 [31 ER 1285 at 1288].
7. [1918] 1 KB 223.
8. [1962] AC 294.
In Tinsley, however, the House of Lords was divided as to whether the "wide principle" still represented the law.
Tinsley v Milligan
In Tinsley, the House held that the defendant was entitled to resist an ejectment action and obtain a declaration of part ownership in respect of property that had been purchased in the plaintiff's name to enable the defendant to claim social security benefits to which she was not entitled. The House held that, because the defendant did not need to plead or disclose her unlawful purpose in order to establish her case, she was entitled to equitable relief. Central to this question was whether the much criticised [24] decision of the Court of Appeal in Bowmakers Ltd v Barnet Instruments Ltd [25] , a case at law, applied in equity. In Bowmakers, the plaintiff recovered damages for the conversion of machine tools that were subject to hire-purchase agreements made in breach of the Defence Regulations. The Court of Appeal held that, despite the illegality of the agreements, the plaintiff could succeed in its claim because it could do so without founding its cause of action on the illegal agreements or pleading their illegality. Du Parcq LJ giving the judgment of the court said [26] :
In our opinion, a man's right to possess his own chattels will as a general rule be enforced against one who, without any claim of right, is detaining them, or has converted them to his own use, even though it may appear either from the pleadings, or in the course of the trial, that the chattels in question came into the defendant's possession by reason of an illegal contract between himself and the plaintiff, provided that the plaintiff does not seek, and is not forced, either to found his claim on the illegal contract or to plead its illegality in order to support his claim.
1. Hamson, Illegal Contracts and Limited Interests, Cambridge Law Journal, vol 10 (1949) 249; Coote, Another Look at Bowmakers v Barnet Instruments, Modern Law Review, vol 35 (1972) 38; Stewart, Contractual Illegality and the Recognition of Proprietary Interests, Journal of Contract Law, vol 1 (1988) 134.
2. [1945] KB 65.
3. Bowmakers [1945] KB 65 at 71.
In Tinsley, the majority of the House held that this principle also applied in equity. Lord Keith of Kinkel and Lord Goff of Chieveley dissented. Lord Browne-Wilkinson, who gave the leading speech, said [27] that, while the "wide principle" had applied in equity in the early nineteenth century, the principles of the law of illegality had developed throughout the century. He thought that with one exception [28] "none of the English decisions are decided by simply applying that principle". Lord Browne-Wilkinson said that, with the fusion of law and equity, the same principles of illegality applied in law and equity and that, as a result, the Bowmakers rule was applicable to the circumstances of the case [29] . This meant that the defendant succeeded in her counter-claim because the transfer of the property into the name of the plaintiff gave rise to a resulting trust in favour of the defendant and the plaintiff could not prove that the defendant had intended to transfer her beneficial interest in the property to the plaintiff. The defendant was therefore able to enforce the trust in equity because she did not have to plead or rely on the illegal purpose that motivated the conveyance.
1. Tinsley [1994] 1 AC 340 at 372-374.
2. Cantor v Cox (1975) 239 EG 121.
3. Tinsley [1994] 1 AC 340 at 375-377.
Speaking for the minority, Lord Goff said that the reason that a court of equity would not assist a party to an illegality was "because he has not come to the court with clean hands" [30] . Thus, although an equitable interest may have arisen, equity will not enforce it where the interest is tainted with illegality. In Lord Goff's view, it does not matter that the plaintiff does not need to rely on or plead the illegality in order to establish his or her case. By whatever means "it comes to the attention of a court of equity that the claimant has not come to the court with clean hands, the court will refuse to assist the claimant" [31] . The minority, therefore, held that the Bowmakers rule is not applicable where equitable relief is sought.
1. Tinsley [1994] 1 AC 340 at 357.
2. Tinsley [1994] 1 AC 340 at 358.
The wide principle and the Bowmakers rule
I think that the majority speeches in the House of Lords in Tinsley were correct in denying the existence of the "wide principle". I doubt that Lord Eldon intended to lay down a rule to the effect that, if the purpose of a transaction was to defeat the operation of an Act of Parliament, equity would always refuse its remedies to a person who had participated in that transaction. It is true that, in Muckleston v Brown [32] , Curtis v Perry [33] , Cottington v Fletcher [34] and other cases, the judges of the Court of Chancery were dealing with trusts and agreements whose objects were to defeat the operation of Acts of Parliament and that they concluded that those trusts and agreements were not enforceable in equity. But that was obviously because, in the circumstances of those cases, the policy of the Acts required the courts to firmly suppress the use of trusts and agreements to avoid the operation of the legislation. Those decisions say nothing about legislation whose policy does not require such drastic remedies. Nor do they require a court of equity to disregard a circumstance that affects the real justice of the case and calls for the assistance of equitable remedies. It would be out of character for a court of equity to do so. In Lord Stowell's words: "A Court of Equity looks to every connected circumstance that ought to influence its determination upon the real justice of the case." [35]
1. (1801) 6 Ves Jun 52 [31 ER 934].
2. (1802) 6 Ves Jun 739 [31 ER 1285].
3. (1740) 2 Atk 155 [26 ER 498].
4. The "Juliana" (1822) 2 Dods 504 at 521 [165 ER 1560 at 1567].
With great respect to the view expressed by Lord Goff in Tinsley, I do not think that the clean hands doctrine constitutes or provides a sound basis for a special rule in equity. The illegality principle is one of general application; it is not limited to proceedings in equity. To say that in the equitable context it derives from the clean hands doctrine is to wrongly deny its conceptual links to the rule as it is applied in other areas. Further, it fails to recognise that the rationale for the two doctrines is distinct: the clean hands doctrine arises from the relationship between the parties to the proceedings, the illegality doctrine derives from public policy considerations. Accordingly, the majority of the House of Lords in Tinsley were correct in rejecting the "wide principle" as governing cases of illegality in equity. But that said, I do not think that this Court should adopt the majority's rule that a claimant cannot obtain relief in any court if that person must plead or rely on illegal conduct (the Bowmakers rule).
The Bowmakers rule
A doctrine of illegality that depends upon the state of the pleadings or the need to rely on a transaction that has an unlawful purpose is neither satisfactory nor soundly based in legal policy. The results produced by such a doctrine are essentially random and produce windfall gains as well as losses, even when the parties are in pari delicto. To demonstrate the random nature of the assignment of substantive relief under the Bowmakers rule approved by the majority in Tinsley one has only to consider the application of that rule to the circumstances of the present case. If the rule were applied in this case, the determining factor would be whether a presumption of advancement arose. Only if it did, would Mrs Nelson need to answer the presumption of a resulting trust and rely on her illegal purpose. If the presumption of advancement did not arise, there would be no need to rely on the illegal purpose to rebut the presumption and the result would be the reverse. Thus, if Mrs Nelson had had the property placed in the name of a friend or relative — or anybody other than her children — she could recover the proceeds of the sale of the Bent Street property, notwithstanding her illegal purpose.
The Bowmakers rule has no regard to the legal and equitable rights of the parties, the merits of the case, the effect of the transaction in undermining the policy of the relevant legislation or the question whether the sanctions imposed by the legislation sufficiently protect the purpose of the legislation. Regard is had only to the procedural issue; and it is that issue and not the policy of the legislation or the merits of the parties which determines the outcome. Basing the grant of legal remedies on an essentially procedural criterion which has nothing to do with the equitable positions of the parties or the policy of the legislation is unsatisfactory, particularly when implementing a doctrine that is founded on public policy. In Tinsley, Lord Goff recognised the perverse nature of the rule adopted by the minority in that case in words that apply equally to the Bowmakers rule adopted by the majority judges. Lord Goff said [36] :
It is important to observe that the principle is not a principle of justice; it is a principle of policy, whose application is indiscriminate and so can lead to unfair consequences as between the parties to litigation.
At least the position of the minority in Tinsley had the virtue that the indiscriminate nature of the rule which they adopted did not depend on procedural issues.
1. Tinsley [1994] 1 AC 340 at 355.
The policy justification for the rule adopted in the minority speeches in Tinsley is that the harsh and indiscriminate nature of the rule will deter people from entering into unlawful agreements and trusts because they know that the courts will not provide them with equitable relief. Whether the rule adopted by the minority would be an effective deterrent is debatable [37] . However, the notion of deterrence seems a weak argument to justify the Bowmakers rule adopted by the majority in Tinsley. The defendant in Tinsley, for example, succeeded in recovering her property notwithstanding the unlawful purpose for which she transferred the property. Moreover, while the Bowmakers rule may impose severe losses on those who are forced to rely on the illegality, it also gives windfall gains to those who rely on the defence of illegality. In so far as the Bowmakers rule is a deterrent, it is also an incentive to illegality because it encourages those to whom property is conveyed to encourage transferors to carry out their unlawful purpose.
1. cf Tribe v Tribe [1996] Ch 107 at 133-134: "It is, of course, artificial to think that anyone would be dissuaded by the primary rule from entering into a proposed fraud, if only because such a person would be unlikely to be a studious reader of the law reports or to seek advice from a lawyer whom he has taken fully into his confidence." (per Millett LJ)
Furthermore, even if this random process of assigning losses and gains without regard to the substantive equities of a dispute is a disincentive to those who might enter illegal transactions, it does not follow that the Bowmakers rule is the most efficient rule to protect the community against the making of trusts and agreements for unlawful purposes. There are other rules that could achieve the same goals of legal policy through a less extreme and a more just process.
A final criticism of the Bowmakers rule adopted by the majority in Tinsley is that it may often defeat the intention of the legislature. Parliament almost invariably provides mechanisms for dealing with breaches of its laws. Those mechanisms sometimes include a provision that makes unlawful and unenforceable an agreement that defeats or evades the operation of the relevant law. If a particular enactment does not contain such a provision, the prima facie conclusion to be drawn is that Parliament regarded the sanctions and remedies contained in the enactment as sufficient to deter illegal conduct and saw no need to take the drastic step of making unenforceable an agreement or trust that defeats the purpose of the enactment [38] .
1. cf Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 at 429.
The present need for the doctrine of illegality
The doctrine of illegality expounded in Holman was formulated in a society that was vastly different from that which exists today. It was a society that was much less regulated. With the rapid expansion of regulation, it is undeniable that the legal environment in which the doctrine of illegality operates has changed. The underlying policy of Holman is still valid today — the courts must not condone or assist a breach of statute, nor must they help to frustrate the operation of a statute. As Mason J put it in Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd [39] , the courts must not "be instrumental in offering an inducement to crime or removing a restraint to crime". However, the Holman rule, stated in the bald dictum: "No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act" [40] is too extreme and inflexible to represent sound legal policy in the late twentieth century even when account is taken of the recognised exceptions to this dictum.
1. (1978) 139 CLR 410 at 429.
2. Holman (1775) 1 Cowp 341 at 343 [98 ER 1120 at 1121].
One of the most significant reasons for adopting a less rigid approach to illegality than the bald dictum in Holman or, for that matter, the Bowmakers rule adopted in Tinsley is that statutory illegality can arise in a number of different ways [41] . First, the statute may directly prohibit the contract or trust. Second, while the statute may not prohibit making the contract or trust, it may prohibit the doing of some particular act that is essential for carrying it out. Third, the statute may not expressly prohibit the contract or trust but the contract or trust may be associated with or made in furtherance of a purpose of frustrating the operation of the statute. Fourth, the statute may make unlawful the manner in which an otherwise lawful contract or trust is carried out. It would be surprising if sound legal policy required each of these forms of illegality to be treated in the same way. There is, for example, a vast difference between the performance of a contract for carriage of goods by ship that is overloaded in breach of the law and the making of a contract for the carriage of goods where the making of the contract is specifically prohibited [42] .
1. See Yango (1978) 139 CLR 410 at 413.
2. cf St John Shipping Corporation v Joseph Rank Ltd [1957] 1 QB 267.
It is worth noting the approach in the cases in the English Court of Appeal which preceded, and were rejected by, the decision in Tinsley v Milligan and which sought a less rigid and dogmatic approach to illegality than is found in the Holman dictum. Those cases included cases in equity [43] , contract [44] and tort [45] . The effect of the approach developed by the Court of Appeal in those cases was summarised in the decision of that Court in Tinsley by Nicholls LJ who said [46] :
These authorities seem to me to establish that when applying the "ex turpi causa" maxim in a case in which a defence of illegality has been raised, the court should keep in mind that the underlying principle is the so-called public conscience test. The court must weigh, or balance, the adverse consequences of granting relief against the adverse consequences of refusing relief. The ultimate decision calls for a value judgment. The detailed principles summarised by Kerr LJ in the Euro-Diam case [47] , and distinctions such as that between causes of action which arise directly ex turpi causa and causes of action to which the unlawful conduct is incidental, are valuable as guidelines. But they are no more than guidelines. Their value and justification lie in the practical assistance they give to the courts by focusing attention on particular features which are material in carrying out the balancing exercise in different types of cases.
1. Tinsley v Milligan [1992] Ch 310.
2. Saunders v Edwards [1987] 1 WLR 1116; [1987] 2 All ER 651; Howard v Shirlstar Ltd [1990] 1 WLR 1292; [1990] 3 All ER 366; Euro-Diam Ltd v Bathurst [1990] 1 QB 1.
3. Pitts v Hunt [1991] 1 QB 24.
4. Tinsley v Milligan [1992] Ch 310 at 319-320.
5. [1990] 1 QB 1.
This approach confers a broad judicial discretion upon the judge to determine whether the grant of relief would affront "the public conscience". While it provides a ready means for a judge to do what he or she thinks is just in the circumstances of the particular case, it does so by means of an unstructured discretion. The so called "public conscience" test, although providing a flexible approach, leaves the matter at large. Greater certainty in the application of the illegality doctrine will be achieved if the courts apply principles instead of a vague standard such as the "public conscience". But what principles, consistent with the public policy underpinnings of the doctrine of illegality, should the courts apply?
If courts withhold relief because of an illegal transaction, they necessarily impose a sanction on one of the parties to that transaction, a sanction that will deprive one party of his or her property rights and effectively vest them in another person who will almost always be a willing participant in the illegality. Leaving aside cases where the statute makes rights arising out of the transaction unenforceable in all circumstances, such a sanction can only be justified if two conditions are met.
First, the sanction imposed should be proportionate to the seriousness [48] of the illegality involved. It is not in accord with contemporaneous notions of justice that the penalty for breaching a law or frustrating its policy should be disproportionate to the seriousness of the breach [49] . The seriousness of the illegality must be judged by reference to the statute whose terms or policy is contravened. It cannot be assessed in a vacuum. The statute must always be the reference point for determining the seriousness of the illegality; otherwise the courts would embark on an assessment of moral turpitude independently of and potentially in conflict with the assessment made by the legislature.
1. See, however, the reservations about the use of "seriousness" as the test for granting or withholding relief in Pitts [1991] 1 QB 24 at 56 (a tort case) quoting Jackson v Harrison (1978) 138 CLR 438 at 455.
2. In re Torrez (1987) 827 F 2d 1299 at 1301-1302.
Second, the imposition of the civil sanction must further the purpose of the statute and must not impose a further sanction for the unlawful conduct if Parliament has indicated that the sanctions imposed by the statute are sufficient to deal with conduct that breaches or evades the operation of the statute and its policies. In most cases, the statute will provide some guidance, express or inferred, as to the policy of the legislature in respect of a transaction that contravenes the statute or its purpose. It is this policy that must guide the courts in determining, consistent with their duty not to condone or encourage breaches of the statute, what the consequences of the illegality will be. Thus, the statute may disclose an intention, explicitly or implicitly, that a transaction contrary to its terms or its policy should be unenforceable. On the other hand, the statute may inferentially disclose an intention that the only sanctions for breach of the statute or its policy are to be those specifically provided for in the legislation [50] .
1. cf Yango (1978) 139 CLR 410 at 429.
Accordingly, in my opinion, even if a case does not come within one of the four exceptions to the Holman dictum to which I have referred, courts should not refuse to enforce legal or equitable rights simply because they arose out of or were associated with an unlawful purpose unless: (a) the statute discloses an intention that those rights should be unenforceable in all circumstances; or (b)(i) the sanction of refusing to enforce those rights is not disproportionate to the seriousness of the unlawful conduct; (ii) the imposition of the sanction is necessary, having regard to the terms of the statute, to protect its objects or policies; and (iii) the statute does not disclose an intention that the sanctions and remedies contained in the statute are to be the only legal consequences of a breach of the statute or the frustration of its policies [51] .
1. Elements (ii) and (iii) may often overlap.
The adoption of these principles accords with the approach of this Court in the leading case of Yango [52] , particularly the judgment of Mason J. In Yango, the Court held that, although s 8 of the Banking Act 1959 Cth prohibited a body corporate from carrying on the business of banking without a licence, a mortgage and guarantees given to an unlicensed corporation in the course of carrying on that business were not void or unenforceable. The Court unanimously held that nothing in the statute made them void and that the separate question of illegal purpose should be determined by following the approach, suggested by Devlin J in St John Shipping Corporation v Joseph Rank Ltd [53] , of examining the terms of the statute to determine the impact of illegality on the enforceability of the contract. Mason J said [54] :
The weighing of considerations of public policy in this case and the decision in favour of enforcing the contract is influenced by the form of the particular legislation. In this case the Act (Banking Act 1959 Cth), as I have mentioned, is to a large extent directed to aiding the Government in executing its fiscal policy rather than regulating the relationship between banker and customer per se, a feature which lends support for the view that the provision of a large recurrent penalty for offences against s 8 is Parliament's determination of the consequences of breach of the section and as the only legal consequences thereof. There is much to be said for the view that once a statutory penalty has been provided for an offence the rule [sic] of the common law in determining the legal consequences of commission of the offence is thereby diminished — see my judgment in Jackson v Harrison [55] . See also the suggestions that the principle cannot apply to all statutory offences (Beresford v Royal Insurance Co Ltd in the Court of Appeal [56] , per Lord Wright; Marles v Philip Trant & Sons Ltd [57] , per Denning LJ, and that it would be a curious thing if the offender is to be punished twice, civilly as well as criminally (St John Shipping Corporation v Joseph Rank Ltd [58] , per Devlin J). The main considerations from which the principle ex turpi causa arose can be seen in the reluctance of the courts to be instrumental in offering an inducement to crime or removing a restraint to crime: Beresford's Case [59] ; Amicable Society v Bolland (Fauntleroy's Case [60] )).
However, in the present case Parliament has provided a penalty which is a measure of the deterrent which it intends to operate in respect of non-compliance with s 8. In this case it is not for the court to hold that further consequences should flow, consequences which in financial terms could well far exceed the prescribed penalty and could even conceivably lead the plaintiff to insolvency with resultant loss to innocent lenders or investors.
1. (1978) 139 CLR 410.
2. [1957] 1 QB 267.
3. Yango (1978) 139 CLR 410 at 428-429.
4. (1978) 138 CLR 438 at 452.
5. Beresford [1937] 2 KB 197 at 220.
6. [1954] 1 QB 29 at 37.
7. [1957] 1 QB 267 at 292.
8. [1938] AC 586 at 599.
9. (1830) 4 Bligh (NS) 194 at 211 [5 ER 70 at 76].
The scheme of the Act
The Defence Service Homes Act 1918 Cth provides assistance to members of the defence forces and certain other persons to acquire homes. The Act was substantially amended in 1988. The provisions of the Act both before and after the amendments are relevant because the contract to purchase the Bent Street property was entered into prior to the amendments although the illegal purpose of concealing Mrs Nelson's beneficial ownership of that property was only carried out after the amendments.
Prior to the amendments, s 20 empowered the Defence Service Homes Corporation to make a loan, referred to as an advance, to an eligible person to enable that person, inter alia, to purchase a home. Under s 21, the maximum advance available was $25,000. Subject to an irrelevant exception, an advance could not be made unless the Corporation was satisfied that the dwelling-house was intended for use as a home for the applicant and the applicant's dependants and that neither the applicant nor the applicant's spouse was the owner of any other dwelling-house (s 23). If the Corporation formed the opinion that money advanced under the Act had not been applied for the purposes for which it was advanced, the Corporation could call in the whole or part of the amount. The Act provided statutory remedies for the Corporation to recover that amount (s 27). Similarly, money advanced could be called up if, at the time of making the advance, the applicant had falsely declared that neither the applicant nor the applicant's spouse was the owner of any dwelling-house other than the one to which the advance related (s 32A).
In 1988 the scheme of the Act was altered following an agreement between Westpac Banking Corporation and the Commonwealth. Under that agreement, the Bank agreed to provide a loan, referred to as a subsidised advance, to a person whom the Commonwealth certified was entitled to such an advance and the Commonwealth agreed to provide a subsidy to the Bank in respect of a subsidised advance. The legislative changes were achieved by the Defence Service Homes Amendment Act 1988 Cth which replaced Pts III-VI of the original Act.
Thus under the amended Act, applications can be made to the Secretary of the Corporation for a certificate of entitlement to a subsidised advance. The Secretary cannot issue such a certificate unless, relevantly, he or she is satisfied that the applicant does not own any dwelling-house other than the house the subject of the application (s 18(1)(b)). Under the amending Act, the maximum advance upon which a subsidy is payable remains at $25,000. The amount received in relation to the Kidman Lane property was, therefore, the maximum possible advance.
If a certificate has been issued as a result of a false statement by the applicant or if that person was not entitled to a subsidy, the Secretary can cancel the subsidy (s 26). Where the subsidy has ceased to be payable, the Secretary may require the repayment to the Commonwealth of either the whole of the subsidy already paid, or such amount as the Secretary considers reasonable. If such a requirement is not complied with, the amount may be recovered as a debt due to the Commonwealth (s 29). The Secretary also has a discretionary power to write off the amount, waive the right of the Commonwealth to recover the amount or allow a person to repay the amount by instalments (s 30). Decisions under these provisions are reviewable both internally and by the Administrative Appeals Tribunal (ss 43-44).
In addition to the remedies within the Act itself, various provisions of the Crimes Act 1914 Cth impose criminal liabilities for conduct that infringes the Act. Relevant provisions are ss 29A, 29B, 29D and 86. Most relevant to the circumstances of this case is s 29B which provides:
Any person who imposes or endeavours to impose upon the Commonwealth or any public authority under the Commonwealth by any untrue representation, made in any manner whatsoever, with a view to obtain [sic] money or any other benefit or advantage, shall be guilty of an offence.
Penalty: Imprisonment for 2 years.
The result in this case
In this case, we are concerned with an agreement or transaction that was not, per se, illegal but which was entered into for an illegal purpose. If Mrs Nelson had never made the subsidy application, she would have fallen within the exception that is available when an illegal purpose is not carried out. It is only because a transaction, that was otherwise lawful, was carried out in order to achieve an unlawful purpose that the question of the impact of illegality arises.
As the examination of the Act has disclosed, it contains internal mechanisms for dealing with false declarations and applications by persons who are not entitled to subsidised advances. The Act recognises that ineligible persons may apply for subsidised advances and provides for recovery of the subsidy paid in relation to such persons. These provisions lend weight to the submission of the appellant that the policy of the Act will not be defeated if the Court enforces her equitable rights. They also suggest that the policy of the Act is not frustrated so long as there is recovery of the benefit given. This view is strengthened by the vesting of a discretionary power of waiver in the Secretary.
If the policy of the Act is not defeated by the Corporation waiving its right to recover a benefit wrongfully obtained, it is hard to see how the policy of the Act is defeated if a court exercising equitable jurisdiction enforced a resulting trust in favour of Mrs Nelson on terms that the benefit obtained under the Act must be repaid. The existence of criminal sanctions strengthens this analysis because the existence of a range of sanctions together with the omission of a provision that makes unenforceable any agreement made in breach of or to evade the Act is a powerful indication that no other sanctions are needed. Evidently, the federal Parliament saw the legislative sanctions and remedies as being sufficient to deal with unlawful conduct similar to that which has occurred in the present case. That being so, I can see no justification for the courts imposing a further sanction by refusing to enforce the legal or equitable rights of applicants under the Act, particularly when such a refusal may often result, as it does in this case, in a penalty out of all proportion to the seriousness of an applicant's conduct.
Of course, equity cannot condone Mrs Nelson's unlawful purpose or encourage it. So far as is possible, rights associated with or arising out of unlawful conduct should only be enforced on condition that the wrongdoer takes all lawful steps to overcome the consequences of that conduct. It will not always be possible for the claimant to do so or for the courts to impose terms designed to remedy the wrongdoing. For example, in Kasumu v Baba-Egbe [61] , legislation specifically prevented a moneylender from enforcing any claim where there had been a breach of the Act. To grant relief to the borrower on terms that he or she restore to the moneylender any benefits obtained from that person would be contrary to the policy of the legislation [62] . In other situations, the inability of the court to mould appropriate terms may be a ground for refusing relief. For example, in Chettiar [63] , the facts of which are analogous to this case, the father sought to rely on an intention associated with an unlawful purpose to overcome a presumption of advancement. It would have been difficult, if not impossible, to formulate a condition by which the father could be required to do equity in order to obtain equitable relief. For in that case, as a result of his unlawful conduct, the father had obtained the benefit for fifteen years of having the permissible rubber production of his land determined by the local district officer rather than by the Assessment Committee constituted under the Malayan Rubber Regulations 1934. In circumstances where the authority responsible for administering the regulations was not a party to the proceedings, it was virtually impossible to assess the benefit gained and the public harm done as a result of the illegality. Where the court cannot evaluate the benefit that the claimant has derived from his or her unlawful conduct, the sound exercise of discretion may sometimes require the court to refuse any relief to the claimant.
1. [1956] AC 539.
2. cf Mayfair Trading Co Pty Ltd v Dreyer (1958) 101 CLR 428.
3. [1962] AC 294.
However, there are no difficulties in this case comparable to those in Chettiar. The benefit obtained is readily ascertainable. Mrs Nelson's breach of the Act will not be condoned if the Court enforces her rights on the condition that she restores to the Commonwealth the benefit that she obtained by her unlawful conduct. That means that she should forthwith repay to the Commonwealth such sum as represents the value of the subsidy given in relation to her subsidised advance, in other words the difference between the Bank's home lending rate of interest at the time of the advance and the rate of interest that was payable in respect of the subsidised advance for the period of the advance. If such a condition is imposed, the policy of the Act will not be frustrated and the Court will not be condoning or encouraging unlawful conduct.
Conclusion
I agree with the orders proposed by Deane and Gummow JJ. |
high_court_of_australia:/showbyHandle/1/9393 | decision | commonwealth | high_court_of_australia | text/html | null | Stamp Duties, Commissioner of (NSW) v Gale [1958] HCA 42 | https://eresources.hcourt.gov.au/showbyHandle/1/9393 | 2024-09-13T22:56:59.297630+10:00 | High Court of Australia
Dixon C.J. McTiernan and Menzies JJ.
Stamp Duties, Commissioner of (NSW) v Gale
[1958] HCA 42
ORDER
Appeal dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
Oct. 14
Dixon C.J.
The question which by this appeal the Commissioner of Stamp Duties of New South Wales brings before us is whether a certain gift made by a deceased person named Leslie Ross Gale within three years of his death, and therefore forming part of his notional estate for the purpose of the assessment and payment of death duty, should be regarded as a money sum or an interest in real property.
The question arises under s. 102 (2) (b) of the Stamp Duties Act 1920-1949 N.S.W.. The material part of that provision says that for the purpose of the assessment and payment of death duty the estate of a deceased person shall be deemed to include and consist of the following classes of property:—" 2 (b) Any property comprised in any gift made by the deceased within three years before his death ". By Act No. 30 of 1939, s. 2 (c) (ii), a proviso was inserted on which a good deal turns. The material words run "Where the property comprised in any such gift consists of money the property to be included in the estate pursuant to this subparagraph shall be the actual amount of the money given or paid".
In Commissioner of Stamp Duties (N.S.W.) v. Perpetual Trustee Co. Ltd. (Watt's Case) [5] the Supreme Court and a majority of the High Court (Higgins J. dissenting) held, to use the language of Campbell J. " that it is an indispensable condition of the operation of s. 102 (2) (b) upon any gift that the subject of the gift should exist at the date of the death in some concrete identifiable form" [6] . (Doubtless the word "concrete" was not intended to exclude a chose in action or other incorporeal right). Thus where a deceased person had caused a sum of money to be applied in buying a steamer ticket to America for a friend and in handing the balance to him in cash as an aid to his intended journey and, as Isaacs J. said [1] , the recipient of the money and the ticket left Australia never to return, there was not a dutiable gift in existence at the donor's death. According to the suggestion of counsel for the executor upon his argument of the present appeal the proviso was inserted to meet the position disclosed by this decision in the case of gifts of money. The suggestion supposes that an unusual amount of time elapsed before the disclosure of the evil resulted in the adoption of the remedy; thirteen years. But whatever be the basis for the suggestion, it seems clear enough that the actual operation of the proviso is to clothe a gift of money with a special characteristic, namely, that of fixity, so that nothing is to be considered except the period that elapsed before the death of the donor took place. If it is less than three years from the gift, then the amount of money comprised in the gift forms part of the estate for duty, however the money may have been applied or misapplied.
1. (1925) 25 S.R. (N.S.W.) 467, at pp. 491, 492; (1926) 38 C.L.R. 12, at pp. 29, 36, 45, 47.
2. (1925) 25 S.R. (N.S.W.), at p. 502.
3. (1926) 38 C.L.R., at p. 36.
In the present case the money was applied in paying the purchase price of an undivided half interest in land the value of which was depressed by the continuing operation or effect of controls set up during the war that had closed. Before the death of the deceased a relaxation of the controls had allowed the value to shoot up. There is no doubt of the animus donandi of the deceased. The transaction grew out of marital mutations that were unfolding at the time and the donee was the lady who subsequently became the deceased's wife and ultimately his widow. But in the circumstances the commissioner persists in maintaining, notwithstanding the contrary opinion of the Supreme Court, that the gift was of the undivided interest in the land, the expression of the value of which underwent a sudden and huge enhancement before the deceased died. Naturally the executor seizes upon the proviso. Indeed he says that, proviso or no proviso, here you have a gift of money the amount of which is fixed and unchangeable for whatever purpose it was given and for whatever purpose it was applied.
It will be necessary to look a little more closely at the facts but enough has been said to make it profitable now to give some consideration to the legislative provisions governing the question.
The primary words, upon which much depends, are "any property comprised in any gift made by the deceased" scil. (within three years before his death). Perhaps it does not matter much, if at all, but we should note that "comprise" in this and other places is used in its prima facie, if not only correct meaning, of "included within"; that is to say not as exhaustively forming the category, in this case the gift. The property is to be comprehended in the gift.
Every other important term in the words quoted above from s. 102 (2) (b) appears to be the subject of a statutory definition. The term "property" is defined very widely by s. 3. The definition concludes with a reference to "any thing in action and any other right or interest". The word "gift" is defined in s. 100. What is material in the definition lies in the opening words, viz. " "gift" means any disposition of property made without full consideration" etc. It will be noticed that this is an exclusive definition; it does not say what the word includes but what it means. To come within it there must be a disposition of property, that is of property as defined. The important word is "disposition". The definition of that word covers many dealings with property and some extensions of the notion of alienation of proprietary interests. But for present purposes all that seems to matter can be restated in few words. Under par. (a) of the definition there is included "any conveyance transfer assignment payment or other alienation of property whether at law or in equity". It is one way of stating the question in the appeal to say that it turns on a choice between treating the disposition as constituted by a payment or payments made by the deceased or treating it as an "assignment" or "other alienation of property in equity". But the commissioner relies also on par. (e) of the definition of the word "disposition". That paragraph runs thus—"Any transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own estate and to increase the value of the estate of any other person". It is not altogether clear how this provision advances the case of the commissioner, even assuming that the facts as they appear in the case stated warrant a finding or inference that the requisite intent existed in the mind of the deceased. For since the question is as to the subject of the gift, not its donative character, that is to say between the money which the deceased expended and the interest in land which his second wife obtained as a consequence, it might well be said that the money represented the value by which he diminished the value of the estate. But perhaps par. (e) is not speaking at all in terms which fit cases that fall under some or one of the preceding paragraphs of the definition.
To return to the material words in par. (a) of the definition of "disposition of property", one must be struck by the fact that those quoted all refer to a process by which the deceased has divested himself of some property, right or interest as he invested the donee with the gift. This conforms with what Isaacs J. in Watt's Case [1] described as "the basic notions on which the duty is founded" [2] . "They are" said his Honour, "(1) the property in view is only that which formerly belonged to the deceased, and (2) the point of time looked at for determining the true ownership of the property is the time of death. Therefore the property, the subject of sub-s. 2 of s. 102 (except merely appointed property), is in every case property which was originally property of the deceased and ceased to belong to him by reason of his disposition referred to" (2). Generalisations should not be pressed too far but prima facie one expects the legislation to bring into the notional estate some right interest or property on the ground that the deceased has parted with it, that is, has parted with it in circumstances of a kind which the legislature decides should lead it to refuse recognition to the alienation for purposes of death duty: not on the ground that a gain has accrued to somebody else, stranger or relative. There are several decided cases, and there is some text book discussion, upon the question what should be considered the subject matter of a gift where what has been parted with by the de cujus has been money and what has been gained in fulfilment of his purpose by the donee has been property, tangible or intangible. Much that has been said upon the question seems almost to treat it as one of characterisation depending upon some aspect of the particular transaction. But it seems clear enough that under the same form of question either of two quite different inquiries may be intended. To ask what was given may in its application to many sets of fact be to ask a completely ambiguous question. For it may mean "What did the donor part with?" On the other hand it may mean "What did the donee acquire in fulfilment of the donor's desire to benefit him?" If Isaacs J. has correctly stated the prima facie purpose of the provisions of the legislation we are considering, it is the former of these two questions that we should expect par. (b) of s. 102 (2) to have in view. The introduction of the proviso by the Act of 1939 provides some confirmation of the expectation. For clearly enough it is framed upon the view that by a gift of money made within the prescribed three years of his death a deceased person depleted his assets as at the time of the gift to the extent of the payment and that as a matter of policy it should be taken conclusively that the depletion as at the death was in the same amount. It might be enough to say that for the purposes of s. 102 (2) (b) all the statute asks you to look at in order to decide between money and other forms of property as the subject of a gift is the nature of the thing of which he divested himself in effecting the gift. It is more direct and probably simpler than attempting, with the aid of decided cases, to characterise the gift independently of the intention of the provision. But it is not in every given case that a ready answer will be yielded by the question what was the thing of which the deceased divested himself in effecting the gift. For in the first place what the deceased may have parted with may be nothing so straightforward as a chattel, an interest in land or a chose in action. He may, for example, have possessed some dispositive power or authority arising out of a right of property or even of contract, and the gift may be the result of its exercise. In the next place, in the course of the transaction constituting the gift and for its very purpose the deceased may have acquired a chose in action, a chattel, an interest in land (legal or more probably equitable) or such a dispositive power. He may have retained it only momentarily and then have transferred it to the donee. Of course it will be by a payment of money that the acquisition will have been brought about. Cases can be imagined in which only a very nice dissection of the transaction will make it possible to say whether the payment was but a step whereby the deceased clothed himself with power to give a tangible or intangible thing or on the contrary was the very gift itself.
1. (1926) 38 C.L.R. 12.
2. (1926) 38 C.L.R., at p. 32.
It seems however better to work out the problem by beginning with the real intention of the statute rather than to ask oneself, as apparently Griffith C.J. did in Union Trustee Co. of Australia Ltd. v. Webb [1] the question what should be regarded in substance as the real subject matter of the gift, a house which a wife contracted to purchase but the purchase money of which her husband paid or the money he paid. Isaacs J. began his answer, which appears to be open only to the criticism of being a trifle over-simplified, by saying: "The Act imposes duties in respect of what a man leaves or what he has only colourably given. But it does not strike at property which he never had at law or in equity" [2] .
1. (1915) 19 C.L.R., at p. 674.
2. (1915) 19 C.L.R., at p. 676.
In Trustees Executors & Agency Co. Ltd. v. Federal Commissioner of Taxation (Teare's Case) [3] a father sold his business to a company in consideration of purchase money for which he received a cheque. He and his two sons respectively applied for parcels of shares in the company, the full amount of which was payable on application and allotment. The shares they respectively applied for were allotted in the respective amounts to his sons and to himself and he paid the amount by returning the cheque to the company. For the purpose of the Estate Duty Act Cth. Williams J. treated the gifts to the sons, for gifts they evidently were, as gifts of money. His Honour said: "The gift was therefore in every case a gift of the moneys, the motive, and it might even be said the condition, being that they should be used to apply for the shares" [1] . Of the other judges Starke J. said nothing expressly to the contrary, while Rich and McTiernan JJ. were actuated by the fact that the recipients of the gift did not receive the money, a reason which cannot be decisive. In the same way in Perpetual Trustee Co. Ltd. v. Commissioner of Stamp Duties (Sargood's Case) [2] the Supreme Court held that, for the purposes of s. 102 (2) (d) of the Act, a man about to marry gave his intended wife money and not a house when, having expressed a wish to give her a house as a wedding present and having requested her to choose one, he paid the purchase money which was due under the contract of sale into which she entered as purchaser. The dissenting judgment of Jordan C.J. in In the Estate of James Anderson Murdoch [3] adheres to the same reasoning, but the majority judgments seem rather to treat the question as if it depended upon characterisation as matter of fact.
1. (1941) 65 C.L.R. 134.
2. (1941) 65 C.L.R., at p. 145.
3. (1935) 36 S.R. (N.S.W.) 160; 53 W.N. 28.
4. (1947) 48 S.R. (N.S.W.) 213; 65 W.N. 60.
There is much in the speeches of their Lordships who formed the majority in Sneddon v. Lord Advocate [4] that supports the view that in legislation such as that under consideration you look for what has been alienated by the deceased. The legislature there considered was cast in a different form and moreover was referential but plainly enough Lord Morton regarded the form of the property as it passed from the donor as a test [5] and so did Lord MacDermott [6] and Lord Reid [7] citing from Attorney-General v. De Préville [8] .
1. (1954) A.C. 257.
2. (1954) A.C., at p. 264.
3. (1954) A.C., at pp. 267, 268.
4. (1954) A.C., at pp. 273, 274.
5. (1900) 1 Q.B. 223, at pp. 229, 231.
In the end one may say that for present purposes it comes down to the question what did the deceased alienate.
It is now desirable to turn to the precise facts of this case. Two brothers, Leslie Ross Gale named at the beginning of this judgment and Raymond Arthur Gale, carried on a business of pastoralists under the firm name of Bibaringa Pastoral Company. Leslie Ross Gale died on 29th July 1950, leaving a will made nineteen days earlier. He named his brother Raymond Arthur as executor and to him probate was granted on 4th October 1950. They carried on the business of the partnership on a grazing property bearing the name "Bibaringa", which was vested in Mary Jane Gale, wife of Leslie Ross Gale, and Myrtle Catherine Rowell Gale, wife of Raymond Arthur Gale, as tenants in common in equal shares. The firm composed of their husbands took a lease of the property from the respective wives as tenants in common. The case stated discloses nothing untoward until 1947. In that year a dissolution of partnership was arranged. Apparently it was to take effect on 1st July 1947. At the same time Mrs. M. C. R. Gale arranged with her brother-in-law Leslie Ross Gale, the now deceased, that she would transfer to him her half interest in the land and in certain household furniture, subject to encumbrances, in consideration of a sum of £2,250. Perhaps this arrangement amounted to a contract. The words of the case stated do not make it appear with any certainty, but clearly enough if there was a contract there was no writing signed by Mrs. M. C. R. Gale. One of the terms of the dissolution was that if within seven years the property, incorrectly described by the words "the equity", and certain plant machinery and vehicles included in the partnership and the household furniture should be sold for an amount exceeding £23,500, then the net profit on the sale should be divided equally between Leslie Ross Gale and Raymond Arthur Gale. It will be seen that this term takes little account of the fact that the land was vested in the two wives; the profit apparently was to be shared between the two husbands. At that time a mortgage existed over the land for £19,000. It is evident enough that the sum of £2,250 is half the difference between the amount of the mortgage and the amount mentioned of £23,500. In spite of the use of the word "equity" it is quite apparent that the base figure was to be £23,500 and not £4,500 for the purpose of arriving at the excess or profit to be divided between the two brothers. At the time of the dissolution of partnership it appears inferentially that the price or the realisable value of the land was restricted by the operation of controls. Presumably the controls arose by or under Pt. III of the National Security (Economic Organization) Regulations. But we are told that later there was a relaxation of the controls and that as a result the property was sold after the deceased's death for £86, 882. In 1947 the matrimonial relationship between the now deceased Leslie Ross Gale and his wife Mary Jane Gale completely broke down. We are not furnished with any information as to the time when the estrangement commenced. We are told, however, that a decree absolute for divorce was pronounced between them on 19th December 1947. On this event the wife, Mary Jane Gale, transferred her undivided half interest to her former husband who purchased it from her for a price unstated. This undivided half share Leslie Ross Gale retained until his death. The appeal is concerned with the other undivided half share, namely that which Mrs. M. C. R. Gale, wife of Raymond Arthur Gale, had arranged or agreed to transfer to Leslie Ross Gale, the now deceased. It appears that the latter contemplated, no doubt contingently upon his then existing marriage being dissolved, entering into a marriage with a lady named Peggy Mary Martin. On 5th December 1947 Mrs. M. C. R. Gale entered into a contract with this lady to sell to her for the sum of £2,250 the undivided half share belonging to the former. The transaction was submitted to the Delegate of the Treasurer no doubt under the National Security (Economic Organization) Regulations and it was approved. Peggy Mary Martin neither then nor after she became Mrs. L. R. Gale paid any of the purchase money and no one supposes that it was ever intended that she should do so. However, between 22nd December 1947 and 18th March 1948 the deceased Leslie Ross Gale paid to his brother Raymond Arthur Gale amounts totalling £5,570 11s. 5d. These payments were in respect of the moneys owing under the agreement for dissolution of partnership and the sale of Mrs. M. C. R. Gale's undivided half share in the land. Out of the money thus received Raymond Arthur Gale accounted to his wife for the purchase price of £2,250. We are not told when the marriage took place between Peggy Mary Martin and Leslie Ross Gale now deceased, but there is a passage in the case stated which says that on 30th September 1948 M. C. R. Gale executed a transfer of her interest in "Bibaringa" in favour of Peggy Mary Martin who before that date had married the deceased. On the foregoing facts it is not difficult to understand why a contest should have arisen as to whether the subject matter of the gift by the deceased to Peggy Mary Martin, his future wife, should be regarded as a gift of money or of an undivided half share in the land. The value of the deceased's half interest in the land, that is to say the half interest he acquired from his former wife after their marriage had been dissolved, was put down as £37,772. The commissioner has of course put that sum down as the value of the disputed share and after deducting half the amount of the mortgage there is an assessable amount left of £28,272. By contrast, if the gift was only of money the assessable amount was £2,250. But once the view of s. 102 (2) (b) stated in this judgment is adopted the facts show clearly enough that if the deceased had no right title or interest legally or equitably in the undivided half share in question the gift must be considered to be one of money. For on that footing it was of money that he divested himself. To say this of course means that the interpretation of the provision already explained is applied. Is it possible on the materials in the case stated to find any interest in the deceased which, directly or indirectly, he made over to Peggy Mary Martin? It is easy to be sceptical concerning the beneficial interest in the land comprised in "Bibaringa" when the legal ownership was vested in Mary Jane Gale and M. C. R. Gale, but there is no warrant at all in the case stated for treating them as anything less than full beneficial owners. When Mrs. M. C. R. Gale fell in with the proposal that she should transfer her undivided interest to Leslie Ross Gale on the dissolution of the partnership between the brothers no enforceable contract arose between her and her brother-in-law. Indeed the commissioner seems to have placed no reliance on this transaction as investing the deceased with any disposable interest in the land. We therefore know little of the transaction in detail or her part, if any, in it. It is described in more than one paragraph in the case stated and in terms apt enough to describe the making of a contract. A document from a solicitor's office is annexed to the case. It is entitled "Suggested basis for dissolution". It contains words which rather support the hypothesis of an agreement but no payment had taken place, no transmutation of possession and there was no writing. It could not therefore have amounted to an enforceable contract. Perhaps there is enough to found a conjecture that when Miss Peggy Mary Martin became the purchaser there was a novation of whatever contract may have been discoverable between Mrs. M. C. R. Gale and her now deceased brother-in-law, but it could be no more than a conjecture and, even if it were so, much more should be known about the materials on which the novation was founded before it could be held that the deceased made over by that means to Peggy Mary Martin a right already subsisting in him to the property. Were it so there would still remain some unanswered questions. What was the value of that right? Did the deceased bind himself to furnish the money? If so, in any enforceable way? The learned Solicitor-General was conscious of these difficulties and cited Skidmore v. Bradford [1] . Sir Frederick Pollock treated that case as one of contract and nothing else: see Pollock on Principles of Contract 9th ed. (1921), p. 760 note. But in any case on the materials before us it is impossible to pursue such a line of reasoning to a conclusion in favour of the commissioner. It is quite evident that this was not the case upon which the commissioner relied. What he sought to have determined was that the total transaction amounted to a gift not of money but of an interest in land. The judgment of the Full Court of the Supreme Court is right and the appeal should be dismissed.
1. (1869) L.R. 8 Eq. 134.
McTiernan J.
I have had the advantage of reading the judgment of the Chief Justice. I agree in his Honour's reasoning and in his conclusions.
Menzies J.
Upon a case stated pursuant to s. 124 of the Stamp Duties Act 1920-1949 N.S.W. the Supreme Court of New South Wales (Full Court) decided that L. R. Gale deceased, who died on 29th July 1950, had within three years of his death made a gift of £2,250 in money and not of a one-half interest as tenant in common in a grazing property called "Bibaringa", which interest at the date of the death of the deceased and after allowing for a mortgage liability was worth £28,271 17s. 6d., and accordingly answered a question that the value of the gift for purposes of the assessment of death duty upon the estate of the deceased was £2,250 and not £28,271 17s. 6d. The Commissioner of Stamp Duties has appealed to this Court against that decision.
The relevant facts are simple enough. Prior to 1947 L. R. Gale and his brother R. A. Gale had carried on the business of graziers in partnership under the firm name of "Bibaringa Pastoral Company" on "Bibaringa" which was then owned by their respective wives as tenants in common in equal shares. The marriage between L. R. Gale and his wife was dissolved on 19th December 1947 and thereafter he bought from his former wife her half share in "Bibaringa" for £2,250 which was its true value after making allowance for the existing mortgage of £19,000. L. R. Gale wanted to make his home on "Bibaringa" and accordingly agreed (1) with R. A. Gale, that the partnership between them should be dissolved as from 1st July 1947, and (2) with M. C. R. Gale, the wife of R. A. Gale, to purchase her half interest in "Bibaringa", subject to the mortgage, for £2,250. These agreements were subject to an over-riding stipulation that if "Bibaringa" should be sold within seven years and the price of the "equity, plant and machinery, motor vehicles and household furniture exceed £23,500 net" the profit on the sale should be divided equally between L. R. Gale and R. A. Gale. The agreement between L. R. Gale and M. C. R. Gale for the purchase of her interest in "Bibaringa" was oral and it is common ground that it was unenforceable and that L. R. Gale did not by reason thereof obtain any proprietary interest in "Bibaringa." At this point it is desirable to set out in terms part of the case stated. "Subsequently" (i.e. to the agreements I have just mentioned) "it was agreed at the request of the deceased that the said interest in the said property as tenant in common of the said Myrtle Catherine Rowell Gale should be sold not to the deceased as aforesaid, but to one Peggy Mary Martin whom the deceased then intended to marry, but between whom and the deceased there then existed no engagement of marriage. A contract of sale was entered into between the said Myrtle Catherine Rowell Gale and the said Peggy Mary Martin for the sale and purchase of the said interest of the former in "Bibaringa" on 5th December 1947" (par. 3 (1)). The contract price of the interest subject to the mortgage was £2,250. As a result of these transactions L. R. Gale owed R. A. Gale £3,320 11s. 5d. arising out of the dissolution of the partnership and P. M. Martin owed M. C. R. Gale £2,250 for her half interest in "Bibaringa". The total amount of £5,570 11s. 5d. was paid by L. R. Gale to R. A. Gale by four payments made between 22nd December 1947 and 18th March 1948. Out of these moneys R. A. Gale accounted to M. C. R. Gale for £2,250. On 30th September 1948 M. C. R. Gale transferred her interest in "Bibaringa" to P. M. Martin who had, by that time, married L. R. Gale. It is only necessary to add that when after the death of L. R. Gale "Bibaringa" was sold for £86,882, R. A. Gale who was his brother's executor claimed that the estate was indebted to him for £31,047 16s. 10d. under the overriding agreement previously mentioned, and the Commissioner of Stamp Duties allowed this amount as a deduction in ascertaining the value of the estate of the deceased. The commissioner claimed, however, that the gift admittedly made by L. R. Gale to Peggy Martin within three years of his death was not £2,250 in money but was a half interest in the equity of "Bibaringa". It was this issue that the Full Court decided in favour of R. A. Gale as executor of the will of L. R. Gale deceased, on the simple ground that L. R. Gale had never had any interest in "Bibaringa" to give to Peggy Martin and that what he had given her was the money which he had paid in satisfaction of her liability to M. C. R. Gale under the contract between them for the sale and purchase of an half interest in "Bibaringa".
Death duty is imposed by the Stamp Duties Act 1920-1949 N.S.W. and the section here relevant is s. 102 which for purposes of the assessment and payment of death duty enumerates certain classes of property which are to be included as part of the estate of a deceased person. The list begins with the actual estate of the deceased, that is, property of the deceased at the time of his death to which persons become entitled under the will or upon the intestacy of the deceased. The list does not, however, stop there but goes on to require the inclusion of certain other descriptions of property, being, in the main, property which the deceased had owned but of which he had disposed in various ways before his death. One such class is that described in s. 102 (2) (b) which is the provision applicable here. It is, so far as is relevant, as follows: "(b) Any property comprised in any gift made by the deceased within three years before his death, and whether made before or after the passing of this Act including any money paid or other property conveyed or transferred by the deceased within such period in pursuance of a covenant or agreement made at any time by him without full consideration in money or money's worth. Where the property comprised in any such gift consists of money, or money is paid as aforesaid in pursuance of any such covenant or agreement the property to be included in the estate pursuant to this subparagraph shall be the actual amount of the money given or paid". This provision upon its face is concerned with property which the deceased gave away during the three years before his death. In other words, it is concerned with what passed from the deceased by way of gift.
In considering s. 102 (2) (b) it is necessary, particularly having regard to the argument of the Solicitor-General for the appellant, to refer to several definitions in s. 100. "Gift" means "any disposition of property made otherwise than by will without full consideration in money or money's worth". "Disposition of property" means "(a) any conveyance, transfer, assignment, mortgage, delivery, payment, or other alienation of property whether at law or in equity; (b)—(d) (e) any transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own estate and to increase the value of the estate of any other person, whether in any of the cases referred to in the foregoing paragraphs the disposition is effected with or without an instrument in writing."
Many authorities were cited in argument from which can be extracted statements, some favouring one view and others the opposite view, on the question whether upon the statute that in each case applied and on the facts of the particular case a gift was one of money or of property paid for with money provided by the donor. Thus in In re Gibb [1] a'Beckett A.C.J. and Hodges J. decided that a gift was of a house whereas Hood J. decided that it was of money that paid for the house; on appeal in Union Trustee Co. of Australia Ltd. v. Webb [2] Griffith C.J. accepted the view of a'Beckett A.C.J. and Hodges J. whereas Isaacs J. agreed wholeheartedly with the view of Hood J. In Sargood's Case [3] Davidson J., in a judgment with which the other members of the Full Court concurred, decided that a gift was of money and not of a house purchased with the money. In Murdoch's Case [1] Davidson and Street JJ. decided against the judgment of Jordan C.J. that the gift there in question was of shares, not money. In Teare's Case [2] Williams J. regarded a gift as a gift of money notwithstanding that it was the intention of the donor that it should be used for the purchase of shares. The text books treat the matter tentatively. See Dymond on Death Duties 12th ed. (1955), p. 149 and Green on Death Duties 4th ed. (1958), pp. 109 et seq. The differences that appear in the judgments to which I have referred seem to me to arise, in a large measure, from directing attention on the one hand to what passed from the donor and on the other to what the donee received and retained; these are not always the same thing, as this case perhaps illustrates. I consider, however, that if in any particular case the question is what passed from the donor, it would have to be a special case before it would be proper to look beyond money which a donor in fact gave to a donee to what the donee bought from a third person with that money even if the money was given for the very purpose of making the purchase which was made. In Sneddon v. Lord Advocate [3] in a passage upon which the Solicitor-General placed great reliance, Lord Reid, in my opinion, did no more than envisage the possibility of such a special case and leave it open for further consideration when he said: "One can figure a case where the donor hands over money with instructions to buy a particular investment with it and the taker is obliged to follow those instructions. In such a case it might be said that the real subject of the gift is that investment" [4] . It seems to me that the significant words of this quotation are "the taker is obliged", and that his Lordship had in mind the kind of case where the gift would not be complete until the money which had been handed over had been used in accordance with the instructions of the donor so that there would be no gift until the investment was made.
1. (1915) V.L.R. 126.
2. (1915) 19 C.L.R. 669.
3. (1935) 36 S.R. (N.S.W.) 160; 53 W.N. 28.
4. (1947) 48 S.R. (N.S.W.) 213; 65 W.N. 60.
5. (1941) 65 C.L.R., at p. 145.
6. (1954) A.C. 257.
7. (1954) A.C., at p. 280.
The present case is different. It is a case where the donee herself agreed to purchase the half interest in "Bibaringa", albeit at the instance of the donor and relying upon him to find the purchase money, and the donor paid the vendor the purchase money owing to her by the donee. What passed from the donor was money; each payment was made to the vendor in satisfaction pro tanto of the liability of the donee; in consequence of such payments the vendor in accordance with the contract of sale transferred the property to the donee. I agree with the Full Court that in these circumstances the gift was a gift of money and I consider that the gift was made at the time of the payments of the money. This is a case where the donor paid all the purchase money owing by the donee but it would, in my opinion, make no difference to the character of the gift if the donee had herself paid part of the purchase price. If that had been the case it would have been difficult to treat the gift as a gift of a half interest in "Bibaringa". Furthermore, I think that some assistance can be derived from taking a case where a donor makes a series of payments in satisfaction of the liability of a donee for the purchase price of property, some of which are made within and some of which are made outside the period of three years before the death of the donor. If, on the one hand, the payments constitute the gift, then those within the period would be brought to duty by s. 102 (2) (b) but those outside the period would not for the simple reason that they were not gifts made by the deceased within three years before his death. On the other hand, the unreality of treating the gift as a gift of the property purchased is, in such a case, revealed by asking whether such a gift was made within or without the three year period.
The Full Court reached its conclusion by regarding the payment of the money as constituting the disposition of property by the donor so that it fell, and fell exclusively, within par. (a) of the definition of disposition of property in s. 100. With this I agree. It was, however, argued by the Solicitor-General that par. (e) of the definition of "disposition of property" was applicable either additionally or alternatively and that for the purposes thereof the "transaction" was to be found in Peggy Martin's entering, at the instance of L. R. Gale, into a contract for the purchase of the half interest in "Bibaringa" on the footing that the purchase money would be paid by L. R. Gale and that she would in due course become the transferee of the property, and in the carrying out of these arrangements.
It is, in my opinion, open to question whether par. (e) of the definition of "disposition of property" can have any application to a case where there has been an actual alienation of property by a donor to a donee. If, however, par. (e) can be made to apply to a disposition also falling within one of the preceding pars. (a) to (d) and if this could in any circumstances make any difference, I do not think that it would help the commissioner in this case. What L. R. Gale did was to diminish the value of his own estate or, more correctly as I think, to diminish his own estate by £2,250 and if, as I consider it must be, attention is directed to what L. R. Gale gave away, then the application of par. (e) results in the conclusion that the gift was of £2,250 and not of any interest in "Bibaringa". Neither his estate, nor the value of his estate, was diminished by parting with any interest in "Bibaringa".
I share the view of the Full Court that here the donor, having no interest in "Bibaringa", cannot be regarded as having given Peggy Martin the interest which she obtained by virtue of a contract to which the donor was not a party and under which he obtained no rights and incurred no obligations, notwithstanding that it was probably the common intention that he would provide the moneys necessary to meet the donee's obligations under that contract. The words of Isaacs J. in Union Trustee Co. of Australia Ltd. v. Webb [1] are apposite: "The facts are that the wife herself purchased in her own name and on her own behalf, and signed the contract creating a contractual obligation on her own part to pay the purchase money. What her husband did was to provide her with the means of payment. In a sense, and a substantial sense, colloquially speaking, he gave her a property just as he might be said to give her a dress. But in law—and we have here to do with law—he did not give her a house but the money to pay for it The house never was his in law or in equity; in other words, he never at any moment of time had the smallest interest in it, and never would it have been part of his estate" [2] . The judgment of Owen J. with which Roper C.J. in Eq. and Herron J. concurred stated the law in similar terms and stated, correctly I think, that there is nothing in Sneddon's Case [3] inconsistent with it. For these reasons I think that the judgment of the Full Court was correct and this appeal must be dismissed.
1. (1915) 19 C.L.R. 669.
2. (1915) 19 C.L.R., at p. 676.
3. (1954) A.C., 257. |
high_court_of_australia:/showbyHandle/1/10354 | decision | commonwealth | high_court_of_australia | text/html | null | Mraz v The Queen [No 2] [1956] HCA 54 | https://eresources.hcourt.gov.au/showbyHandle/1/10354 | 2024-09-13T22:57:00.682530+10:00 | High Court of Australia
Dixon C.J. Williams, Webb, Fullagar and Taylor JJ.
Mraz v The Queen [No 2]
[1956] HCA 54
ORDER
Application for special leave to appeal granted. Hearing of the application to be treated as the hearing of the appeal. Appeal allowed. Order of the Supreme Court as the Court of Criminal Appeal discharged. In lieu thereof order that the conviction for rape and judgment thereon be quashed and a verdict and judgment of acquittal be entered.
Cur. adv. vult.
The Court delivered the following written judgment:—
Sept. 14
Dixon C.J., Williams, Webb, Fullagar and Taylor JJ.
This application for special leave to appeal depends upon a question of issue estoppel. By the order from which special leave to appeal is sought the Supreme Court dismissed an appeal by the applicant from a conviction of rape. He objects that his conviction of rape is inconsistent with the findings made, or which must be taken to have been made, on an indictment of murder upon which he had already been tried. The charge of murder had been based upon the death of a young woman on 27th September 1954. The case for the Crown had been that the applicant had ravished her and that he had caused her death during or immediately after the commission of this crime.
The course taken at the trial of the indictment for murder was somewhat curious. The jury were told by the presiding judge that before they could convict the applicant of murder they must be satisfied not only that he committed rape and in the course of doing so had caused her death but also that the act was "malicious". If they considered that rape had been committed by the applicant and that death was caused in the course of the commission of the crime but that the act was not malicious they should acquit him of murder but they might convict him of manslaughter. The jury in the result found a verdict of not guilty of murder but guilty of manslaughter.
On appeal from the Supreme Court sitting as a court of criminal appeal this Court set aside the verdict of guilty of manslaughter and directed that a verdict and judgment of acquittal of that crime be entered. The grounds upon which this order was based are set out in the judgments of the members of the Court who formed the majority [1] . For present purposes it is enough to say that it appears that in the opinion of the majority of the Court the direction of the presiding judge was wrong and could not be said to have occasioned, with respect to the conviction of manslaughter, no substantial miscarriage of justice, and that upon the evidence no such case of manslaughter arose as would make it proper to order a new trial on that charge. After this judgment, which was delivered on 10th November 1955, the applicant was indicted for rape in respect of the same set of facts. He filed a somewhat irregularly drawn plea to the indictment setting up the previous proceedings as an answer to the indictment. Upon this plea a verdict for the Crown was found. The applicant had been allowed also to plead not guilty to the indictment but upon the trial of the issues raised by this plea a verdict of guilty of rape was returned. He appealed to the Supreme Court from the conviction upon the ground that by reason of the proceedings on the former indictment he should have been discharged from the indictment and that the verdict for the Crown on his special plea was wrong. The appeal was dismissed and the present application is for special leave to appeal from the order so dismissing it.
1. (1955) 93 C.L.R. 493.
Under s. 18 of the Crimes Act 1901-1951 N.S.W. the crime of murder is committed if the act of the accused causing the death charged was done during or immediately after the commission by the accused of the crime of rape, that being a crime that was punishable by death or penal servitude for life. The acquittal of murder therefore necessarily negatived the proposition that the applicant caused the death of the young woman during or immediately after the commission by the accused of the crime of rape. It is of no importance for this purpose that the jury were or might have been led to negative the proposition by an erroneous direction by the presiding judge. On a subsequent indictment the Crown would be precluded upon any issue which could not be found consistently with the negative of the proposition. For the Crown is as much precluded by an estoppel by judgment in criminal proceedings as is a subject in civil proceedings: R. v. Wilkes [1] ; Sambasivam v. Public Prosecutor of Malaya [2] . But the affirmative of the proposition involves three elements or things, viz. (1) that the applicant committed rape and (2) that during or immediately after the commission of the crime (3) an act of his caused the death of the young woman. Now to negative the proposition as a whole it is enough to find that any one of these three elements was lacking. But the jury's verdict included a finding that the applicant was guilty of manslaughter as well as a finding that he was not guilty of murder. Accordingly so far as the verdict of the jury is concerned it affirmed the last of these three elements, namely that an act of the applicant caused death.
1. (1948) 77 C.L.R. 511, at pp. 518, 519.
2. (1950) A.C. 458, at p. 479.
The verdict must, therefore, as a matter of law involve the proposition that either (1) the applicant did not commit rape, or (2) though his act caused death, he did not do it during or immediately after the commission of rape.
This is an alternative proposition of a negative character, one arising on the face of the record from a consideration only of the indictment and the verdict understood as they must be by reference to the law of homicide. It is a negation in the alternative upon which, so long as the verdict stood in its entirety, the applicant was entitled to rely as creating an issue estoppel against the Crown. He was entitled so to rely upon it because when he pleaded not guilty to the indictment of murder the issues which were thereby joined between him and the Crown necessarily raised for determination the existence of the three elements we have mentioned and the verdict upon those issues must, for the reasons we have given, be taken to have affirmed the existence of the third and to have denied the existence of one or other of the other two elements. It is nothing to the point that the verdict may have been the result of a misdirection of the judge and that owing to the misdirection the jury may have found the verdict without understanding or intending what as a matter of law is its necessary meaning or its legal consequences. The law which gives effect to issue estoppels is not concerned with the correctness or incorrectness of the finding which amounts to an estoppel, still less with the processes of reasoning by which the finding was reached in fact; it does not matter that the finding may be thought to be due to the jury having been put upon the wrong track by some direction of the presiding judge or to the jury having got on the wrong track unaided. It is enough that an issue or issues have been distinctly raised and found. Once that is done, then, so long as the finding stands, if there be any subsequent litigation between the same parties, no allegations legally inconsistent with the finding may be made by one of them against the other. Res judicata pro veritate accipitur. See per Higgins J. in Hoysted v. Federal Commissioner of Taxation [1] and per Lord Shaw for the Privy Council [2] ; Reg. v. Walker [3] and Reg. v. Hartington Middle Quarter [4] . And, as has already been said, this applies in pleas of the Crown.
1. (1921) 29 C.L.R. 537, at pp. 561, 563.
2. (1926) A.C. 155, at pp. 170, 171; (1925) 37 C.L.R. 290, at pp. 303, 304.
3. (1843) 2 M. & Rob. 446, at p. 457 [174 E.R. 345, at p. 348].
4. (1855) 4 El. & Bl. 780, at pp. 792, 793 [119 E.R. 288, at p. 293].
In the present case, however, all that is disclosed by the record consisting of the indictment and the verdict is that either (1) the applicant was found not to have committed rape, or (2) that the young woman's death, though caused by his act, was not caused during or immediately after the commission by him of rape. Unless the applicant is able to make it appear that the verdict of not guilty of murder ought not to be treated as possibly depending on the second of these two elements his plea of issue estoppel must fail. For non constat that the verdict of not guilty conceded that the applicant had been or might have been guilty of rape and was to be referred only to a finding that, though so guilty, it was not during, or immediately after, the commission of the crime that he caused the death of the young woman. The fact is that there was neither contest nor doubt at the trial upon this latter issue. That an act of intercourse took place and that at the time, or shortly afterwards, the woman died was neither denied nor deniable. The issue at the trial was whether it was done against her will. Is it open to the applicant to rely on this fact in order to put out of consideration the merely logical possibility, arising as it does only on the state of the record, that the verdict may depend on the issue involved in the words "during or immediately after the commission of a crime" occurring in s. 18 of the Crimes Act?
Now in ascertaining what were the issues determined judicially it is proper to look beyond the record. See per Isaacs J. in Gray v. Dalgety & Co. Ltd. [5] . You cannot show that issues necessarily involved in the conclusion were not found. You cannot say that, though as a matter of law the conclusion could not be reached except by passing upon certain issues, yet one or more of them was not passed upon. You cannot do so unless it so appears upon the face of the record, or in the case of courts where there is no record, unless it so appears from the course of procedure by which in such a court the character of the claim and the answer is determined. It should be added, however, that the parties may definitely agree to suspend, defer or otherwise eliminate a necessary issue and then it is not covered by the determination. That is shown by Hoysted's Case, the report of which in the Privy Council [1] , should be read with the report of the decision in this Court [2] . But there is no question of this having been done in the present case. What the applicant needs to do here is to exclude the possibility, a merely logical possibility, that the foundation of the verdict was the denial of an element that on the facts was not denied and could not be denied. Indeed it was in truth an element of an entirely notional character which factually could have no significance and accordingly passed unnoticed. It is quite consistent with the indictment and the verdict to exclude the possibility in question. There is no reason why, in order to ascertain the issue which in truth was found, matters of this kind should not be taken into consideration by the court when deciding the validity of a plea of issue estoppel. It is by no means the same thing as going into evidence as to the course of the previous trial for the purpose of showing that what in point of law must be covered by the verdict or finding was in fact not considered at all. That is to run counter to the very principle of issue estoppel, which is to treat an issue of fact or law as settled once for all between the parties if it is distinctly raised and if the judgment pronounced implies its determination necessarily as a matter of law. All that the applicant need do here is to add to the record certain information which makes it possible to see what issue it was that the finding must necessarily cover. That information makes it clear enough that the finding must cover the issue which in fact is one of rape or no rape. To say that the jury never meant to negative rape is to overlook the essence of the error made on the previous trial. The jury were in effect told that it was not enough if there was a rape, it must be a rape done with malice. Doubtless it was a curious conception. But if it is assumed that they followed and acted upon the direction, what the jury may be supposed to have found is that there was not a rape done with malice. To speculate why a jury finds manslaughter on an indictment of murder is often fruitless, and in this case the direction may have had no further effect upon the result than to encourage the returning of a verdict of manslaughter. But let it be assumed that in fact it meant that there was no rape done with malice. That only meant that, having availed themselves of an erroneous reason supplied by the judge's charge, the jury found a verdict upon the very issue which under the plea of not guilty the indictment for murder, properly understood according to law, presented to them as an issue of rape or no rape.
1. (1916) 21 C.L.R. 509, at p. 543.
2. (1926) A.C. 155; (1925) 37 C.L.R. 290.
3. (1921) 29 C.L.R. 537.
The foregoing reasoning shows that the verdict of not guilty of murder read with the verdict of guilty of manslaughter must be taken to cover the issue of rape and to negative the commission of that crime by the applicant.
It remains to consider the effect of the order of the High Court vacating the finding of guilty of manslaughter. In form that order set aside the conviction of manslaughter and ordered that a verdict of acquittal of manslaughter should be entered. In the foregoing reasoning the fact that the jury convicted the applicant of manslaughter has been used to show that the verdict of not guilty of murder did not, indeed could not, mean that the applicant had not caused the death. Does the reversal of the conviction of manslaughter by the High Court remove the ground on which this step in the reasoning proceeds? It does not; and the reason why it does not do so is that the reversal of the conviction of manslaughter was done by the order of the Court and what "issue" or "question" that order determined is to be ascertained by considering the proceedings in the High Court and not simply the proceedings at the trial. The jury did not find a verdict of not guilty of manslaughter; it is the court's order that placed that verdict on the record. It was of course competent for the Court to do so on any relevant ground. It is difficult if not impossible to imagine any relevant ground which would involve the result that the jury's verdict of acquittal of murder should be treated as involving any wider, different or additional issue than an examination of the indictment, the verdict and the matters put in issue would disclose. But in fact the matters decided by the High Court as the ground of the order made are known: they appear clearly enough from the reasons and they do not in any way open any larger or other issue as the basis of the verdict of not guilty of murder. They do not do so either in reality or as a matter of logical possibility. In fact the grounds on which the decision of the majority is based mean that in the Court's opinion the conviction of manslaughter was vitiated by the judge's direction and that a new trial should not be ordered as to manslaughter because manslaughter was a conclusion not supported by the facts in evidence.
From this it follows that the jury's verdict of not guilty of murder in the circumstances involves as a matter of law a finding that the applicant did not commit rape. An indictment for rape is therefore inconsistent with the verdict upon this issue. Accordingly the applicant's plea of issue estoppel is made out.
In our opinion special leave to appeal should be granted. The hearing of the application should be treated as the hearing of the appeal. The appeal should be allowed and the order of the Supreme Court discharged. In lieu thereof it should be ordered that the conviction for rape and the judgment thereon should be reversed and a verdict of not guilty should be entered. |
high_court_of_australia:/showbyHandle/1/9032 | decision | commonwealth | high_court_of_australia | text/html | null | Commonwealth v Bogle [1953] HCA 10 | https://eresources.hcourt.gov.au/showbyHandle/1/9032 | 2024-09-13T22:57:02.664919+10:00 | High Court of Australia
Dixon C.J. McTiernan, Williams, Webb, Fullagar, Kitto and Taylor JJ.
Commonwealth v Bogle
[1953] HCA 10
ORDER
Commonwealth of Australia and Commonwealth Hostels Ltd. v. Bogle— Questions answered—
1
(a) No.
(b) Yes.
2. Unnecessary to answer.
3. The effect of the Prices Regulation Act 1948 is to make illegal any contract by the defendant to pay to the plaintiff company the amounts claimed. The case does not disclose any relevant contract between the defendant and the plaintiff Commonwealth.
4. No.
5. No.
6. See answer to question 3.
7. The Court has jurisdiction in the action.
Case remitted to Kitto J. Costs of case stated to be dealt with by Kitto J. Commonwealth of Australia and Commonwealth Hostels Ltd. v. Clark; Commonwealth of Australia and Commonwealth Hostels Ltd. v. Boreham:— Questions answered:—
1.
(a) No.
(b) Yes.
2. Unnecessary to answer.
3. The effect of the Prices Regulation Act 1948 is to make illegal any contract by the defendant to pay to the plaintiff company the amounts claimed. The case does not disclose any relevant contract between the defendant and the plaintiff Commonwealth.
4. No.
5. See answer to question 3.
6. The Court has jurisdiction in the action.
Case remitted to Kitto J. Costs of case stated to be dealt with by Kitto J.
Cur. adv. vult.
The following written judgments were delivered:—
March 13, 1953
Dixon C.J.
I have had the advantage of reading the judgments prepared by Fullagar J. in these three cases and I agree both in the conclusions and the reasons they express.
McTiernan J.
The management and conduct of a hostel is not ordinarily a function of government unless the hostel provides for special classes of people in whom the Executive has a special interest. The people living in the hostels, managed and conducted by Commonwealth Hostels Ltd., came to Australia under a migration scheme conducted by the Executive. The provision of food and shelter for these people fell within the sphere of the Executive's responsibility. Although it may be said that it did not become an essential function of government, the hostels which the Minister for Labour and National Service handed over to Commonwealth Hostels Ltd. were established by the Government to meet the needs of the migrants.
The question which arises is whether the company manages and conducts these hostels merely under its status as a company incorporated according to State law and as non-governmental enterprises, or whether the company is an agency conducting these hostels as governmental institutions. I should think that Commonwealth Hostels Ltd. is in the latter situation.
It is obvious that the company was formed solely for the purpose of filling departmental needs. The fact that the company was incorporated under the Companies Act 1938 Vict., does not prevent it from carrying out its objects in the capacity of a departmental agency. The memorandum of association confines the objects of the company to the provision of accommodation for migrants, members of the forces and their dependants, and persons in the service of the Commonwealth or of an authority of the Commonwealth and their dependants, and to the provision of accommodation only for such members of these classes as the Minister for Labour and National Service requires the company to provide accommodation.
The company plainly owes its incorporation to an executive decision; all the corporators are public servants; otherwise, the special character of its objects could not be explained. The memorandum of association provides that upon the winding up of the company any property remaining after payment of debts is not to be distributed among the members but to be transferred to the Minister for Labour and National Service. The articles provide that each director shall be appointed by an instrument in writing under the hand of the Minister and that the remuneration of a director is subject to the Minister's control. The articles require that the accounts of the company shall be audited by the Commonwealth Auditor-General. These articles also provide that the company shall take steps to wind up its affairs as soon as practicable after receiving a written notice from the Minister that in his opinion such a course is in the circumstances necessary or desirable. The finances of the company are provided out of moneys appropriated by Parliament for the services which the company undertakes; it can undertake them only at the Minister's request: its objects extend to no other services.
The relationship of the company to the Commonwealth is settled not only by the terms of its constitution, but by the agreement dated 20th November 1951 made between the Commonwealth and the company. This agreement recites the objects mentioned above for which the company was formed and that the memorandum of association is framed to preclude the company from paying any portion of its income or property directly or indirectly in any form by way of profit to the members of the company. The agreement provides that the company shall have no right, title or interest in any of the real or personal property of the Commonwealth comprised in the hostels. The company is not entitled under the agreement to manage and conduct any hostel unless it is specified by the Minister. Practically, the company has little if any discretion of its own in the management of any hostel specified by the Minister. It must not act without the Minister's approval in matters of policy and many matters of detail. Nominally the company employs the managers and staff of the hostels committed to it by the Minister, but this authority is granted under the terms of the agreement. The paymaster of all the personnel ranking as employees of the company is, in truth, the Commonwealth. In my opinion the company, by reason of its constitution and the relationship created by the agreement with the Commonwealth, manages and conducts the hostels in the capacity of an agency of the Commonwealth. I think that, if an unincorporated committee of persons were appointed by the Executive to manage and conduct these hostels upon the terms of an agreement similar to that made with this company, there could be no doubt that it would be an agency of the Commonwealth and the provision of sustenance and shelter to the people admitted to the hostels would retain the character of services rendered by the Executive.
Commonwealth Hostels Ltd. owes its corporate status to State law. It does not follow that it is not a mere instrumentality of the Commonwealth while exercising its powers as a corporation. The question whether it is a mere instrumentality of the Commonwealth depends upon the control which the Minister may exercise over it through its constitution and the conditions, stipulated by the agreement, upon which it managed and conducted the hostels. In my opinion it managed and conducted the hostels committed to it by the Minister as departmental establishments and as manager the company was an agency of the Executive. It would be difficult to contemplate this company in its capacity of manager of the hostels as a taxpayer of a State if it decided to impose a company tax.
In my opinion none of the State Acts regulating prices, with which the cases are concerned, manifests an intention to control the price of any service rendered by the Commonwealth. A service rendered by any agency of the Commonwealth is not therefore within the purview of the Act. It follows that each of these cases should be determined against the defendant.
Williams J.
In these three cases I am of opinion that the questions asked in the cases stated should be answered as follows. In Bogle's Case: 1. (a) and (b): No; 2. and 3.: Do not arise; 4. No; 5. No; 6. The Commonwealth of Australia; 7. Does not arise. In Clark's Case: 1. (a) and (b): No; 2. and 3.: Do not arise; 4. No; 5. The Commonwealth of Australia; 6. Does not arise. In Boreham's Case: 1. (a) and (b): No; 2. and 3. Do not arise; 4. No; 5. The Commonwealth of Australia; 6. Does not arise.
I do not propose to give reasons at length for reaching these conclusions. There are two plaintiffs, the Commonwealth of Australia and Commonwealth Hostels Ltd. The company was incorporated on 13th September 1951 under the provisions of the Companies Act 1938 Vict.. It is a company not for profit limited by guarantee having seven members all of whom are civil servants of the Commonwealth and all of whom undertake to contribute to the assets of the company in the event of it being wound up &c. such amounts not exceeding £1 as may be required for payment of the debts and liabilities of the company &c. Its principal object is to provide, acquire, take over, establish, equip, maintain, conduct, control, manage or supervise hostels in Australia for the accommodation of migrants; members of the defence forces of the Commonwealth and their dependants; persons in the service of the Commonwealth of Australia or any authority under the Commonwealth and their dependants; persons engaged upon work for the Commonwealth of Australia or any authority under the Commonwealth or their dependants for whom the Minister of State for Labour and National Service requests the company to provide accommodation. Clause 6 of the memorandum of association provides that if upon the winding up or the dissolution of the company there remains after the satisfaction of all its debts and liabilities any property whatsoever, the sum shall not be paid to or distributed amongst the members of the company, but shall be paid or transferred to the Minister of State for Labour and National Service and shall be applied in such manner as he may direct. The articles of association of the company provide that its directors shall be appointed by the Minister and that the office of director shall be vacated if the director is required by the Minister to resign. Article 59 provides that the company shall take steps to wind up its affairs as soon as practicable after receiving a written notice from the Minister that in his opinion such a course is in the circumstances necessary or desirable.
On 20th November 1951 an agreement in writing was entered into between the Commonwealth and the company and it is under this agreement that the company is managing and conducting the hostels referred to in the suits. One of these hostels is situated in New South Wales, one in Victoria and one in South Australia. It is an agreement to manage and control such of the hostels as are from time to time specified by the Minister. There is no transfer of title of the hostels from the Commonwealth to the company, they remain the property of the Commonwealth as heretofore. Clause 9 of the agreement expressly provides that nothing therein contained shall be deemed to confer on the company any right title or interest in any of the real or personal property of the Commonwealth comprised in the hostels. Clause 2 of the contract provides that the Commonwealth will make available by way of loan to the company upon such terms and conditions as may be determined by the Minister such funds as are appropriated by Parliament for this purpose. Clause 7 provides that the company will at all times observe and comply with any directions given by the Minister relating to the policy to be adopted by the company in carrying out its undertaking as to the management and control of the hostels. The agreement contains a number of other provisions intended to give the Minister complete control of the manner in which the hostels are to be managed and conducted. It is unnecessary to refer to all of them. There is an undertaking by the company not to alter the scale of charges from time to time approved by the Minister for the accommodation and facilities provided in the hostels. Another undertaking is to proceed to close down any hostel under the management or control of the company as soon as is reasonably practicable after being so requested in writing by the Minister.
The principal object of the company, its constitution as a whole, and the provisions for its internal management clearly indicate to my mind that the company was created by the Commonwealth so that it would have a convenient corporate agent for carrying out a governmental purpose of the Commonwealth where it is incidental to such a purpose to provide hostels, housing and other forms of accommodation for migrants and the other persons referred to in the principal object. The terms and conditions of the agreement of 20th November 1951 prove that the company is in fact managing and conducting the hostels in execution of the first of these governmental purposes as the mere agent of the Commonwealth. It is managing and conducting on behalf of the Commonwealth a certain activity in which the Commonwealth considers it necessary to engage as incidental to its national purpose of promoting and assisting immigration into Australia. This activity is providing board and lodging for immigrants when they first land in Australia pending their absorption into the community. For this purpose the Commonwealth has acquired a large number of hostels and the Commonwealth Parliament has voted the large sums of money in the Appropriation Acts to which we were referred. In Skinner v. Commissioner for Railways [1] Jordan C.J. has summed up with his usual lucidity the considerations which determine whether a body represents the Crown for the purpose of being entitled to the benefit of the Crown's prerogatives, privileges and immunities including that of not being bound by statutes unless an intention in that behalf appears either expressly or by necessary implication. If the body is really an agent of the Crown it is immaterial, as his Honour pointed out, that it is incorporated or that it can sue or be sued or is carrying on trading activities. Later cases are collected in Bank of New South Wales v. The Commonwealth [2] .
1. (1937) 37 S.R. (N.S.W.) 261, at pp. 269-270; 54 W.N. 108, at p. 109.
2. (1948) 76 C.L.R. 1, at p. 273.
The extent to which the Crown in right of the Commonwealth can be bound by State legislation is a subject upon which there has been a difference of opinion in this Court: In re Richard Foreman & Sons Pty. Ltd.; Uther v. Federal Commissioner of Taxation [3] . In Minister for Works (W.A.) v. Gulson [4] there was also a difference of opinion whether the immunity under discussion only applies, in the case of Commonwealth legislation, to the Crown as sovereign head of the Commonwealth, and in the case of State legislation to the Crown as sovereign head of the State. For the reasons given in Gulson's Case [4] I am of opinion that whenever it is intended that Her Majesty shall be bound in respect of her prerogative, rights or property, whether as the sovereign head of the United Kingdom or any part of the British Commonwealth, or of the Commonwealth of Australia, or any State it is necessary that she shall be expressly named or that a necessary implication to that effect shall appear from the purpose and provisions of the statute. Accordingly, since the company is an agent of the Commonwealth, it cannot be subject to the provisions of the various State Acts relied upon unless these Acts bind the Crown expressly or by necessary implication. The Acts in question are the Landlord and Tenant Acts passed in New South Wales, Victoria and South Australia in 1948 and the Prices Regulation Acts of those States passed in the same year. In the end, the defendants did not, if I understood the argument correctly, claim that they were tenants and entitled to rely on the Landlord and Tenant Acts. If they had attempted to do so the attempt must have failed because these Acts expressly exempt the Crown in right of the Commonwealth. But the defendants did claim that they were being provided with board and lodging by the company and entitled to rely on the Prices Regulation Acts and particularly the provisions of those Acts relating to declared services. The New South Wales and Victorian Acts do not bind the Crown expressly and there is nothing to be gathered from their purpose or provisions to raise a necessary implication. The South Australian Act provides that service means the supply for reward of water, electricity, gas, transport, or other rights, privileges or services (not being services rendered by a servant to a master) by any person (including the Crown and any statutory authority) engaged in an industrial, commercial, business, profit-making or remunerative undertaking, or enterprise. This definition refers to the Crown but, when it is read as a whole, it would seem that the Crown is intended to mean the Crown in right of the State of South Australia, a meaning which accords with that placed upon the Crown in Essendon Corporation v. Criterion Theatres Ltd. [1] .
1. (1947) 74 C.L.R. 508.
2. (1944) 69 C.L.R. 338.
3. (1944) 69 C.L.R. 338.
4. (1947) 74 C.L.R. 1.
It was submitted for the defendants that, even if the company was an agent of the Commonwealth, it had nevertheless contracted with the inmates of the hostels as a principal and that the Commonwealth could not come in and claim the benefit of the contract without becoming subject to the principle that where A employs B to make a contract for him and B makes a contract with C, if B is a person who might reasonably be supposed to be acting as a principal and is not known or suspected by C to be acting as the agent of anyone, A cannot make a demand against C without the latter being entitled to stand in the same position as if B had in fact been a principal (Montagu v. Forwood [2] ; Isaac Cooke & Sons v. Eshelby [3] ). It was submitted that if the company sued the defendants, they would be able to plead the Prices Regulation Acts and that the Commonwealth as an undisclosed principal could not be in a better position. In my opinion this principle cannot be invoked to whittle away the immunity of the Crown. A person who is a mere agent of the Crown is entitled to the same shield as the Crown itself, and the company as such agent is as much immune from the provisions of these Acts as the Crown itself (Roberts v. Ahern [4] ; Tyne Improvement Commissioners v. Armement Anversois S/A (The Brabo) [5] ).
1. (1893) 2 Q.B., at p. 355.
2. (1887) 12 App. Cas., at p. 278.
3. (1904) 1 C.L.R. 406.
4. (1949) A.C. 326.
Webb J.
In all three cases I agree with the answers proposed by Fullagar J. and substantially for the reasons given by his Honour but I wish to add a few words.
It is not contested that the Commonwealth can employ as its servant a company incorporated under the laws of a State. However I do not think that this company is the servant of the Commonwealth. One naturally looks for a clear indication of an intention to do such an unusual thing as to employ a company as a mere servant of the Commonwealth, and I can find no such indication. I am unable to regard the agreement between the company and the Commonwealth as constituting the former merely the manager of the latter. The appointment of a manager is not ordinarily effected in such form. In my opinion the terms of the agreement reveal the company to be an independent contractor for the supply of board and lodging to specified persons who seek it from the company. It is true that the combined effect of the memorandum and articles of association of the company and the agreement is that the Commonwealth controls the exercise of the powers and the scope of the operations of the company; but it is not true that the Commonwealth controls the manner of performing those operations to such an extent as to make the company its servant. In all essential particulars the position of the company under the agreement appears to me not to be different from what it would be if the company were an ordinary hotel keeper or boarding house keeper.
To meet the point that the company is an independent contractor there seems to be no alternative but to contend that the company is at most only apparently so; and that, having regard to its memorandum and articles of association, it is really the Commonwealth in the guise of a Victorian company limited by guarantee. To establish that contention it is necessary either to deny the incontestable, that is, that the company is a separate entity; or to prove that the company is in fact a mere puppet, whatever the documents may represent; but as to this there is no evidence.
No assistance can, I think, be derived from the cases dealing with specially created statutory corporations, such as railway and education commissioners. Their position in relation to the Crown always depends on the terms of the particular statutes.
In my opinion then this company, like other companies, is bound by the landlord and tenant and price fixing legislation of the States. However, the relevant landlord and tenant legislation is not applicable to the facts stated in any of the three cases.
Fullagar J.
—Commonwealth and Commonwealth Hostels Ltd. v. Bogle: This is a case stated by Kitto J. in an action in which the Commonwealth and a company named Commonwealth Hostels Ltd. are plaintiffs and one Andrew Bogle is defendant. The claim is a claim for the price of board and lodging and other services and facilities provided for the defendant. The plaintiffs sue in the alternative, alleging that the one or the other of them is entitled to the amount claimed.
From about the end of 1949 the Commonwealth Government provided, as a matter incidental to the carrying out of its immigration policy, a number of hostels for the accommodation of immigrant families. One such hostel is situate at Brooklyn in the State of Victoria, and is known as the Brooklyn Hostel. It consists of a large building, containing seventy rooms, which is erected on land held by the Commonwealth under a lease. The defendant and his wife and child commenced to live at the Brooklyn Hostel on 18th July 1951, and they are still living there. The accommodation provided for the defendant and his wife and child consists of three rooms, two of which are furnished as bedrooms, and the third of which is furnished as a sitting-room. Blankets and bed linen are provided in all the bedrooms in the hostel. Meals are provided for the residents of the hostel in a central dining hall. Electric light and power are provided. There are bathrooms and lavatories and laundries for the use of the residents. The washing of one sheet and one pillow-slip per person per week is done for the residents. There is a playground for children, a first-aid station, and a library. All furniture, furnishings, fittings and equipment in the hostel have at all times been the property of the Commonwealth.
For the accommodation of himself and his family and for the services and facilities mentioned above the charge made to the defendant, up to 27th April 1952, appears to have been at first £6 13s. 0d. per week and later £6 18s. 6d. per week. The exact manner in which these sums were calculated need not be considered, but it should be mentioned that the charges made were arrived at on a basis which took into account the earnings of members of a household.
Up to 27th January 1952 the Brooklyn Hostel and the other hostels were managed and controlled by a Department of State of the Commonwealth, the Department of Labour and National Service. On that date a change took place, the effect of which is one of the matters in controversy in this case. Up to that date, however, the position seems clear enough. It was not, I think, contended that the residents of the hostels were tenants. Having regard to the purpose of the hostels, to the character of the services and facilities provided, to the inclusive nature of the charge made, and to the fact that master keys of all the rooms were retained by officers of the Department, it seems clear that they were not tenants but lodgers. And the contracting parties were the Commonwealth and the respective residents of the hostels. In particular there was a contract between the defendant Bogle and the Commonwealth that, in consideration of the Commonwealth providing the accommodation and services and facilities which have been described, he would pay to the Commonwealth the sum of £6 18s. 6d. per week. It is not necessary, for the purpose of answering the questions in the case stated, to inquire further into the implied terms of the contract, but one would suppose that it was terminable on reasonable notice by either party, and that a week's notice would in the circumstances be reasonable notice.
The change which, as has been said, took place on 27th January 1952 consisted in the taking over of the management and control of the Brooklyn Hostel by the plaintiff company, Commonwealth Hostels Ltd. The legal effect of what was done in this connection requires examination, but, before entering upon that examination, it will be convenient to explain why the question is or may be important and to state the contentions of the parties to the action.
On or about 16th April 1952 notice was given to the residents of the Brooklyn Hostel, including the defendant, that, as from Sunday, 27th April 1952, the charges for the accommodation and facilities provided in the hostel would be increased to a specified amount. The amount of the increase in the case of the defendant was from £6 18s. 6d. to £8 7s. 6d. For the three weeks commencing on 27th April 1952 and ending on 17th May 1952 the defendant made payments to the plaintiff company at the rate of £8 7s. 6d. per week, but thereafter, although he remained in occupation, he paid £6 18s. 6d. only and refused to pay any more. What is claimed in the action is the difference between £8 7s. 6d. per week and £6 18s. 6d. per week for the period commencing on 18th May 1952 and ending on 12th September 1952. The writ was issued on 18th September 1952. The prima facie basis of the claim presumably is that a contract to pay at the increased rate for the future is to be inferred from the facts that the defendant remained in occupation and paid the increased rate for three weeks.
The defendant relies on a declaration and a prices regulation order relating to the provision of board and lodging and in force under the Prices Regulation Act 1948-1951 Vict., and he also relies on s. 35 of that Act, which provides, so far as material, that no person who is the proprietor of any residential business (as defined) shall charge any person for lodging board and amenities provided at a rate higher than the rate charged at the commencement of that person's period of occupation as a lodger. Section 35 may, in my opinion, be eliminated from consideration at once. I do not think it can be said that either the Commonwealth or Commonwealth Hostels Ltd. was the proprietor of a residential business within the meaning of that section. This view, however, does not dispose of the defendant's case, for the prices regulation order on which he relies is quite general in its application and is not limited to persons who carry on a business. If it applies to the present case, its terms will operate to make illegal the raising of the charge for accommodation and facilities provided, which was announced on 16th April 1952.
In the view which I have ultimately taken of this case it is not necessary to decide whether the Commonwealth is bound by the Prices Regulation Act Vict.. I think I should say, however, that, in my opinion, the Commonwealth is not bound by that Act, and, if I had thought that the Commonwealth, as the party with whom the defendant contracted, was the proper plaintiff in this action, I should have held that the defence to which I have referred failed. To say that a State can enact legislation which is binding upon the Commonwealth in the same sense in which it is binding upon a subject of the State appears to me to give effect to a fundamental misconception. The question whether a particular State Act binds the Crown in right of a State is a pure question of construction. The Crown in right of the State has assented to the statute, and no constitutional question arises. If we ask whether the same statute binds the Crown in right of the Commonwealth, a question of construction may arise on the threshold. In considering that question we are, or should be, assisted by a presumption that references to the Crown are references to the Crown in right of the State only. If the answer to the question of construction be that the statute in question does purport to bind the Crown in right of the Commonwealth, then a constitutional question arises. The Crown in right of the State has assented to the statute, but the Crown in right of the Commonwealth has not, and the constitutional question, to my mind, is susceptible of only one answer, and that is that the State Parliament has no power over the Commonwealth. The Commonwealth—or the Crown in right of the Commonwealth, or whatever you choose to call it—is, to all intents and purposes, a juristic person, but it is not a juristic person which is subjected either by any State Constitution or by the Commonwealth Constitution to the legislative power of any State Parliament. If, for instance, the Commonwealth Parliament had never enacted s. 56 of the Judiciary Act 1903-1950, it is surely unthinkable that the Victorian Parliament could have made a law rendering the Commonwealth liable for torts committed in Victoria. The Commonwealth may, of course, become affected by State laws. If, for example, it makes a contract in Victoria, the terms and effect of that contract may have to be sought in the Goods Act 1928 Vict. (see Federal Commissioner of Taxation v. Official Liquidator of E. O. Farley Ltd. (In Liquidation) [1] and In re Richard Foreman & Sons Pty. Ltd.; Uther v. Federal Commissioner of Taxation [2] ). But I should think it impossible to hold that the Parliament of Victoria could lawfully prescribe the uses which might be made by the Commonwealth of its own property, the terms upon which that property might be let to tenants, or the terms upon which the Commonwealth might provide accommodation for immigrants introduced into Australia.
1. (1940) 63 C.L.R. 278, at p. 308.
2. (1947) 74 C.L.R. 508, at p. 528.
On the other hand, if the plaintiff company is the party with which the defendant contracted, and is therefore the proper plaintiff in the action, I should think that, unless some special reason could be found for excluding it from the field covered by the Prices Regulation Act 1948-1951, that company, like any other company in Victoria, was bound by regulations and orders made under the Act. It is necessary, therefore, to consider whether the party with which the defendant contracted (assuming, as the case stated assumes, that he contracted with one or the other) was the Commonwealth or the plaintiff company. This means that we must examine the constitution of the company and what took place after its incorporation.
The plaintiff company was incorporated, evidently on the initiative of the Commonwealth Government, under the Companies Act 1938 Vict. on 13th September 1951. It is a company limited by guarantee, the maximum amount for which a member can be made liable being £1. Each of the seven signatories to the memorandum and articles is described as a civil servant. Apparently there are not and never have been any other members. The memorandum empowers the company to "provide, acquire, take over, establish, equip, maintain, conduct, control, manage or supervise" hostels for the accommodation of "migrants" and others. It also empowers the company to enter into any arrangement with any Government and to carry out a number of subsidiary "objects". It provides that the income and property of the company shall be applied solely towards its objects, and that no portion thereof shall be paid or transferred directly or indirectly by way of dividend, bonus, or otherwise howsoever by way of profit, to the members of the company. If there is any surplus on a winding up, it is not to be distributed among the members of the company, but is to be paid to the Minister of State for Labour and National Service to be applied by him in such manner as he may direct. The articles provide that every director is to be appointed by the Minister by writing under his hand and is to hold office on the terms specified in the instrument of appointment. A director is to cease to hold office upon being required in writing by the Minister to resign. The accounts of the company are to be audited by the Commonwealth Auditor-General. The company is to take steps to wind up its affairs upon receiving a written notice from the Minister that such a course is, in his opinion, necessary or desirable.
The lease of the Brooklyn Hostel was never assigned by the Commonwealth to the company, nor was any sub-lease to the company executed, nor was any property of the Commonwealth ever transferred to the company. But on 20th November 1951 a contract in writing was made between the Commonwealth and the company, the terms of which are of great importance. The instrument recited that it was intended that the company should "assume responsibility for managing and conducting the hostels now being managed and conducted by the Commonwealth through the Department of Labour & National Service" and also those in course of completion which would on completion have been managed and conducted by the Commonwealth through the Department. It then provided (by cl. 1) that the company should undertake the management and control of such of the hostels as should from time to time be specified by the Minister and should maintain standards of accommodation and service not inferior to those existing at the time of the specification. Clause 2 provided that the Commonwealth should make available to the company by way of loan such funds as should be appropriated by Parliament for the purpose. Clause 3 provided for the employment by the company of officers and employees "now engaged by the Department in the administration management and control of the hostels". Clause 5 provided that the company should, when requested, undertake on behalf of the Department the work of locating sites for and equipping hostels the management and control of which would on completion be undertaken by the company. Clause 6 provided that the company would, on being informed of any accommodation required, ensure that satisfactory arrangements were made for such accommodation. Clause 7 provided that the company would comply with any directions of the Minister as to "the policy to be adopted by the company in carrying out its undertaking as to the management and control of the hostels". By cl. 8 the company, inter alia, undertook (a) to maintain the hostels and the property of the Commonwealth comprised therein in good repair and condition, (b) to furnish information required by the Minister, (c) to permit the Minister or any person nominated by him to inspect "any of the premises under the management or control of the company," (g) not to alter the scales of charges from time to time approved by the Minister for accommodation and facilities provided in the hostels, (h) to supervise, when requested, the erection and equipping "of hostels the management and control of which will on completion be transferred to the company", (i) to close down any hostel "under its management or control" on being requested in writing by the Minister so to do. Clause 9 provided that nothing contained in the instrument should be deemed to confer on the company any right title or interest in any of the real and personal property of the Commonwealth comprised in the hostels. Clause 10 provided that, upon the company undertaking the management and control of hostels specified by the Minister, the benefit of all contracts entered into by the Commonwealth and then existing for the supply of goods and services and the conduct of facilities in connection with the hostels should by force of the agreement thereupon be assigned to the company, which would discharge all obligations and liabilities of the Commonwealth in connection with all such contracts.
The Minister for Labour and National Service at a later date "specified", in accordance with cl. 1 of the contract, a number of hostels, including the Brooklyn Hostel, as hostels of which the company was to undertake the management and control. The date of "taking over" was 27th January 1952, although the "specification" was not formally made until 19th February 1952. It was made by a letter of that date to the chairman of directors of the company, in which the Minister specified the named hostels "as those which I desire the company to manage and control from the date from which I am advised the company will be ready to take over from the Department, viz. 27th January 1952".
On 18th January 1952 a notice was exhibited on notice boards at the Brooklyn Hostel, which commenced: "Residents are hereby informed that in connection with the change over of hostels from the Department of Labour and National Service to the Commonwealth Hostels Ltd. a stocktake of all equipment in every room of the hostel has to take place in the next few days". The notice proceeded to give certain information about the "stocktake", and to invite the co-operation of the residents. It was signed "H. G. H. Beeren, Manager, Nos. 3 and 4 Hostel". It came to the knowledge of the defendant Bogle.
On 16th April 1952 the notice which announced the increased charges was exhibited on notice boards at the Brooklyn Hostel. The notice was headed "Commonwealth Hostels Ltd.". It stated that an increase in hostel tariff charges for adults would apply from Sunday 27th April 1952. It then proceeded to announce "the new rates which have been approved by the Commonwealth Government". It was signed "C. R. Thomas, General Manager". It came to the knowledge of the defendant, who, as has been seen, paid the increased charges for the first three weeks after 27th April.
Only two other facts need, I think, be stated. The first is that the payments made by the defendant, after the "taking over" by the plaintiff company, are stated in the case to have been made to the company, and receipts stamped with the stamps required by the Stamps Act 1946 Vict. were given therefor in the name of the company. The second is that the defendant was not at any material time aware of the existence of the contract of 20th November 1951 between the Commonwealth and the company.
The object or objects of the Commonwealth Government in incorporating the company and placing in its hands the conduct and management of the hostels can, on the material before us, only be matter for conjecture. Whatever may have been the practical purpose sought to be achieved, it is with the legal effect of what was done, and with that alone, that the Court is concerned. And the important question is whether the company was substituted for the Commonwealth as the party contracting with the defendant in respect of the provision of accommodation and other facilities at the Brooklyn Hostel. In other words, the question is whether a novation took place. If it did, the company is the proper plaintiff. If it did not, the Commonwealth is the proper plaintiff. The question is largely a question of inference from facts proved or admitted. But the case stated expressly states that the parties are unable to adduce further evidence beyond that of which the effect is set out in the case. On that material I do not think that any other conclusion is open than that the company took the place of the Commonwealth as the contracting party with the immigrant boarders or lodgers at the Brooklyn Hostel, and that a novation did take place.
The general effect of the contract of November 1951 is, I think, that in relation to the hostels "taken over" the company is to be substituted for the Department of Labour and National Service—in other words, for the Commonwealth—in relation to hostel accommodation and in relation to persons accommodated in hostels. It was argued that the essence of the agreement was that the company was to "manage" the hostels and that as "manager" it became a mere "servant" or "agent" of the Commonwealth. The argument is not without force, but a little reflection, I think, reveals it as savouring of unreality. It is not difficult to conceive purposes which might be served by the substitution of a new corporate entity for the Commonwealth as the person responsible for the conduct of the hostels, but it seems impossible to conceive any rational purpose that could be served by the interposition of a corporate "manager" between the Commonwealth and the individual managers and servants who must of necessity be employed. There is no reality about the conception of the new corporation as a fellow servant of the Commonwealth with the individual servants employed. In any case the agreement expressly provides (cl. 3) that employees hitherto employed by the Department are to become employees of the company. It is clearly contemplated that the staffs required for running the hostels shall be engaged and paid by the company. The company covenants with the Commonwealth to maintain the hostels and the property of the Commonwealth therein, and to make any necessary replacements (cl. 8 (a)). In respect of funds provided by the Commonwealth for the company the relation of the Commonwealth and the company is to be that of borrower and lender (cll. 2, 8 (d)). It is to provide accommodation when required (cl. 7) and to maintain existing standards of accommodation (cl. 1). The provision in cl. 8 (g) that scales of charges are not to be altered without the approval of the Minister clearly contemplates that, in the absence of such a provision, the company could make such charges as it thought fit. Clause 10 expressly provides for the transfer from the Commonwealth to the company of relevant contracts. It may be that, on its true construction, this clause does not in terms include the benefit of existing contracts by residents to pay for their accommodation. But that it was intended that the benefit of such contracts should be included is made plain by the fact that, after the date of the "taking over", payments for accommodation were made by residents to the company, which gave receipts in its own name stamped in accordance with the Stamps Act of the State.
A novation is, of course, a tripartite affair, and the agreement of November 1951 affects the position only as between the Commonwealth and the company. But the "change over of hostels from the Department of Labour and National Service to the Commonwealth Hostels Ltd." was announced to residents of the Brooklyn Hostel on 18th January 1952, and they were informed that "in connection with the change over" a "stocktake" of all equipment in every room would be made. This notification came to the knowledge of the plaintiff, and he thereafter made his payments to the company, which acknowledged them in the manner indicated above. These facts compel the conclusion that a novation took place.
The position now reached is that, as from 26th January 1952, the contract with respect to the accommodation of the defendant at the Brooklyn Hostel is a contract between the company of the one part and the defendant of the other part. In other words, the company, and not the Commonwealth, is the proper plaintiff. The remaining question is whether the Victorian price-fixing orders on which the defendant relies apply to the company.
The Prices Regulation Act 1948-1951 came into force by proclamation on 20th September 1948. Section 4 provided that declarations and orders made under the National Security (Prices) Regulations (which ceased to operate of their own force on 19th September 1948) should have the force of law in Victoria until repealed or amended under the Act. By virtue of this section there was in force in Victoria on 27th January 1952 a declaration of the provision of board and lodging as a "declared service" under the regulations, and a Prices Regulation Order (No. 2426) made under the regulations on 8th February 1946 with respect to the provision of board and lodging. This order, by virtue of a declaration made on 9th December 1947 under the regulations, did not apply to the services supplied or carried on "by State or semi-governmental or local governing bodies". (The exemption was not confined to the provision of board and lodging: it extended to all services supplied by the "bodies" mentioned). Prices Regulation Order No. 2426 Cth. remained in force in Victoria until 21st July 1952, when it was superseded by Prices Regulation Order No. 436 Vict. made under the State Act. Clause 5 of Prices Regulation Order No. 2426 would, if applicable to the plaintiff company, render illegal the increase in the charge for accommodation to the defendant and his wife and child announced by the company on 16th April 1952.
The first argument submitted for the plaintiff company was that it was exempted from the operation of Prices Regulation Order No. 2426 because it was a "semi-governmental body". It is extremely difficult to attach any precise meaning to this expression. The expression "State bodies" is equally obscure. The remaining expression, "local governing bodies", creates, of course, no difficulty. It seems to me to be unnecessary for present purposes to assign any meaning to the relevant expression. I am disposed to think that, in its context, it contemplates bodies exercising some degree of governmental power. But, in any case, it comes between a reference to State organisations and a reference to bodies which are the creatures of State laws, and I would read it as referring exclusively to bodies which have some sort of relation or "semi-relation" to a State and as having no reference to the Commonwealth or any Commonwealth "bodies". When the order was in force under the National Security Act 1939-1946, the reference would, of course, be to any State. When it ceased to operate under that Act and became an expression of the will of the Parliament of Victoria, it may be that it should be regarded as referring to Victoria only.
The other argument for the plaintiff company was that it was exempt from order No. 2426 by reason of the relation of the company to the Crown in right of the Commonwealth. The matter was treated for the most part as a question of construction. The defendant's counsel referred to s. 37 (2) (e) of the Prices Regulation Act, which provides that nothing in Pt. III of the Act shall prevent any transaction to which the State or the Commonwealth is a party. Part III relates to transactions in land. It is Pt. II of the Act that relates to the fixing of prices for goods and services, and Pt. II contains no such provision as s. 37 (2) (e). It was said, therefore, that Pt. II ought to be construed as applying to the State and to the Commonwealth. By way of answer to this argument the company relied on the rule that the Crown is not bound by statute unless an intention to bind it appears expressly or by clear implication. It said further that it stood in a particular relation to the Crown—that is, of course, the Crown in right of the Comwealth—and it relied on what it called "the shield of the Crown".
I have already stated my opinion that a State has no power to bind the Commonwealth by such legislation as that which is contained in the Prices Regulation Act. And I would frame the final question arising on this case stated by asking:—is the company's relation to the Commonwealth such as to identify it with the Commonwealth and place it constitutionally in the same position as the Commonwealth with regard to the application of the Prices Regulation Act? If we must employ metaphors, it would be more appropriate to speak of the "shield of the Commonwealth", though I would not, of course, deny the relevance of the numerous authorities dealing with what has been called the "shield of the Crown".
I do not think it necessary to discuss at any length the question raised by the company's contention, because it seems to me impossible to say that the company is the Commonwealth, or is entitled, by reason of any relation which it has with the Commonwealth, to claim immunity from the provisions of the Victorian Act. In such cases as Grain Elevators Board (Vict.) v. Dunmunkle Corporation [1] ; Victorian Railways Commissioners v. Herbert [2] and Rural Bank of New South Wales v. Hayes [3] a statutory corporation is involved, and the question must turn partly on the effect of the incorporating statute and partly on the construction of the statute from which exemption is claimed, though other matters may also be material. In such cases as Marks v. Forests Commission [4] we have a statutory corporation claiming to share the immunity of the Crown at common law from liability in tort. I must say that, with the greatest respect to the learned judge who decided it, I cannot think that that case was rightly decided. But, however this may be, in the present case we have no incorporating statute in which implications may be found. Here we have simply a company formed in the ordinary way under the Companies Act of the State, and functioning as such within the legal system of the State. On its face the Prices Regulation Act obviously applies to every such company which supplies board and lodging for reward, and there is no other statute to construe. It sues in its own right as a party to a contract a person who has contracted with it. The contract alleged is one which is made illegal by the State Act. What reason can there be for saying that the statute is inapplicable? The company is not the Crown in right of the Commonwealth. It has no right to sue on behalf of the Crown in right of the Commonwealth. It seems to me sufficient to paraphrase what I said in Rural Bank of New South Wales v. Hayes [5] , and to say that the Act does not affect rights of the Commonwealth, but the rights asserted by the company in these proceedings are simply not rights of the Commonwealth. It is said that the company was formed at the instance of the Commonwealth, that the Commonwealth through the Minister is in a position under the articles to control the company, and that the ultimate financial interest is that of the Commonwealth. But none of these things can affect the legal character of the company as a person suing in the courts. If the company were a company limited by shares, it could make no difference that the Commonwealth held ninety-nine per cent of the shares. It is said (with perhaps more force) that the company is in possession and control of property of the Commonwealth, and that its activities are activities in which the Commonwealth, in the course of the exercise of the immigration power, is vitally interested. But again I am unable to regard these matters as affecting in any way the legal nature of the company. Having been incorporated under the Companies Acts of the State, it seems to me that it must be subject to the Companies Acts and all other State legislation which in terms applies to such companies. It may be that the Commonwealth Parliament could, under s. 51 (xxvii.) and (xxxix.) of the Constitution, enact legislation conferring immunities on the company and prevailing over State legislation by virtue of s. 109. But no such question need be considered, because no such legislation has been enacted.
1. (1946) 73 C.L.R. 70.
2. (1949) V.L.R. 211.
3. (1951) 84 C.L.R. 140.
4. (1936) V.L.R. 344.
5. (1951) 84 C.L.R., at p. 153.
I ought to mention in conclusion the case of Roberts v. Ahern [1] , which might be thought to lend support to the argument of the company. In Pirrie v. McFarlane [2] , Higgins J. included Roberts v. Ahern [1] in a list of cases which he regarded as highly dubious since the Engineers' Case [3] . In West v. Commissioner of Taxation (N.S.W.) [4] , Evatt J. quotes this passage (including the reference to Roberts v. Ahern [1] , as illustrating the "numerous and startling applications" of the general doctrine of immunity of instrumentalities before it was overthrown. Roberts v. Ahern [1] is indeed, I think, to be regarded as representing an extreme application of that overthrown doctrine.
1. (1904) 1 C.L.R. 406.
2. (1925) 36 C.L.R. 170, at p. 213.
3. (1904) 1 C.L.R. 406.
4. (1920) 28 C.L.R. 129.
5. (1937) 56 C.L.R. 657, at pp. 696-697.
6. (1904) 1 C.L.R. 406.
7. (1904) 1 C.L.R. 406.
I think that the Commonwealth is properly made a party to the action, and that this Court therefore has jurisdiction under s. 75 (iii.) of the Constitution. Having such jurisdiction, it can give effect to the rights of the parties as found by it, and can give judgment for any party accordingly.
The questions asked by the case stated are as follows:—
1. Is it open to me on the facts and documents aforesaid to find that the payments which the defendant became liable to make for the accommodation and other benefits provided as abovementioned during the period from 18th May 1952 to 13th September 1952, both inclusive, were payments—(a) of rent, within the meaning of the Landlord and Tenant Act 1948 Vict., or (b) for a declared service, within the meaning of the Prices Regulation Act 1948-1951 Vict.?
2. If question 1 (a) be answered, yes, and I find that the said payments were payments of rent within the meaning of the said Landlord and Tenant Act 1948, was the amount thereof affected in any and what manner by the operation of that Act?
3. If question 1 (b) be answered, yes, and I find that the said payments were payments for a declared service within the meaning of the said Prices Regulation Act 1948-1951, was the amount thereof affected in any and what manner by the operation of that Act and the declarations and orders mentioned in par. 34 of this case or any of them?
4. Is it open to me on the facts and documents aforesaid to hold that the amount of the payments which the defendant became liable to make in respect of the said period was affected in any and what manner by the operation of s. 35 of the said Prices Regulation Act?
5. Has the defendant's knowledge or belief as to the nature or extent of the relationship between the plaintiff the Commonwealth of Australia and the plaintiff company at any time any and what materiality to the question whether either of the plaintiffs is entitled to judgment in this action?
6. If, having regard to the answers to the preceding questions, the defendant is liable to pay in respect of the said period an amount in excess of that which he has already paid, is the excess amount owed to the plaintiff the Commonwealth of Australia or to the plaintiff company?
7. If the excess amount is owed to the plaintiff company, has this Court jurisdiction to give judgment for the plaintiff company in this action?
These questions should, in my opinion, be answered as follows:—
1.
(a) No.
(b) Yes.
2. It is unnecessary to answer this question.
3. The effect of the Prices Regulation Act 1948-1951 is to make illegal any contract by the defendant to pay to the plaintiff company the amounts claimed. The case does not disclose any relevant contract between the defendant and the plaintiff Commonwealth.
4. No.
5. No.
6. See answer to question 3.
7. The Court has jurisdiction in the action.
Commonwealth and Commonwealth Hostels Ltd. v. Clark: In this case the defendant is a resident of a hostel known as the Finsbury Hostel in the State of South Australia. The land on which this hostel stands is held by the Commonwealth under a lease. The plaintiff company was on 31st January 1952 registered under Pt. XII of the Companies Act 1934-1939 S.A. as a company incorporated in Victoria and carrying on business in South Australia. The Finsbury Hostel, which was originally opened by the Commonwealth on 20th December 1949, was among the hostels "specified" by the Minister for Labour and National Service as a hostel the management and control of which was to be taken over by the company as from 27th January 1952.
The defendant and his wife commenced to live at the Finsbury Hostel on 16th April 1952. From that date up to 26th April 1952 he was charged and paid in respect of himself and his wife £5 13s. 0d. per week. On or about 18th April 1952 he was notified that the charge would be increased, for the week commencing 27th April 1952 and thereafter, to £6 17s. 0d. per week. The defendant refused to pay, and has never paid, the increased rate. The claim made in the action is for the difference between the amount of the increased charge notified to the defendant and the amount actually paid by him in respect of the period from 27th April 1952 to 6th September 1952. The writ was issued on 18th September 1952.
The facts of this case differ in two respects from the facts in Commonwealth and Commonwealth Hostels Ltd. v. Bogle and Commonwealth and Commonwealth Hostels Ltd. v. Boreham. In the first place, the defendant in this case, unlike the defendants in the other two cases, did not make any payment at the increased rate which was demanded as from 27th April 1952. Whereas both Bogle and Boreham continued to reside at their respective hostels and paid the increased charge for the first three weeks, Clark, though continuing to reside at the Finsbury Hostel, has at all times refused to pay at a rate higher than that which he was charged when he went to live there on 16th April. The second difference is this. Whereas both Bogle and Boreham originally went into residence at a time when their respective hostels were under the administration of the Department of Labour and National Service, Clark went into residence at the Finsbury Hostel at a time after the company had taken over the management and control of that hostel.
With questions raised by the first matter of difference the case stated by Kitto J. is not concerned—or at any rate not directly concerned. The difference, however, may render the questions asked by the case stated academic for the time being. The claim of either plaintiff, in each of these cases, must rest on contract. Unless contracts can be established whereby the respective defendants promised to pay whatever reasonable charge might from time to time be fixed by the Commonwealth or the company, it will be necessary for the plaintiffs to prove in each case a contract whereby the defendant promised to pay the increased charge. In the cases of Bogle and Boreham it may well be right to infer the making of such a contract from the remaining in occupation plus the making of payments at the increased rate. But Clark, though he remained in occupation, made no payments at the increased rate, and his mere remaining in occupation seems quite equivocal. It is quite consistent with his saying:—"I will not pay, or promise to pay, at the increased rate. I realise that, if I do not, you may give me a week's notice and then turn me out, but I intend to stay here, and pay under our existing contract, until you do turn me out". There would seem to be no reason why he should not say this. The mere unilateral announcement that the charges are to be increased would operate not as a rescission of an existing contract but as an offer to make a new contract. The well known principle of Davenport v. The Queen [1] would seem to be incapable of application to such a case. That principle rests on election: see Craine v. Colonial Mutual Fire Insurance Co. Ltd. [2] . Here the position would seem simply to be that an offer is being refused by Clark, the offeror being left to its rights under the existing contract if it chooses to exercise them. It seems proper to draw attention to these matters, but, as I have said, they do not arise on the case stated.
1. (1877) 3 App. Cas. 115.
2. (1920) 28 C.L.R. 305, at pp. 324, 325.
The second difference between the case of Clark on the one hand and the cases of Bogle and Boreham on the other hand is a matter which might affect the answers to the questions in the case stated, but, in the view which I take, does not. The view which I take in the cases of Bogle and Boreham is that the original contracts were between the Commonwealth and the respective defendants, but that in each case there was a novation discharging those contracts and substituting the company for the Commonwealth as the party contracting with the defendant. In those cases the original contract was made before the company took over the management and control of the hostels: in Bogle's case it was made before the incorporation of the company. In this case of Clark the original contract was made after the company had taken over the management and control of the Finsbury Hostel. That original contract was, in my opinion, a contract between the defendant and the company. My reasons for this conclusion will appear from what I have said in Bogle's Case.
The effect of the relevant price-fixing legislation in force at the material time in South Australia is the same as that of the corresponding New South Wales legislation.
The questions asked by the case stated are the same as those asked in Boreham's Case, and they should, in my opinion be answered in the same way.
The Commonwealth and Commonwealth Hostels Ltd. v. Boreham: In this case the defendant is a resident of a hostel known as the Bunnerong Hostel in the State of New South Wales. The plaintiff company was on 30th January 1952 registered under Pt. VI of the Companies Act 1936-1940 N.S.W. as a company incorporated in Victoria and carrying on business in New South Wales. The Bunnerong Hostel, which was originally opened by the Commonwealth on 1st April 1950, was among the hostels "specified" by the Minister for Labour and National Service as a hostel the management and control of which was to be taken over by the company as from 27th January 1952.
The defendant commenced to live with his wife and two children at the Bunnerong Hostel on 16th October 1951. From that date up to 26th April 1952 he was charged and paid in respect of himself and his family £9 1s. 6d. per week. On or about 18th April 1952 he was notified that the charge would be increased for the week commencing 27th April 1952 and thereafter to £10 10s. 6d. per week. For the week commencing 6th July 1952 and subsequent weeks the charge was reduced to £10 0s. 0d. per week, the reason being that the defendant's wife ceased to be in employment. The defendant paid the increased charge for the three weeks ending on 17th May 1952, and thereafter refused to pay at a rate higher than the old rate. The claim made in the action is for the difference between the amount of the increased charges notified to the defendant and the amount actually paid by him in respect of the period from 18th May 1952 to 20th September 1952. The writ was issued on 1st October 1952.
The facts of this case are indistinguishable from those in the case of Commonwealth and Commonwealth Hostels Ltd. v. Bogle, in which I have already expressed my views, and the effect of the relevant price-fixing legislation is precisely the same, except that the Prices Regulation Act 1948-1949 N.S.W. contains no provision corresponding to s. 35 of the Victorian Act.
The questions asked by the case stated are as follows:—
1. Is it open to me on the facts and documents aforesaid to find that the payments which the defendant became liable to make for the accommodation and other benefits provided as abovementioned during the period from 20th April 1952 to 20th September 1952, both inclusive, were payments—
(a) of rent, within the meaning of the Landlord and Tenant (Amendment) Act, 1948-1951 N.S.W., or
(b) for a declared service, within the meaning of Prices Regulation Act 1948-1949 N.S.W.?
2. If question 1 (a) be answered, yes, and I find that the said payments were payments of rent within the meaning of the said Landlord and Tenant (Amendment) Act 1948, as amended was the amount thereof affected in any and what manner by the operation of that Act?
3. If question 1 (b) be answered, yes, and I find that the said payments were payments for a declared service within the meaning of the said Prices Regulation Act 1948, as amended, was the amount thereof affected in any and what manner by the operation of that Act and the declaration and orders made thereunder or any of them?
4. Has the defendant's knowledge or belief as to the nature or extent of the relationship between the plaintiff the Commonwealth of Australia and the plaintiff company at any time any and what materiality to the question whether either of the plaintiffs is entitled to judgment in this action?
5. If, having regard to the answers to the preceding questions, the defendant is liable to pay in respect of the said period a sum in excess of that which he has already paid, is the excess amount owed to the plaintiff the Commonwealth of Australia or to the plaintiff company?
6. If the said excess amount is owed to the plaintiff company, has this Court jurisdiction to give judgment for the plaintiff company in this action?
These questions should be answered as follows:—
1.
(a) No.
(b) Yes.
2. It is unnecessary to answer this question.
3. The effect of the Prices Regulation Act 1948 is to make illegal any contract by the defendant to pay to the plaintiff company the amounts claimed. The case does not disclose any relevant contract between the defendant and the plaintiff Commonwealth.
4. No.
5. See answer to question 3.
6. The Court has jurisdiction in the action.
Kitto J.
In these cases I am of opinion that the questions should be answered in the manner proposed by Fullagar J. and for the reasons he has stated.
Taylor J.
In Boreham's Case the Commonwealth of Australia and Commonwealth Hostels Ltd. sues the defendant Boreham to recover the sum of £40 9s. 6d. being the balance of moneys alleged in the writ to be owing for board and lodging supplied to the defendant, his wife and two children at the Bunnerong Hostel, a hostel which was established to provide temporary accommodation for immigrants.
The hostel, which comprises a number of buildings, is situated at Bunnerong near Sydney on land leased to the Commonwealth and was, during the period in respect of which the claim is made, controlled and managed by Commonwealth Hostels Ltd., a company incorporated on 13th September 1951 under the Companies Act 1938 Vict. and registered in New South Wales as a foreign company. The hostel was established some considerable time before the incorporation of the company and, for a time, it was controlled and managed by the Commonwealth through officers of the Department of Labour and National Service. It was during this period that the defendant and his family first came to the hostel and their occupation of quarters at the hostel continued until after the control and management thereof was assumed by the company. There is no dispute that during the period in respect of which the claim is made the defendant and his family were provided with "board and lodging" as alleged.
The dispute between the parties has arisen out of the circumstance that on 18th April 1952 written notice was given to the defendant that the charge for accommodation and the benefits provided for himself, his wife and children would be increased as from 27th April 1952. The defendant paid the increased charge for three weeks from the last-mentioned date, but these payments were made by the defendant and other occupants of the hostel "under protest until such time as our legal officers instruct us to discontinue payment or until the increase is removed". After the expiration of the period of three weeks the defendant refused and continued to refuse to pay the amount of the increase, and it is in respect of the total sum so involved that this action is brought.
The facts concerning the claim have been agreed upon by the parties and, upon those facts as set forth in a case stated, the following questions are raised by Kitto J. for the opinion of this Court:
1. Is it open to me on the facts and documents aforesaid to find that the payments which the defendant became liable to make for the accommodation and other benefits provided as above-mentioned during the period from 20th April 1952 to 20th September 1952, both inclusive, were payments—(a) of rent, within the meaning of the Landlord and Tenant (Amendment) Act 1948-1951 N.S.W., or (b) for a declared service, within the meaning of the Prices Regulation Act 1948-1949 N.S.W.?
2. If question 1 (a) be answered, yes, and I find that the said payments were payments of rent within the meaning of the said Landlord and Tenant (Amendment) Act 1948, as amended, was the amount thereof affected in any and what manner by the operation of that Act?
3. If question 1 (b) be answered, yes, and I find that the said payments were payments for a declared service within the meaning of the said Prices Regulation Act 1948, as amended, is the amount thereof affected in any and what manner by the operation of that Act and the declaration and orders made thereunder or any of them?
4. Has the defendant's knowledge or belief as to the nature or extent of the relationship between the plaintiff the Commonwealth of Australia and the plaintiff company at any time any and what materiality to the question whether either of the plaintiffs is entitled to judgment in this action?
5. If, having regard to the answers to the preceding questions, the defendant is liable to pay in respect of the said period a sum in excess of that which he has already paid, is the excess amount owed to the plaintiff the Commonwealth of Australia or to the plaintiff company?
6. If the said excess amount is owed to the plaintiff company, has this Court jurisdiction to give judgment for the plaintiff company in this action?
At the outset it should be stated that the parties, by their counsel at the hearing, were in agreement that the facts clearly showed that the defendant never at any time became a tenant to either the Commonwealth or the company and that the payments from time to time made by the defendant were not in the nature of rent. I have no doubt that this is the correct conclusion on the facts and questions 1. (a) and 2. should be answered accordingly.
The substance of the remaining questions makes it quite clear that the initial question for consideration in this case is whether the defendant agreed to make payments at the increased rate and, if so, whether the Commonwealth or the company was the other contracting party. If there was no such agreement on the part of the defendant the claim of the plaintiffs must fail at the outset whilst it is a matter of considerable importance in relation to some of the questions whether, if such an agreement was made, the Commonwealth was contractually entitled and bound.
In spite of the statement contained in the case that the defendant "did not verbally or in writing agree to pay the increased charge for accommodation", I have no doubt that the defendant did, by his conduct, agree to make such payments. It is perhaps unnecessary to say that contracts may arise not only from express words, but also from the conduct of parties, and in this case the defendant's conduct must be taken unequivocally to indicate his agreement to pay the increased charges. He received notice on 18th April 1952 that the charges would be increased as from 27th April; he and his family remained in the hostel after the latter date and continued to do so during the period in respect of which the claim is made and for an initial period of three weeks he made payments at the increased rate. It is true that these payments were made under protest, as previously mentioned, and with this aspect of the matter I shall deal presently, but apart from this circumstance the defendant's actions could lead to no conclusion other than that he was agreeable to the new terms. What then was the effect of making the payments under protest? Is it open to a person in the circumstances in which the plaintiff found himself to say "I shall remain in occupation and I shall pay the increased charges but I shall pay them under protest and that will indicate that I am not agreeing to make these increased payments?" In my opinion, he is not. The words "under protest" have no precise legal significance, except where they are given some special meaning by statute or by agreement and, in the circumstances of this case, could mean no more than that the defendant, though agreeing to pay the increased charges, did not wish to be taken as abandoning any existing material right. No doubt the defendant had in mind the provisions of the Landlord and Tenant (Amendment) Act 1948-1951 N.S.W. and the Prices Regulation Act 1948-1949 N.S.W.. His conduct cannot, in my opinion, give rise to the inference that he was not, otherwise, assenting to a variation of the charges, for it would be a strange thing if a lodger whilst agreeing after reasonable notice to pay at an increased rate and though doing so under protest, could reserve the right to claim at some later or even remote stage that he had never so agreed. Perhaps the point may be more clearly stated by saying that where one or two parties of a contract enters into it, "under protest", he nevertheless makes a binding contract. The case of Smith v. William Charlick Ltd. [1] is clear authority for the proposition that a payment of money made under protest cannot be said to be an involuntary payment, except in special circumstances which are not present in this case. No doubt the defendant made the increased payments during the first three weeks of the relevant period in order that he might be allowed to remain in occupation of his quarters. The payments were not involuntary in any legal sense and, in my opinion, the only effect of paying under protest was to indicate an intention not to abandon any rights, extraneous to the contract, which might afford him protection against, or some relief from, his newly assumed obligation.
1. (1924) 34 C.L.R. 38.
These observations leave untouched the question whether this new obligation was assumed under a contract made with the Commonwealth or with the company, but, in my opinion, there can be little, if any, doubt that the company was the other contracting party. It was argued on behalf of the plaintiffs that the defendant originally made his agreement for accommodation with the Commonwealth and that, notwithstanding the subsequent assumption by the company of the management and control of the hostel pursuant to the agreement between it and the Commonwealth on 20th November 1951 the original agreement between the defendant and the Commonwealth relating to the former's accommodation subsisted, though with some modifications, at all relevant times. In my opinion, this view is not open on the evidence. Although it may be said that the company undertook the management and control of the hostel on behalf of the Commonwealth and therefore, in a general sense, that it acted on behalf of the Commonwealth, it is clear that in the performance of its functions of management and control it acted as a principal in relation to persons with whom it contracted. The agreement of 21st November 1951 makes it clear that such a course was intended and the evidence does not suggest that when the company entered into contracts it did so otherwise than in the capacity of a principal. On the contrary, the facts in the case and the relevant documents make it quite clear that the company acted as a principal on such occasions. I have no doubt that the original contract for accommodation made between the defendant and the Commonwealth was novated shortly after the assumption by the company of the management and control of the hostel or at the very latest when the company and the defendant with the assent of the Commonwealth made their agreement with respect to accommodation at the increased charges. Accordingly, the action, if maintainable, is maintainable at the suit of the company alone.
Whether or not it is maintainable at all depends upon the answers to a number of problems which arise in relation to the Prices Regulation Act 1948-1949 N.S.W. and declarations and orders thereunder. It was contended by counsel for the defendant that the rights of the defendant under the agreement for accommodation were, in the language of s. 3 (1) of the Act, rights under an agreement for the provision of lodging and therefore constituted "a service" within the meaning of that Act. Further, it was said, a service of this nature was a "declared service" pursuant to Prices Declaration No. 82 N.S.W. made under the Act on 10th October 1951 and maximum rates for such a service had been fixed either by Prices Regulation Order No. 190 N.S.W. or Prices Regulation Order No. 259 N.S.W.. Both of these orders were made before the charges for accommodation at the hostel were increased and since such increased charges were in excess of the maximum rates so fixed the plaintiff company, it was claimed, was not entitled to recover. The first answer made by the company to this line of defence was that it represented the Crown in right of the Commonwealth and that the Prices Regulation Act 1948-1949 N.S.W. does not and did not at any material time bind the Crown in that right. Secondly, it was said that Prices Declaration No. 82 (N.S.W.) excludes from the category of services declared by it services which are supplied or carried on by "a State or semi-governmental or local governing body" and the company even if it does not in a strict legal sense, represent the Crown was at all material times a semi-governmental body. It was further argued that if upon its true construction the Act does purport to bind the Crown in right of the Commonwealth it exceeds the limits of the legislative power of the State.
The Act does not purport expressly to bind the Crown and, as far as I can see, there is nothing in the Act giving rise to any implication that this was the intention of the legislature. On the contrary its provisions seem to me to be intended to regulate rights as between "subject and subject" (cf. Minister for Works (W.A.) v. Gulson [1] per Starke J.), and the whole history and purpose of the wartime and post-war legislation with respect to price fixing, both Commonwealth and State, clearly supports this view. In Gulson's Case [2] Rich J. expressed the view that "the Crown in all its capacities is prima facie not bound by a statute made in any part of the Empire unless this is provided for expressly or by necessary implication" [3] . This view was expressed after a consideration of Williams v. Howarth [4] ; Theodore v. Duncan [5] and Federal Commissioner of Taxation v. Official Liquidator of E. O. Farley Ltd. [6] . The observations of Williams J. in Gulson's Case [2] indicate quite clearly that he accepted the same view which, again, is implicit in the reasons of Starke J. The latter accepted as a rule of construction "that the Crown is not bound by a statute unless specially named or included by necessary implication despite the distinction taken in R. v. Sutton [7] between the Crown in right of the States" [1] . Having accepted the existence of the rule of construction Starke J. proceeded to examine the legislation in order to see if it contained any indication of contrary intention, and added that general words were not enough to give such an indication. In my opinion the rule, as stated by Rich J. in Gulson's Case [2] must now be taken to be the true rule.
1. (1944) 69 C.L.R. 338, at p. 358.
2. (1944) 69 C.L.R. 338.
3. (1944) 69 C.L.R., at p. 356.
4. (1905) A.C. 551.
5. (1919) A.C. 696.
6. (1940) 63 C.L.R. 278.
7. (1944) 69 C.L.R. 338.
8. (1908) 5 C.L.R. 789.
9. (1944) 69 C.L.R. 338, at p. 358.
10. (1944) 69 C.L.R. 338.
As I have already said, there are no indications in the Prices Regulation Act that it was the intention of the legislature to bind the Crown; on the contrary, its provisions tend to the opposite conclusion. But this conclusion cannot assist in the solution of the present case unless it should also be held that the company in a strict legal sense, represents the Crown and is therefore entitled to the same privileges and immunities as the Crown itself. Its relationship to the Executive Government is substantially determined by the agreement of 21st November 1951 and it is, I think, material to indicate the general purport and effect of that agreement. Before doing so, however, it is desirable to make some reference to the memorandum and articles of association of the company. Whilst its objects specify that the company was established to provide, acquire, take over, establish, equip, maintain, conduct, control, manage or supervise hostels housing and other forms of accommodation in Australia for the accommodation of migrants, members of the Defence Forces of the Commonwealth and their dependants, persons in the service of the Commonwealth and persons engaged upon work for the Commonwealth for whom the Minister of State for Labour and National Service requests the company to provide accommodation, the company is authorized to engage in many other activities. Clause 5 of the memorandum contains a provision prohibiting the payment of any part of its income or property by way of dividend, bonus or otherwise howsoever by way of profit to the members of the company, and cl. 6 provides that if upon the winding up or dissolution of the company there remains after the satisfaction of all its debts and liabilities any property whatsoever, the same shall not be paid to or distributed amongst the members of the company but shall be paid or transferred to the Minister and shall be applied in such a manner as he may direct. Article 31 gives to the Minister the right to appoint the directors of the company and, pursuant to arts. 33 and 39 (e), the power to remove directors summarily is also vested in the Minister. Article 55 provides that the accounts of the company shall be audited by the Commonwealth Auditor-General. The agreement recites the registration of the company with the object of providing in Australia hostels housing and other forms of accommodation in Australia for the accommodation of the classes of persons specified in the object to which I have referred and also recites that the memorandum of the company has been so framed as to preclude the company from paying or transferring any portion of its income or property directly or indirectly by way of dividend, bonus or otherwise howsoever by way of profit to members of the company. After reciting the intention of the parties that the company shall assume responsibility for managing and conducting the hostels, housing and other forms of accommodation and ancillary services then being managed and conducted by the Commonwealth through the Department of Labour and National Service, the agreement proceeds to specify the terms upon which this is to be done.
By the agreement the company undertakes the management and control of such of the hostels as are from time to time specified by the Minister. Clause 4 provides that the Minister may at any time after consultation with the board of directors direct the type, characteristics and standard of the accommodation and facilities to be provided and the company undertakes to ensure that satisfactory arrangements will be made for the accommodation of the number and classes of persons notified to it. Further, the company undertakes to maintain the hostels and the property of the Commonwealth comprised therein in good repair; to permit the Minister or any person nominated by him to inspect the premises at all reasonable times; to proceed to close down the hostel or other form of accommodation as soon as is reasonably practicable after being so requested in writing by the Minister; and not to alter the scales of charges from time to time approved by the Minister for accommodation and facilities provided in the hostels. Nothing in the agreement is to be deemed to confer on the company any right, title or interest in any of the real or personal property of the Commonwealth comprised in the hostels, whilst cl. 2 provides that the Commonwealth will make available by way of loan to the company upon such terms as may be determined by the Minister such funds as are appropriated by Parliament for the purpose. A number of other terms of the agreement make it quite clear that the company is subject to almost continuous supervision and direction by the Minister or officers appointed by him for that purpose.
In Grain Elevators Board (Vict.) v. Dunmunkle Corporation [1] Latham C.J., after discussing the tests which had been proposed and applied from time to time for the purpose of determining whether a person or a body is entitled to the privileges and immunities of the Crown went on to say: "But if a board is a body independent of the Government with discretionary powers of its own, so that it is not a mere agent of the Government, then such a body does not represent the Crown. This was the criterion which was applied in Fox v. Government of Newfoundland [2] and by this Court in Repatriation Commission v. Kirkland [3] . See also Ex parte Graham; Re Forestry Commission [4] . The question was put in the following form in Roper v. Public Works Commissioners [5] —whether the persons in question were acting as servants of the Crown or merely as a statutory body invested with public rights, duties and liabilities like the trustees of a public dock or public park. Were they Government servants doing the work of the Government? In Metropolitan Meat Industry Board v. Sheedy [6] , their Lordships of the Privy Council described the Board there under consideration as "a body with discretionary powers of their own. Even if a Minister of the Crown has power to interfere with them, there is nothing in the statute which makes the acts of administration his as distinguished from theirs" " [7] . Repatriation Commission v. Kirkland [3] was a case which presented special features and it was held that the Repatriation Commission represented the Crown in the strict legal sense. This conclusion was based on the ultimate view that it was "a corporation to which is handed over the administration of what is really a Government department" (per Knox C.J. and Starke J. [1] ); that "the functions of the Repatriation Commission have been expressly made functions of the Executive Government in the strict sense" (per Higgins J. [2] ) and that Parliament had "simply created a very special department for a very special purpose, and for convenience has "vested" the property in that department" (per Rich J. [3] ). But none of these observations could have any application to the facts of the present case. It is true that the company's functions were for a time performed by a department of the Executive Government, but this does not constitute those functions when performed by the company functions of the Government, nor does the existence in the Minister of a power to control and direct the company's activities, or the fact that it may, to a considerable extent be dependent upon loans from public revenue, make such a conclusion possible. The plain fact is that it is a body with an independent existence and that it has a substantial measure of independent discretion in the performance of its functions and those functions are not characteristically functions of Government. I have no doubt that the company does not represent the Crown in any legal sense and that it is not entitled to the privileges and immunities of the Crown.
1. (1946) 73 C.L.R. 70.
2. (1898) A.C. 667.
3. (1923) 32 C.L.R. 1.
4. (1945) 45 S.R. (N.S.W.) 379; 63 W.N. 29.
5. (1915) 1 K.B. 45, at p. 52.
6. (1927) A.C. 899, at p. 905.
7. (1946) 73 C.L.R., at p. 76.
8. (1923) 32 C.L.R. 1.
9. (1923) 32 C.L.R., at p. 8.
10. (1923) 32 C.L.R., at p. 15.
11. (1923) 32 C.L.R., at p. 21.
Since the company is, therefore, bound by the provisions of the Prices Regulation Act 1948-1949 N.S.W. the rights to which the defendant was entitled under his agreement for accommodation constituted "a service" within the meaning of that Act and it was a "declared service" unless it was a service supplied by a "State or semi-governmental or local governing body". The expression "semi-governmental" body has caused me considerable difficulty. It is not a technical term and it is impossible to give any precise meaning to it. It was argued, however, that its application is limited to bodies having an association only with one or more of the States and that it has no application to bodies, having only an association with the Commonwealth. There is real difficulty in determining what is meant by the expression "semi-governmental". No doubt, it is possible to say that a body which represents the Crown in the strict sense is not semi-governmental; it is governmental. This proposition may lead to the very general conclusion that a semi-governmental body is a body which, whilst not legally representative of the Crown, has some definite and substantial connection with it in the performance of its functions. But not every such body could be said to be a semi-governmental body, because the characterisation of the body as such would, to some extent, be dependent upon the nature of the functions performed by it, and the mere existence of some contractual relation between such a body and the government would not be sufficient to invest it with this character. However, it is, I think, unnecessary to attempt to give any precise meaning to the term because it is clear that the defendant's first submission on this point is correct. The expression appears to have originated in some of the legislation passed in 1942 to refer from the States to the Parliament of the Commonwealth power to make laws with respect to certain subject matters. In New South Wales the relevant Act referred to the Parliament of the Commonwealth, inter alia, "profiteering and prices (but not including prices or rates charged by State or semi-governmental or local governing bodies for goods or services)". It is of interest to note that although power was referred to the Commonwealth Parliament in this limited form the National Security (Prices) Regulations continued to operate in their original form. But by subsequent declarations under those regulations there was omitted from the declaration of services, those services "supplied or carried on by State or semi-governmental or local governing bodies". The form of one of the earlier declarations made under the National Security (Prices) Regulations appears in the report of the Victorian Chamber of Manufactures v. Commonwealth [1] , and it is notable that the first of these declarations excepted services supplied or carried on "by any State of the Commonwealth or any authority constituted by or under any State Act" and also those "supplied or carried on by any Local Government Authority established for any locality by or under any State Act relating to any local government". The exception in Prices Declaration No. 82 (N.S.W.) of services supplied or carried on by any "State or semi-governmental or local governing body" must, I think, in the circumstances be taken to refer to bodies which, though not in the strict sense representative of the Crown, have some real and substantial relationship to the Government of New South Wales.
1. (1943) 67 C.L.R. 335.
The question then arises whether the relevant prices regulation orders in New South Wales operated to fix a lower rate for "board and lodging" than that which the company seeks to charge with respect to the relevant period. So far as I can see the only point which arises on this matter arises under cl. 4 of Prices Regulation Order No. 190 N.S.W.. This paragraph purports to fix and declare the maximum rate at which any person may supply any board and/or lodging which is not of substantially the same kind as board and/or lodging supplied by that person on the prescribed date, to be such rate as, after application by that person, is fixed by the commissioner by notice in writing to such person, or, until such rate has been fixed by such notice as aforesaid, the rates in the order thereinafter specified. "Prescribed date" means in relation to the supply by any person of any kind of board and/or lodging 1st March 1949, or if substantially the same kind of board and/or lodging was not supplied by that person on that date, the last preceding date upon which substantially the same kind of board and/or lodging was supplied by that person. Clause 4 appears to be the relevant provision in this case and if this paragraph does not operate to fix a rate for the service supplied to the defendant, then the company would be entitled to charge at the increased rate. Counsel for the company argued that this clause did not so operate because its operation was confined to those cases where a person had supplied board and/or lodging of some kind on the prescribed date, but of a character which was not substantially the same as that supplied at the date of the promulgation of the order. In my view, cl. 4 is not limited in its operation to persons who supplied board and lodging on the prescribed date. It applies to any person supplying board and lodging which corresponds with the description "not substantially the same kind as board and/or lodging supplied by that person on the prescribed date". I understand the clause to fix a maximum rate with respect to any board and lodging which is not substantially the same kind as any board or lodging supplied by that person on the prescribed date. In the result, therefore, I am of the opinion that cl. 4 did operate to fix a maximum rate for the board and lodging supplied to the plaintiff and that the company was not entitled to charge at a rate in excess of that prescribed.
Questions not dissimilar to those which arise in Boreham's Case, also arise in Bogle's Case and Clark's Case, and I find myself in general agreement with the reasons of my brother Fullagar which I had an opportunity of considering after setting out my own views on the questions which arise in Boreham's Case. In the circumstances, it is sufficient for me to say that I entirely agree that the questions asked in all three cases should be answered as proposed by Fullagar J. |
high_court_of_australia:/showbyHandle/1/10420 | decision | commonwealth | high_court_of_australia | text/html | null | Arnold v Mann [1957] HCA 64 | https://eresources.hcourt.gov.au/showbyHandle/1/10420 | 2024-09-13T22:57:18.521815+10:00 | High Court of Australia
Dixon C.J. Fullagar and Kitto JJ.
Arnold v Mann
[1957] HCA 64
ORDER
Appeal dismissed with costs. Subject to an undertaking on the part of the appellant to pay a sum of £5 a week to the respondent in respect of the premises in the meantime, the Court will direct that this order be drawn up as of Thursday, 14th November, 1957.
Cur. adv. vult.
The following written judgments were delivered:—
Oct. 3
Dixon C.J.
This is an appeal as of right by the defendants in an action of ejectment against an order of the Full Court of the Supreme Court of New South Wales dismissing an appeal from a judgment for the claimant given by Maguire J. sitting by consent without a jury. Though the result of the trial before Maguire J. was a judgment in the action for the claimant, that learned judge sat to try only one issue. There had already been a trial of the action before a judge with a jury. That trial had resulted in verdict and judgment for the claimant but on an appeal by the defendants the Full Court of the Supreme Court had decided that the issue in question ought to have been put to the jury in addition to the issue that was in fact submitted to them, an issue which they found for the claimant. The finding of that issue was not set aside by the Full Court and is not now questioned.
The premises in question form the site of a butcher's shop and dwelling in Liverpool Road, Enfield. The business was carried on by one James Towers, who, before the first trial of the action, but after the events which here matter, lost his life by drowning. He had taken a lease of the premises from the owner in fee simple, a lady named Mabel Isabel Keen. The lease was for three years expiring on 16th May 1952 at an annual rent of £260 payable monthly. There was an option of renewal exercisable not later than 16th February 1952 which Towers, the lessee, failed before that date to exercise. The lease contained a provision that if the lessee were permitted to hold over after the expiration of the term he should be deemed to be a weekly tenant only at a rent of £5 per week and that such tenancy should be determinable by a week's notice in writing by either party. There were numerous covenants by the lessee, one of which was against assignment or subletting without consent. Combining the operation of s. 133B (see too s. 132 and s. 86) of the Conveyancing Act 1919-1943 with the modifications contained in the covenant, the effect was that the lessor might not withhold her consent if the proposed assignee or lessee were proved to the reasonable satisfaction of the lessor to be respectable and responsible.
Another of the lessee's covenants was not to carry out any structural alterations or additions to the said premises without the written consent of the lessor. It appears that towards the end of the term Towers without consent proceeded to build a brick retaining wall round the yard of the shop, and by filling the enclosed space with earth to make a level yard. The lessor claimed that this amounted to a breach of the covenant. Towers held over but on 17th June 1952 there was served upon him a formal notice to quit based upon the breach of covenant and expressed to expire on 18th July 1952, thus giving a period in excess of thirty days satisfying s. 63 (2) (a) (ii) of the Landlord and Tenant (Amendment) Act 1948-1951.
The ground stated by the notice to quit is within that prescribed by s. 62 (5) (b) (i) of the Act and, if in truth the covenant was broken by the work caused to be done by the lessee Towers, his tenancy would end at the expiration of the notice on 18th July 1952. That is the effect that has been ascribed to s. 67. If, as Towers did, the tenant continues in occupation of the premises he does so not in the exercise of the proprietary right the lease gave him before it was determined but in reliance upon the protection given him by the Act. As provided by s. 62 (3) the lessor may proceed in a competent court as defined by s. 69 to recover possession from him and that court must take into consideration before making an order many matters besides the fact that the tenancy has been lawfully determined: s. 70. But unless and until an order is made the tenant may continue to occupy the premises notwithstanding that his tenancy has been determined by a valid notice to quit given on a ground authorised by s. 62 (5) which in point of fact truly existed. See Anderson v. Bowles [1] ; Andrews v. Hogan [2] ; Bonnington and Co. Pty. Ltd. v. Lynch [3] ; Read v. Morris [4] . His possession or occupancy however involves no more than a personal right and it does not pass by assignment to a stranger to the former tenancy; Richardson v. Landecker [5] . But to assign his tenancy of the land is precisely what Towers proceeded to do. By a deed dated 24th October 1952 he purported to assign to Arnold and Warzecha, the present defendants appellants, the weekly tenancy arising under the lease in consequence of his holding over after the expiry of the term. The assignment was a formal document reciting the lease and its relevant provisions including that already mentioned deeming the lessee to be a weekly tenant at a rent of £5 per week if he was permitted to hold over. It recited that he was holding over under the lease and assigned the weekly tenancy of him Towers as weekly tenant as aforesaid at £5 per week in the said premises. In September 1953 Mrs. Keen transferred the estate in fee simple in the land to her daughter Mrs. Mann who is the claimant respondent.
1. (1951) 84 C.L.R. 310, at p. 320.
2. (1952) 86 C.L.R. 223.
3. (1952) 86 C.L.R. 259, at p. 268.
4. (1952) 53 S.R. (N.S.W.) 39; 70 W.N. 53.
5. (1950) 50 S.R. (N.S.W.) 250; 67 W.N. 149.
Taking the view that, if Towers had ceased to be a weekly tenant before the assignment, the assignment could pass nothing to Arnold and Warzecha who would be strangers to the tenancy and outside the protection of s. 62, Mrs. Mann caused a writ in ejectment to be issued out of the Supreme Court in her name as claimant against Arnold and Warzecha as defendants to recover possession of the premises from them. That was as long ago as 2nd November 1953.
The first question which naturally suggests itself is whether, on the assumption that Towers at the date of the assignment no longer occupied the land in virtue of a tenancy but only under the protection of the statute, an action of ejectment in the Supreme Court would lie against Arnold and Warzecha who came in as his purported assignees. In other words do sub-ss. (1) and (3) of s. 62 apply to such a case and give exclusive jurisdiction to a court of competent jurisdiction as defined by s. 69? It is, I think, convenient to repeat a passage from what I said in Andrews v. Hogan [1] concerning the possibility after the determination of a lease of maintaining in the Supreme Court an action of ejectment against persons who had come in under the tenant but whom I did not regard as within the definition of lessee contained in s. 8 (1). The passage is as follows: "The question is whether such a proceeding comes within the fair meaning of the words of s. 62 (1). The words are "to recover possession of the premises from the lessee or for the ejectment of the lessee therefrom". These words should, I think be given the widest meaning of which they are capable. They are obviously directed at all forms of proceeding for obtaining the possession which belongs to or is attributable to the lessee. In s. 62 (3), the correlative provision, the lessor is authorised to take proceedings in a court of competent jurisdiction subject to the prescribed conditions for the recovery of prescribed premises, but in that case the description of the proceedings is not limited by any mention of the character of the person from whom there is to be the recovery. In s. 70 (1) (a) the hardship to be considered is that of the lessee or any other person, and in s. 70 (2) the requirement of suitable alternative premises is made a condition of an order for recovery of any dwelling house in terms capable of including a proceeding directed against anyone and for that matter in any court. In s. 82 (3) and (4) provision is made for the protection of sub-tenants when the lessee receives a notice to quit and is proceeded against. All these provisions show that the plan of the Act is to throw the protection it gives round the tenant and those claiming under him as sub-tenants. The plan makes it important that a wide application should be given to the leading prohibition against proceedings for recovery of possession from the lessee upon which the whole plan hangs. I think therefore the words of that provision should be interpreted as extending to a proceeding by writ of ejectment where, although the lessee is not named, the direction of the writ to persons by description is sufficient to include him and he may defend the action and where a judgment for the claimant would terminate his possession by the sub-tenants who are defendants [1] ".
1. (1952) 86 C.L.R. 223.
2. (1952) 86 C.L.R., at pp. 233, 234.
In that case the tenant had died and his possession was notionally attributable to the Public Trustee who treated himself as a passive and interim repository of the interest. Recovery from the defendants would however have operated against the possession attributable to the Public Trustee. In the present case I think Towers by giving up possession to Arnold and Warzecha lost the protection of s. 62. No doubt the possession obtained by the latter may be regarded as derived from him but, on the assumption that at the time of the assignment Towers occupied under no right except the protection of the statute, it is clear enough that on his side he could not assign that protection to Arnold and Warzecha and that on their side the recovery of the land from them involves no right of possession of his.
For after going out of possession, albeit in their favour, he can have no right to possession or occupation whatever be the event. Without qualifying in any way what I said in the passage quoted from Andrews v. Hogan [1] , I do not think the present case falls within the principle which the passage attempts to state. I therefore am of opinion that, on the hypothesis adopted, an action of ejectment might be maintained in the Supreme Court against Arnold and Warzecha.
1. (1952) 86 C.L.R., at pp. 233, 234.
That hypothesis, of course, could not accord with fact unless the ground stated in the notice to quit in truth existed, that is to say, unless the building of the retaining wall and the other work which Towers caused to be done amounted to a breach of the covenant in the lease so that, within the meaning of s. 62 (5) (b) (i), Towers as lessee had failed to observe a term or condition of the lease. This however was denied by the defendants and at the first trial the learned judge who presided was of opinion that it was the only issue, in the sense that on the evidence the claimant was entitled to succeed unless upon that issue the jury found against her. Accordingly he submitted that issue and no other to the jury. The verdict was for the claimant. On appeal however the learned judges forming the Full Court (Street C.J., Roper C.J. in Eq., and Herron J.,) considered that there was evidence to support an alternative view of the case which, if found, would entitle the defendants to succeed.
That view is that after the notice to quit and before the assignment a new weekly tenancy arose between Mrs. Keen and Towers and that Towers's interest as such weekly tenant passed under the assignment to the defendants. If that were so s. 62 (1) and (2) would apply and an action in the Supreme Court of ejectment would not be maintainable.
Adopting this view of the evidence the court granted a new trial limited to the issue in question; the decision was pronounced on 2nd November 1955 and is reported [1] ; but a question of costs was disposed of on 29th February 1956 [2] and the rule is drawn up as of that day. The issue for trial as framed by the rule of court is—whether after the 18th day of July 1952 a tenancy existed between James Towers and Mabel Isabel Keen the predecessor in title of the present claimant.
1. (1956) S.R. (N.S.W.) 212; 73 W.N. 250.
2. (1956) 73 W.N. (N.S.W.) 149.
The issue was tried by Maguire J. sitting by consent without a jury. His Honour found the issue in favour of the claimant, that is to say in the negative. From that decision the defendants appealed to the Full Court of the Supreme Court. The appeal was heard by Owen, Herron and Walsh JJ., who unanimously dismissed the appeal. It is from that decision that the appeal comes to this Court. For the appellants it was suggested that the decision is not altogether compatible with the earlier decision of the Full Court. But evidently Herron J., was unconscious of any such incompatibility: for he was a member of the court on both occasions. The earlier decision was that there was evidence fit to be submitted to a jury that a new tenancy was created and quite consistently with that view the court as a tribunal of fact may find that no such tenancy in truth came into existence. Now we in our turn are called upon to consider the correctness of the finding made upon the issue by Maguire J., and of the decision of the Full Court confirming that finding.
The difficulty arises from the fact that after the expiration of the notice to quit Mrs. Keen took no proceedings to evict Towers, received rent from him and by her solicitors conducted a correspondence with Towers's solicitors which might be considered to be based on the continued acceptance of Towers as a tenant. Little importance attaches to the receipt of the rent during the period named in the issue which it should be noted begins on the day when the notice to quit expired. For by s. 80 where notice to quit has been given the acceptance of rent in respect of any period within six months after the giving of the notice is not of itself to constitute evidence of a new tenancy or operate as a waiver of the notice. The words "of itself" show that it may be included with other circumstances as part of the proofs by which a real intention to form a new tenancy may be shown. But the six months from the giving of the notice to quit had not expired when the assignment was made on 24th October 1952 and since in the meantime Towers remained in enjoyment of the premises the acceptance of rent is a wholly equivocal circumstance.
There seems little room for doubt that at the end of the term of three years the lessor had resolved to take measures to terminate Towers's tenancy. A notice as under s. 129 of the Conveyancing Act 1919-1943 dated 15th May 1952 and signed by Mrs. Keen's son as the lessor's agent required Towers to remedy the breach of covenant pulling down the dwarf wall and also to pay £300 for the breach. The notice informed him that the lessor would be entitled to re-enter in the event of failure to comply with the notice within a reasonable time. The notice was in fact complied with except as to compensation and by 1st July 1952 at all events the wall was demolished and the filling removed. It is suggested for the appellants that this must have weakened the ground upon which the notice to quit was based so greatly that Mrs. Keen's advisers may have considered that a magistrate would refuse to make an order for the ejectment of Towers. It is suggested that this may be the explanation of the failure of Mrs. Keen to proceed at once and of the apparent acceptance by the solicitors in their correspondence of the position that Towers remained a tenant.
It appears that as early as 22nd May 1952 Towers through his solicitor asked for a new lease for three years on the old terms except as to rent which he desired to be fixed by named valuers. After referring this request to their client and her son, Mrs. Keen's solicitors on 13th June 1952 refused it, adding that rent was now payable at the rate of £5 per week and that receipt of rent did not constitute a waiver of any rights accruing to Mrs. Keen under the lease. Towers's solicitors retorted that so far as they knew he had validly exercised his option of renewal, a view that had no foundation. On 1st July 1952 they wrote to Mrs. Keen saying that Towers had consulted them about the notice to quit alleging the structural alterations. The letter said that the wall had now been pulled down and the filling removed and expressed regret on behalf of Towers at his failure to observe the strict letter of his obligations. This called forth a letter from Mrs. Keen's solicitors requesting information as to Towers's willingness to vacate the premises and threatening ejectment proceedings.
To this there was a categorical reply from Towers's solicitors that he was not prepared to vacate the premises. That was on 4th July 1952. After this there are no written communications until 19th September 1952. On that day Towers's solicitors wrote to Mrs. Keen's solicitors referring to a contemplated sale of the butcher's business of which, as they wrote, she had been advised. At the earlier trial evidence had been given of the conversations thus referred to but for some reason that evidence was not led on the second trial. All we know is that there was a dispute about them. The letter enclosed references as to the suitability of the purchasers who in fact were the now defendants appellants. The letter ended by requesting on behalf of Towers the approval of Mrs. Keen "to the transfer of the existing tenancy to Messrs Arnold and Warzecha" and asking that her instructions be obtained.
It will be seen that up to this point nothing appears in evidence which would warrant the conclusion that Towers continued in occupation otherwise than under the protection of the Landlord and Tenant (Amendment) Act. The notice to quit had, according to the hypothesis demanded by the jury's verdict on the first trial, been validly given on a statutory ground existing in fact and it had expired. Towers had been asked if he would get out and had refused to do so. Nothing else had been done except that he paid rent and it was received as s. 80 contemplates. But Towers's solicitors then proposed a transfer of "the existing lease" and submitted the credentials of the proposed transferees on the apparent footing that the covenant against assignment without consent contained in the old lease still applied. Five weeks later, namely on 24th October 1952, Towers assigned his supposed tenancy to the defendants. If such a tenancy was created it must have arisen out of what took place in the interval. Of course what had occurred before and what occurred afterwards might have the one a prospective and the other a retrospective value as evidence because of some light it might throw on the conduct of the parties during that five weeks. But, as it seems to me, in the end it must be what they did and said in the period between 19th September and 24th October 1952 that governs the question whether a new tenancy had been created. For so far as the evidence discloses the facts it seems clear enough to me that up to 19th September it had not done so. Materials however were soon forthcoming to provide a footing for the contention that at all events Mrs. Keen's solicitors took the description "weekly tenant" to be apt to describe Towers, whatever the legal result of that might be. For on 23rd September 1952 they wrote— "We wish to acknowledge receipt of your letter of 18th instant and to our subsequent telephone conversation with your Mr. Hill" (Towers's solicitor). "We confirm the fact that your client desires either an assignment of his present weekly tenancy or a fresh weekly tenancy granted in favour of the purchasers. We wish to advise that we have requested instructions of our client and as soon as we receive the same we shall again communicate with you".
Perhaps the reference to a letter of 18th is a mistake for that of 19th September. There is little evidence of the conversation to which the letter refers except that Mr. Hill in his evidence said that in it no mention of the notice to quit was made. He said that there had been some earlier discussions about it but from his letter of 19th September onwards there was never any mention of it in any conversation. The words "his present weekly tenancy" in the sentence in the letter beginning "We confirm" look very much like a flat admission that a weekly tenancy existed. But conceivably it may be merely part of the statement of Mr. Hill the making of which is confirmed.
Next comes a letter dated 1st October from Mrs. Keen's solicitors saying that she was prepared to give a new lease to the purchasers of a smaller area at a slightly lower rent. To this on 10th October Towers's solicitors reply in a long letter referring to some telephone conversations and confirming the details of Mrs. Keen's proposal. The letter proceeds—"We place on record that we have not at any time nor have the proposed tenants requested a Lease but in fact we have specifically requested approval to "the transfer of the existing tenancy". And your letter of the 23rd ult. reads in part " your client desires either an assignment of his present weekly tenancy or a fresh weekly tenancy". Having made our request for consent on the 19th ult. we can only assume from the correspondence and the telephone conversations which the writer has had with Mr. Connolly Jnr. that your client has refused to consent to the proposed assignment." Then finally a claim is made that the purchasers have not been objected to on the ground of want of respectability or responsibility and accordingly that consent has been unreasonably withheld. On 13th October Mrs. Keen's solicitors replied in an argumentative letter which did not take the point that the tenancy had been determined. There is a passage which says, somewhat obscurely—"Furthermore, with relation to the question of the weekly tenancy, your client has never admitted and has in fact denied that he did not in fact comply with the terms of the written lease with relation to the exercise of an option for a renewal". Perhaps this means that Towers always claimed to have exercised his option. But that is not the footing in which the letters were written: for it would mean a term of three years not a weekly tenancy.
The letter of 13th October ends—"We would request that you convey to your client the advice that any assignment without consent will be the subject of immediate ejectment proceedings. However, should the purchasers wish to obtain an assignment, if the usual documentary evidence as required in these cases is submitted to us, we shall forward the same to our client with a request for further instructions". Again this looks like acquiescence in the assumption that there is a tenancy. On 14th October Towers's solicitors send further references and on 15th October Mrs. Keen's solicitors write saying that they have received further instructions and offer a new lease to the purchasers at a still lower rent but of a smaller area. The letter expresses dissatisfaction with the references and demands a comprehensive bank reference. Finally, on 22nd October 1952, two days before the assignment, Towers's solicitors write enclosing various documents, supporting the eligibility of the purchasers. There were enclosed a statutory declaration, a form of guarantee and finally the assignment for approval. It was said too that failing consent consideration would be given to assigning without Mrs. Keen's consent. In fact this is what was done.
It is not unimportant that the assignment does not refer to any new tenancy but relies wholly on the old one existing under the lease, that which in fact was terminated by the notice to quit. It must be remembered too that it is in virtue of the fact of the erection of the dwarf wall and the filling of the space enclosed that a breach of covenant took place and only so did the notice to quit obtain its efficacy. Looking at the matter now on the basis of the now unchallengeable finding of the jury this may seem clear enough. But it was a fact that Towers doubtless put on one side as cured by the removal of the wall and filling and which ultimately he contested.
It would hardly accord with reality to ascribe to the parties an actual intention to create a new tenancy. Such a thing does not seem to have been present to their minds or the minds of their solicitors. The correspondence and the events which followed do not seem to me to give any different complexion to what occurred between 19th September and 24th October 1952. Mrs. Keen continued to deny the right of the purchasers to occupy the premises, but it was not, so it is said, until after the issue of the writ on 2nd November 1953 that the right ground was taken. Cheques for rent were given to her agent but with two exceptions they were not banked and those exceptions were explained as due to the mistake of an unauthorised agent, the money being returned.
In my view the case of the defendants must fail. One may put aside at once the possibility of saying that independently of intention the law imputes to the parties the formation of a new tenancy, or in other words to imply artificially an intention of forming again the relation of landlord and tenant, the kind of intention which Lord Sumner described as "one of those so-called intentions which the law imputes; it is the legal construction put on something done in fact": Blott's Case [1] . That I think cannot be done. There must be some actual intention that the relation should subsist.
1. (1921) 2 A.C. 171, at p. 218.
Once the notice to quit took effect on 18th July 1952 as a termination of the tenancy it became necessary for the parties in some way to form a new tenancy before any subject matter could exist upon which the assignment of 24th October 1952 could operate. The right enjoyed by Towers to the protection of the statute was incapable of assignment: see Keeves v. Dean [2] and John Lovibond & Sons Ltd. v. Vincent [3] .
1. (1924) 1 K.B. 685.
2. (1929) 1 K.B. 687.
Once the notice to quit expires the old tenancy is gone. It is too late to continue the old tenancy by a common agreement that the notice to quit shall be withdrawn. Indeed according to Tayleur v. Wildin [4] , the facts of which are much better stated in [5] , even before the expiration of the notice to quit nothing can save the old tenancy: a new one must be created. One would have thought that if by mutual consent the unexpired notice were withdrawn a conventional estoppel would arise requiring the parties to treat it as if it had never been. For the term or interest had not at that time been destroyed. But be that as it may, after the destruction of the tenancy nothing but a new tenancy will serve. If a new tenancy between Towers as tenant and Mrs. Keen as landlord had arisen, it might perhaps be argued that the assignment expressed as it is to relate to the tenancy under the lease would be insufficient to pass it. However as the new tenancy would be an identical interest though under a different title it would seem that it would pass under the provisions of s. 68 of the Conveyancing Act 1919-1943 construed with the definitions in s. 7 of the words conveyance and property. Again, although a new tenancy must be created and an intention, express or implied, must be found that there shall be a weekly tenancy between the parties, certain distinctions must be kept in mind. On the one hand what is needed is a common intention that there shall be a tenancy: not an intention that the tenancy shall be a new one as opposed to a revival or continuation of the old one. If the parties really intended to revive or continue the old tenancy mistakenly believing that they could do so, for example, by a retraction ex post facto of the notice to quit, this might perhaps be construed as the creation of a new tenancy. On the other hand a mistaken belief that the notice to quit had not destroyed the tenancy is not the same as an intention to revive or continue it. Such a mistake might quite well arise from reliance upon the doctrine of Krupa v. Zacabag Pty. Ltd. [1] , and a failure to realise that, at all events after the decision in Andrews v. Hogan [2] , it was no longer law: see Read v. Morris [3] . Again a fear on the part of Mrs. Keen or her advisers that a magistrate would refuse to turn out Towers and an acquiescence in his remaining in occupation would not be the same as an intention to revive or continue the old tenancy.
1. (1868) L.R. 3 Exch. 303.
2. (1868) 18 L.T. (N.S.) 655.
3. (1950) 50 S.R. (N.S.W.) 304; 67 W.N. 221.
4. (1952 July 31) 86 C.L.R. 223.
5. (1952) 53 S.R. (N.S.W.) 39; 70 W.N. 53.
The fact is that the situation created by the Landlord and Tenant (Amendment) Act is not only complicated. It places the parties in such a position, for the landlord one perhaps of disadvantage and for the tenant of advantage, that it is impossible to spell out of conduct which formerly would mean an intention express or implied to form or continue the relation of landlord and tenant any such intention. Nor can the use of terms be given its former significance. For no new terminology to describe their statutory relation has come into existence. In the present case I think that the correspondence which I have discussed should not be construed as intending to create any relation of landlord and tenant or to revive or continue one. It is no more than a reflexion of an understanding of the de facto position which the tenant was able to occupy and a misuse of terms.
The solicitors did not mean to depart at all from the legal situation that resulted from what had been done, even if in all the confusion of statute and case law they neither accurately understood nor described it. I think that Maguire J., was justified in refusing to infer an intention to create a new tenancy and I see no room for imputing an intention real or artificial to revive or continue the old one.
For these reasons I think that the appeal should be dismissed.
Fullagar J.
This is an appeal from a judgment of the Supreme Court of New South Wales (Full Court) dismissing an appeal from Maguire J. The proceeding before Maguire J. was an action of ejectment commenced by a writ issued so long ago as 2nd November 1953. The respondent claimant, Mrs. Mann, is the owner of the fee simple of certain premises in a suburb of Sydney, which at all times material have been occupied as a butcher's shop. The appellants went into possession of those premises in October 1952 and have been in possession ever since. They claim to be in possession as assignees from one James Towers of a weekly tenancy. The claimant's contention (which has so far been upheld) is that the weekly tenancy, which Towers purported to assign to the appellants, had been terminated before the assignment by a notice to quit given by her predecessor in title, Mrs. Keen, so that Towers had no tenancy to assign. To this the reply of the appellants (which has so far been rejected) is that the notice to quit had been "waived" before the assignment, with the result that a new tenancy was created, to which the protection afforded by the Landlord and Tenant (Amendment) Act (1948) N.S.W. attaches. The land is under the general law. The premises are prescribed premises within the meaning of the Act.
The story begins with a lease dated 13th May 1949, whereby Mabel Keen demised the premises in question to James Towers for a term of three years from 16th May 1949. The lease provided that if the tenant should hold over after the expiration of the term he should hold on a weekly tenancy at a rent of £5 per week. The lessee was given an option of renewal on giving notice three months before the expiration of the term, provided that no breach of covenant had been committed. There was a clause in the lease which purported to modify the provision contained in s. 133B of the Conveyancing Act 1919 that, where there is in a lease a covenant not to assign without the landlord's consent, consent shall not be unreasonably withheld. The lease also contained a covenant not to make any structural alteration or addition in or to the premises. The notice to quit, which was given under s. 62 of the Landlord and Tenant (Amendment) Act and was based on a breach of this covenant, was given on 17th June 1952, and expired on 18th July 1952.
Before examining the facts further it is necessary to consider the effect of the expiration of a notice to quit duly given in accordance with the provisions of the Landlord and Tenant (Amendment) Act. The case of Anderson v. Bowles [1] was concerned with the National Security (Landlord and Tenant) Regulations and the Landlord and Tenant Act 1948 of Queensland. The material provisions of those regulations and that Act did not differ materially from those of the New South Wales Act here in question, and in that case the law was stated thus:—"A body of judicial decision exists for the view that, after a valid notice to quit has been given in accordance with reg. 58 (which corresponds with s. 41 of the Act) and expires, a tenancy is brought to an end by virtue of reg. 62 (s. 46), but nevertheless the lessee remains protected against dispossession by the lessor whether by peaceable re-entry or otherwise unless and until an order for possession is made by a court of competent jurisdiction under the statutory provisions and the time for the execution of the order expires, the tenant being liable to pay the rent and observe the other obligations of the tenancy, so far as applicable, in the meantime [1] ". The effect of this is that on the expiration of the notice the tenancy and the true relation of landlord and tenant come to an end, and (what is the important point for present purposes) the rights and immunities given by the Act to the tenant are personal to him and not capable of assignment. A considerable number of cases decided by State Courts was cited in Anderson v. Bowles [2] as supporting the passage quoted above, and these included the New South Wales case of Richardson v. Landecker [3] . In Krupa v. Zacabag Pty. Ltd. [4] a different view was taken by the Full Court of New South Wales. It was held in that case that the expiration of a notice to quit given under the Act did not terminate the tenancy, but that the tenancy continued to subsist until the tenant vacated the premises or an order for possession was obtained under the Act. If an order was applied for and refused, the position continued as before the giving of the notice to quit. Krupa v. Zacabag Pty. Ltd. [4] was followed in Furness v. Sharples [5] . Those two cases, however, were overruled in Read v. Morris [6] ; where the law was again stated as in Anderson v. Bowles [2] and Richardson v. Landecker [3] . It must clearly now be taken that the effect of a valid notice to quit under the Act is the same as that of a valid notice to quit at common law. That is to say, it terminates the tenancy as from its expiration.
1. (1951) 84 C.L.R. 310.
2. (1951) 84 C.L.R., at p. 320.
3. (1951) 84 C.L.R. 310.
4. (1950) 50 S.R. (N.S.W.) 250; 67 W.N. 149.
5. (1950) 50 S.R. (N.S.W.) 304; 67 W.N. 221.
6. (1950) 50 S.R. (N.S.W.) 304; 67 W.N. 221.
7. (1950) 51 S.R. (N.S.W.) 13; 68 W.N. 18.
8. (1952) 53 S.R. (N.S.W.) 39; 70 W.N. 53.
9. (1951) 84 C.L.R. 310.
10. (1950) 50 S.R. (N.S.W.) 250; 67 W.N. 149.
Both before and after the expiration of the notice to quit certain correspondence took place between the solicitors for Mrs. Keen and the solicitors for Towers. This will have to be considered later in some detail. It is enough at the moment to say that Towers wished to assign the weekly tenancy, which he appears to have believed himself to have, to the appellants, who had bought, or were proposing to buy, his business. He sought the consent of Mrs. Keen to such an assignment, and supplied a number of references as to the character and credit of the appellants. A guarantee of one of them was also tendered. No consent being given, Towers on 24th October 1952 executed an instrument whereby he purported to assign to the appellants the weekly tenancy which under the terms of the lease followed on the expiration of the term. This was doubtless done in reliance on s. 133B of the Conveyancing Act 1919 N.S.W. and the decisions of which Treloar v. Bigge [1] , is a well-known example. The appellants appear to have entered into possession immediately after the assignment. The right to assign, if it be assumed that Towers had anything to assign, does not appear to have been disputed in these proceedings.
1. (1874) L.R. 9 Ex. 151.
If, of course, Towers had remained in possession, he could only have been ejected by proceedings in a court of petty sessions under the Landlord and Tenant (Amendment) Act, and in those proceedings questions of comparative hardship and other questions might have been raised and required consideration. The respondent's contention, however, is that, Towers having no tenancy to assign, there is no relation of landlord and tenant between her and the appellants, who may therefore be ejected in the ordinary way by proceedings in the Supreme Court. Section 75 of the Act does not, it is said, apply, because the respondent is not the appellants' lessor. For about a year after the assignment correspondence took place somewhat intermittently between the solicitors for the assignees and the solicitors who acted first for Mrs. Keen and later for the respondent Mrs. Mann. This correspondence also it will be necessary to consider with some care. The conveyance of the fee simple to Mrs. Mann was executed on 17th September 1953, and on 2nd November 1953 the writ in the action was issued.
The action has had a chequered career. It came on first for hearing on 15th June 1955 before McClemens J. and a jury. His Honour left to the jury the question whether there had been a breach of covenant by Towers, and the jury answered this question in the affirmative and returned a verdict for the claimant. His Honour, however, refused to leave to the jury any question as to whether the relation of landlord and tenant was subsisting between Towers and Mrs. Keen at the date of the assignment. The appellants appealed to the Full Court, which held that the learned judge had fallen into error in refusing to leave the other question to the jury, and ordered a new trial limited to the issue whether after 18th July 1952 a tenancy existed between Towers and Mrs. Keen. The new trial took place before Maguire J., the parties by consent dispensing with a jury. Maguire J. correctly observed that the Full Court had held no more than that there was evidence of a tenancy fit to be submitted to a jury, and he decided as a matter of fact that there was no tenancy in existence at the material time. A second appeal was made to the Full Court, which affirmed the judgment of Maguire J. It is from this decision that the present appeal is brought.
The question whether there was a tenancy subsisting at the date of the assignment would, of course, if Maguire J. had sat with a jury, have been a question for the jury. But it would have had to be left to the jury with a very careful direction as to certain matters of law. And a proper charge to the jury must, in my opinion, have included directions to the effect that (1) what the tenant had to prove was an agreement that the tenancy should continue in spite of the expiration of the notice to quit, and (2) if they found that the parties had by mutual consent treated the tenancy as still subsisting after the expiration of the notice, they should infer that such an agreement had been made. It would not, I think, have been necessary to tell them that the effect in law of such an agreement would be to create a new tenancy, and it would have been perhaps not wrong, but certainly most misleading, to tell them without more that what the tenant had to prove was that the parties had agreed that a new tenancy should be created. Yet it was, I think, along these lines that Maguire J., proceeding without a jury, directed himself, and I think that his ultimate finding was reached on a misunderstanding of the true position at common law.
Both Maguire J. and the Full Court correctly stated the difference between what has been called waiver of a forfeiture and what has been called waiver of a notice to quit. When a forfeiture is incurred, the tenancy becomes voidable only and not void: the landlord has an election whether he will re-enter or sue in ejectment or whether he will allow the tenancy to continue. The important point is that "waiver" is here a unilateral matter: any unequivocal act or statement by the landlord will suffice to establish it. If once the landlord has shown an election to allow the tenancy to continue, he cannot change his mind against the tenant's will, and the tenancy continues notwithstanding anything he may say or do: quod semel in electionibus, etc. But, when a valid notice to quit has been given and has expired, no question of election arises. The tenancy simply comes to an end, and the relation of landlord and tenant cannot be re-established by any unilateral act: the agreement or assent of both parties is necessary. The distinction is well illustrated by contrasting Doe d. Cheny v. Batten [1] with Davenport v. The Queen [2] .
1. (1775) 1 Cowp. 243 [98 E.R. 1066].
2. (1877) 3 A.C. 115.
In the present case, it has never been disputed that it was necessary for the tenant to prove assent or agreement. What has been in dispute is the effect of certain cases in which it has been held that the legal result of assent or agreement is not that the old tenancy is continued but that a new tenancy is created. In Blyth v. Dennett [3] (although the point was of no importance) the court clearly took the view that, if there was a "waiver" or "withdrawal" of a notice to quit after its expiration, a new tenancy would be created. It would seem impossible to doubt the correctness of this view. In Tayleur v. Wildin [4] , however, the Court of Exchequer went much further. In that case there had been a "withdrawal" of a notice to quit before its expiration, and it was held that a new tenancy, distinct from the old, was created as from the expiration of the notice. It is indeed not surprising that this decision did not commend itself to the Court of Appeal in Ireland in Lord Inchiquin v. Lyons [5] . However, in Freeman v. Evans [6] the Court of Appeal applied Tayleur v. Wildin [4] , saying that it had been uniformly accepted and acted upon in England.
1. (1853) 13 C.B. 178 [138 E.R. 1165].
2. (1868) L.R. 3 Ex. 303.
3. (1887) 20 L.R. Ir. 474.
4. (1922) 1 Ch. 36.
5. (1868) L.R. 3 Ex. 303.
In the present case, as in Blyth v. Dennett [3] , the agreement, if any was made, was made after the expiration of the notice to quit. It is therefore clear, whatever may be thought of Tayleur v. Wildin [4] , that, if any agreement were made, it would have technically the effect of creating a new tenancy. It is not, therefore, wrong to say that the ultimate question in the case is whether the landlord and the tenant agreed that a new weekly tenancy should follow on the old weekly tenancy, which had been terminated by the notice to quit. But such a statement of the question is apt to be very misleading. For it is not to be supposed that a tenant in the position of the appellants fails to establish the subsistence of a tenancy at the material time unless he shows that there was a conscious intention on the part of himself and his landlord to create a new tenancy as distinct from continuing the old. If (to take a very clear example) the tenant wrote to the landlord, saying:—"I ask you to allow my tenancy to continue as from the expiration of your notice to quit", and the landlord wrote back, saying:—"I am quite agreeable to that course", the tenant would have a clear defence in an action of ejectment. The result would be the same if the actual terms of their agreement were that the notice to quit should not be regarded as having terminated the tenancy. What the law says in such cases as this is not that the parties must have consciously assented to a new tenancy, but that, if they have assented to the existence of a tenancy, the tenancy which their assent creates is a new tenancy. In other words, a new tenancy may be effectively created after the expiration of a notice to quit, although the parties never addressed their minds to a new tenancy as such, but have thought throughout in terms of an uninterrupted and unchanged relation of landlord and tenant. There are passages in Blyth v. Dennett [1] and in Clarke v. Grant [2] , which might at first sight appear to be opposed to the view which I have expressed, but they were clearly, I think, not intended to deny that view. If that view were incorrect, tender and acceptance of rent could never be sufficient evidence of the existence of a tenancy. Yet it is well settled at common law that tender and acceptance of rent, if unexplained, will establish the existence of a tenancy: see Blyth v. Dennett [1] , per Jervis C.J. [3] and per Maule J. [4] .
1. (1853) 13 C.B. 178 [138 E.R. 1165].
2. (1868) L.R. 3 Ex. 303.
3. (1853) 13 C.B. 178 [138 E.R. 1165].
4. (1950) 1 K.B. 104.
5. (1853) 13 C.B. 178 [138 E.R. 1165].
6. (1853) 13 C.B., at p. 180 [138 E.R., at p. 1166].
7. (1853) 13 C.B., at p. 181 [138 E.R., at p. 1166].
One other observation should be made. While it must not be forgotten that in the one case agreement must be proved while in the other a unilateral act will be enough, yet, generally speaking, very much the same kind of evidence will suffice to establish "waiver" of a notice to quit as will suffice to establish waiver of a forfeiture. The agreement which it is necessary to prove may (as has often been said) be either express or implied, and it is far more common to find a tenant setting up an implied agreement than an express agreement. Moreover, in this type of case, perhaps more than in any other, it is necessary to remember that the effect of what one party says or does must depend not on what his real intention is, but on what the other party would reasonably believe to be his intention. If we find the parties clearly acting on a conventional basis, we may find quite enough to require the inference of an implied agreement. The same inference may arise if we find one party acting as he would presumably not have acted if it had not been for a reasonable belief induced by the other that that other was accepting a certain position as subsisting.
One other matter must be mentioned before proceeding to consider the evidence in this case. In such cases at common law tender and acceptance of rent will often be decisive in favour of the tenant. This is because it is prima facie not explainable on any other basis than that the parties are treating the relation of landlord and tenant as still subsisting. In the present case, however, the position is affected by s. 80 of the Landlord and Tenant (Amendment) Act 1948, which provides that in the case of prescribed premises tender and acceptance of rent for a period of six months after the giving of a notice to quit shall not "of itself constitute evidence of a new tenancy or operate as a waiver of a notice to quit". There is an obvious ambiguity in these words. Applying the principle that a statute should not be construed as altering the common law to a greater extent than is made clear by its language, I would not treat s. 80 as meaning that evidence of tender and acceptance of rent is inadmissible on the issue of waiver or new tenancy, but as meaning only that such evidence cannot be alone sufficient to establish the affirmative of the issue. I agree, with respect, with the view of the Full Court in Arnold v. Mann [1] , where their Honours said: "The unqualified acceptance of rent by a landlord, after the expiration of a notice to quit is, however, a circumstance to be considered along with other facts when the inquiry is whether a new tenancy has been created or not" [2] .
1. (1956) S.R. (N.S.W.) 212; 73 W.N. 250.
2. (1956) S.R. (N.S.W.), at p. 218; 73 W.N., at p. 254.
It is in the light of all these considerations that the matters on which the appellants rely must now be approached. Those considerations were evidently fully present to the minds of the Full Court on the former appeal, and, although the judgment delivered on that occasion determined only that there was a question to go before a jury, one is left in little doubt as to how that court would have decided the question if the decision had been for them. In fact the question did not go before a jury, and, since it turns entirely on correspondence and facts which are not in dispute, this Court (whatever might have been the position if a verdict of a jury had been in question) is in as good a position as the learned trial judge to decide it. It should be mentioned at the outset that the lessor, Mrs. Keen, had authorised her solicitors, Messrs. Warrington Connolly & Co., to deal with the whole matter and conduct all negotiations on her behalf up to the time when she conveyed the property to the respondent.
The option of renewal contained in the lease was not exercised within the time prescribed. The term, as has been said, expired on 16th May 1952 and Towers (whom it will be convenient to call the lessee) became after that date a weekly tenant at a rental of £5 per week. On the day before it expired Mrs. Keen (whom it will be convenient to call the lessor) gave notice under s. 129 of the Conveyancing Act 1919 requiring the lessee to remedy an alleged breach of covenant within a reasonable time. The notice to quit was given on 17th June 1952, and expired according to its terms on 18th July 1952. In the meantime on 1st July the lessee's solicitors wrote to the lessor referring to the notice to quit, and saying that Towers had removed the structure alleged to have been erected in breach of his covenant. They added: "We feel sure that you will appreciate that he has rectified the position as promptly as possible". On 3rd July the lessor's solicitors wrote acknowledging this letter as an admission of a breach of covenant, and asking to be advised whether the lessee was "prepared to vacate the premises on or before 18th July in accordance with the notice to quit served upon him". The letter concluded: "Should he not be prepared to vacate the premises, our instructions are to proceed with ejectment proceedings". This letter brought a prompt reply. On 4th July the lessee's solicitors wrote saying that their client "is definitely not prepared to vacate the subject premises".
This letter of 4th July is, I think, as the Full Court thought, of considerable importance. The lessee has remedied the breach of covenant, and has declared unequivocally that he will not go out when the notice to quit expires. One would certainly have expected that declaration, if the lessor did not intend the tenancy to continue, to be met, at latest immediately on the expiration of the notice to quit, by a declaration that the lessee had no right to remain in possession. There has been a good deal of discussion as to whether the lessor's silence and inactivity were dictated or influenced by the decision in Krupa v. Zacabag Pty. Ltd. [1] . This may indeed serve to explain the attitude of her solicitors. At any rate, nothing in fact happens, except that rent continues to be tendered and accepted, until 18th September 1952, two months after the expiration of the notice to quit, when it is the lessee's solicitors who become active.
1. (1950) 50 S.R. (N.S.W.) 304; 67 W.N. 221.
In September the lessee was contemplating selling his business to the appellants and on the 19th of that month his solicitors wrote to the lessee's solicitors, enclosing a number of references as to the appellants' character and financial standing, and requesting "the approval of your client to the transfer of the existing tenancy to the purchasers". The lessor's solicitors replied on 23rd September 1952 referring to a telephone conversation which had taken place between them and saying: "We confirm the fact that your client desires either an assignment of his present weekly tenancy or a fresh weekly tenancy granted in favour of the purchasers". It seems to me difficult to imagine a clearer recognition of an existing weekly tenancy than is contained in this letter. It is true, as Maguire J. said, that it purports literally to do no more than repeat a statement made by the lessee's solicitors. But that is not the whole truth. It imports also a clear acceptance of the position so stated. But much more was to follow.
On 1st October 1952 the lessor's solicitors wrote to the lessee's solicitors a letter, which did not refer to the proposal for an assignment or to the references as to the purchasers, but offered a lease to the purchasers of a reduced area of land. The lessee's solicitors replied on 10th October "placing on record" that they had not requested a lease but had requested "approval to the transfer of the existing tenancy". They add that they can only assume from the correspondence and telephone conversations that the lessor has refused to consent to the proposed assignment, and they say that such refusal is a breach of the covenant in the lease that consent to an assignment shall not be unreasonably withheld. The next letter was written on 13th October by the lessor's solicitors to the lessee's solicitors. It begins by taking a rather nice point by "presuming" that when the lessee's solicitors speak of the transfer of the existing tenancy they mean an assignment. There follows a rather obscure reference to "the question of the weekly tenancy", which I take to refer to a contention which had been put forward some time before by the lessee that he was entitled to a renewal of the lease as distinct from a weekly tenancy, a contention which seems to have been untenable and which had been emphatically rejected before the notice to quit was given. The letter repeats the offer of a lease, but says that the references submitted are definitely not satisfactory. It says that any assignment without consent will be the subject of immediate ejectment proceedings and concludes: "However, should the purchasers wish to obtain an assignment, if the usual documentary evidence is submitted to us, we will forward the same to our clients with a request for further instructions". A further reference was forwarded by the lessee's solicitors on 14th October, and on 15th October the lessor's solicitors write saying that, if the lessee is prepared to have his tenancy varied by excluding part of the premises, the landlord will be prepared to grant a lease at a rental of £3 10s. 0d. per week. They add that they are "still not satisfied with the references produced". This letter again appears to me clearly to recognise the existence of a tenancy.
It is against the background of all this correspondence that the payment of rent must be viewed. In fact rent was tendered and accepted up to the date of the assignment, and one month's rent was tendered and accepted in November, which was after the assignment. That alone would not be enough, but in its setting it assumes special significance, and s. 80 of the Act does not, in my opinion, as I have said, forbid us to attach significance to it.
The assignment of the tenancy is dated 24th October 1952, but it appears to have been forwarded by the lessee's solicitors to the lessor's solicitors on 22nd October 1952 with a letter asking for the lessor's approval and stating that they regard consent as having been unreasonably withheld. The appellants appear to have entered into possession immediately, and on 25th October their solicitor writes to the lessor enclosing cheque for £20 for rent for the four weeks commencing 20th October. On 16th December he writes again saying that a draft lease has been handed to him and asking for the survey plan of the land comprised in it. The reply to this letter, which is dated 18th December (i.e. two months after the assignment) is remarkable. There is no suggestion that the lessee had nothing to assign. It says that there is no survey plan in existence, and then, obviously referring to the assertion, on the basis of which the assignment has been executed, that consent had been unreasonably withheld, says: "The solicitors acting for the outgoing lessee had occasion to refer us to the restriction imposed by the Conveyancing Act on the lessor's refusal to consent to an assignment or subletting, but this right is expressly restricted in a clause of the lease granted to Mr. James Towers on 30th May 1949."
The next letter from the lessor's solicitors is not written until 10th March 1953, i.e. some five months after the assignees have taken possession. This letter enclosed a cheque for £20 by way of refund of an amount of £20 which had been paid by cheque as for rent in November. This letter says that the lessor "does not recognise you as having any rights to be in possession of the property and accordingly appropriate action will be taken". Even now there is no suggestion that Towers had nothing to assign. What is said is quite consistent with the view that the challenge to the assignment is on the ground that consent had not been unreasonably withheld. The reply to this letter, which is dated 18th March 1953, points out that the amount said to be refunded was paid as long ago as 22nd November 1952, the cheque having been presented for payment on 29th November. It says: "Your statement that my clients have no right to occupy the property is emphatically denied. As you are aware, the tenancy of the property was assigned to them by Mr. Towers, the former tenant, after protracted negotiations to obtain the consent of your client." There was no reply to this letter.
The rest of the correspondence does not, I think, matter. It continues in a very desultory way, with much tender and refusal of cheques, until 2nd November 1953, when the writ is issued.
In considering what inference should be drawn from all the evidence it is permissible, I think, to look at all the letters up to and including the letter of 18th December 1952. Some of these were written after the assignment, and it was not contended that any new tenancy was created after the assignment between Mrs. Keen or Mrs. Mann and the appellants. But letters written after the assignment may have a very definite bearing on the inference to be drawn from the earlier correspondence, and the later letters here do, in my opinion, strongly support the view that Towers and Mrs. Keen were both proceeding before the assignment on the agreed basis that Towers's tenancy had not come to an end. And that, in my opinion, is quite sufficient for the appellants. It is, as I have said, nothing to the point to say that neither of them thought about creating a new tenancy as distinct from continuing the old.
The position as I see it was simply this. Towers was asserting throughout that the weekly tenancy which followed on the expiration of the term of his lease was still existing notwithstanding the notice to quit. This was no idle assertion. Apart altogether from the fact that this assertion may have seemed to be supported by Krupa v. Zacabag Pty. Ltd. [1] he might have denied breach of covenant or asserted that any breach had been remedied within a reasonable time. The lessor's solicitors knew from the beginning that he was maintaining that he had a weekly tenancy. He remained in possession without challenge after the expiration of the notice to quit and in September he asked for the lessor's consent to an assignment of his existing tenancy. The reply to this request refers to his present weekly tenancy. The lessor does not wish to consent to an assignment but desires to grant a new lease of a smaller area to the assignees. Knowing that the lessee's purpose in obtaining references is to effect an assignment, she expresses dissatisfaction with the references forwarded regarding the character and financial resources of the appellants, and further references are obtained. She says that a mere invitation to make inquiry of a bank is insufficient, because it is "the purchaser's obligation to place the relevant evidence before the lessor." The lessee is asked to agree to "have his tenancy varied" by excising a portion of the area. With regard to the references she remains dissatisfied. The lessee then expresses the view that consent to an assignment has been unreasonably withheld, and he assigns without consent. No suggestion that the lessee had nothing to assign is made until many months afterwards. Nothing at all is said or done by the lessor for some two months, and then she makes no suggestion that the lessee had no tenancy. Instead, in a letter which refers to the "outgoing lessee", she says that the statutory requirement that consent shall not be unreasonably withheld was qualified by the terms of the lease. In other words, she relies, and relies only, on the view that the assignment could not be justified on the ground that consent had been unreasonably withheld. No question of consent could arise if there was no tenancy to assign. Looking at the whole of the facts and the correspondence, I think the conclusion inescapable that, between the expiration of the notice to quit and the assignment, the lessor and the lessee were dealing with one another on the agreed and accepted basis that the weekly tenancy had not come to an end but was still subsisting. And the legal result is, in my opinion, that a new tenancy was created between them.
1. (1950) 50 S.R. (N.S.W.) 304; 67 W.N. 221.
The appeal should, in my opinion, be allowed.
Kitto J.
The appellants in this case were the defendants and the respondent was the claimant in an action of ejectment in the Supreme Court of New South Wales. The respondent is seised of an estate in fee simple in the land the subject of the action, having acquired his title by a conveyance from a Mrs. Keen about September 1953. The appellants, as appears from a letter of 24th December 1953 from their solicitors to the respondent's solicitors, defended their possession of the land on two grounds: (1) that Mrs. Keen had leased the land by a deed of 30th May 1949 to one James Towers, and that by virtue of an assignment from Towers dated 24th October 1952 they held the land as tenants from week to week; and (2) that Mrs. Keen, by certain conduct of hers after the date of the assignment, had accepted the defendants as lessees of the land from her.
The action was tried before McClemens J. and a jury. The lease of 30th May 1949 from Mrs. Keen to Towers was proved. It was a lease of the subject land for a term of three years from 16th May 1949, with a proviso that if the lessee should be permitted to hold over after the expiration of the term he should be deemed to be a weekly tenant only, at a rental of £5 per week, the tenancy to be terminable by a week's notice in writing by either party. There was an option of renewal, but it was not exercised. From 16th May 1952, therefore, Towers was a weekly tenant.
The lease made applicable to the weekly tenancy certain covenants of which two only need be mentioned. One was a covenant against assigning or subletting without leave, the meaning which would otherwise be given to that covenant by Pt. II of Sched. IV of the Conveyancing Act 1919 N.S.W. being modified so as to provide that the lessor's consent should not be refused in the case of an assign tenant or occupier proved to the reasonable satisfaction of the lessor to be respectable and responsible. The other covenant was that the lessee should not make or carry out any structural alterations or additions to the premises without the written consent of the lessor.
On 17th June 1952, Mrs. Keen served on Towers a notice to quit the premises on or before 18th July 1952. It is not disputed that this notice satisfied the requirements of the common law for the determination of Towers's weekly tenancy. By reason of the provisions of s. 62 (2) of the Landlord and Tenant (Amendment) Act 1948 N.S.W., the notice could not operate to produce this result unless it were given upon one of the grounds prescribed in the several paragraphs of s. 62 (5). It purported to be given upon the ground stated in par. (b) (i), namely that the lessee had failed to observe a term or condition of the lease the observance of which had not been waived or excused by the lessor, the term or condition referred to being the covenant against making or carrying out structural alterations or additions without consent. The jury found at the trial that such a breach had in fact been committed. The notice to quit therefore operated, by force of s. 67 of the Landlord and Tenant (Amendment) Act, to terminate Towers's tenancy. It is nothing to the point, though it is the case, that Mrs. Keen had given Towers a notice to remedy the breach of covenant and that after the service of the notice to quit the breach was remedied. The situation brought about by the expiration of the notice to quit on 18th July 1952 was that Towers had no tenancy in the strict sense of the word, but that he remained protected against dispossession by the lessor, whether by peaceable re-entry or otherwise, unless and until an order for possession should be made by a court of competent jurisdiction under Pt. III of the Act and the time for the execution of the order should expire, being liable to pay the rent and observe the other obligations of the former tenancy, so far as applicable, in the meantime: Anderson v. Bowles [1] ; Bonnington & Co. Pty. Ltd. v. Lynch [2] . He thus had a personal right of occupation, but no interest in the land capable of assignment: Read v. Morris [3] .
1. (1951) 84 C.L.R. 310, at p. 320.
2. (1952) 86 C.L.R., at p. 268.
3. (1952) 53 S.R. (N.S.W.) 39, at pp. 43, 45, 53; 70 W.N. 53, at pp. 56 et seqq.
Nevertheless Towers purported to assign to the appellants, by the deed of 24th October 1952 upon which they relied in the action, a weekly tenancy under the proviso in the lease of 1949 as to holding over after the expiration of the three year term. Since he had no such tenancy, the proof of this purported assignment at the trial did not enable the defendants to succeed on the first of the grounds specified in their solicitors' letter of 24th December 1953. Neither did they succeed on their second ground, namely that Mrs. Keen had accepted them as her tenants after the date of the purported assignment. The jury accordingly returned a verdict for the claimant.
An appeal was taken to the Full Court of the Supreme Court, and that Court ordered a new trial, limited to the question whether, after the expiration of the notice to quit, a tenancy existed between Mrs. Keen and Towers: Arnold v. Mann [1] . This meant, of course, whether after the expiration of the notice to quit a new tenancy was created by agreement between Mrs. Keen and Towers. The reason for directing the new trial on this question was that their Honours considered that there was evidence from which a finding might be made that such a tenancy was created, and that if the finding should be made it would follow, by reason of the provisions of ss. 62 and 69 of the Landlord and Tenant (Amendment) Act, that the question whether the appellants had acquired the status of assignees or not would be a matter within the exclusive jurisdiction of a court of petty sessions: [2] .
1. (1956) S.R. (N.S.W.) 212; 73 W.N. 250.
2. (1956) S.R. (N.S.W.), at p. 222; 73 W.N., at p. 257.
The new trial was had before Maguire J., who sat, by consent, without a jury. His Honour found that there was no tenancy between Mrs. Keen and Towers after the expiration of the notice to quit, and accordingly he gave a verdict and judgment for the claimant. The Full Court, on appeal, affirmed this decision, and from that Court's judgment the present appeal is brought.
The material relied upon by the appellants to establish that a new tenancy arose between Mrs. Keen and Towers after 18th July 1952 consisted of the fact that Towers thereafter remained in possession, the fact that he made and Mrs. Keen accepted payments of rent eo nomine, and the contents of a body of correspondence between the parties' respective solicitors. The payments of rent were accepted in respect only of periods within six months after the giving of the notice to quit; and, that being so, Mrs. Keen's acceptance of them cannot of itself be regarded as constituting evidence of a new tenancy, for s. 80 of the Landlord and Tenant (Amendment) Act 1948 so provides. What weight it should be given in a consideration of the facts as a whole is another matter; though even in such a consideration the existence of s. 80 must be taken into account as a relevant circumstance. Indeed the existence of all the provisions of the Landlord and Tenant (Amendment) Act as they applied to the situation must be borne constantly in mind, for it provides a background against which the conduct of the parties may take on an aspect quite different from that which it would wear if it had occurred in a situation governed only by the common law. This has been recognised time and again by the courts both in England and in this country. One of the earliest cases in which it was brought out was Davies v. Bristow [1] . We do not need in the present case to consider whether the learned judges in Davies v. Bristow [2] were right in the view they appear to have taken that at common law a landlord's acceptance of money tendered by his former tenant as rent in respect of a period after the expiration of a notice to quit is not conclusive evidence of a tenancy in that period. The Court of Appeal has agreed with that view in Clarke v. Grant [3] , but without adverting to the question whether the landlord should be allowed to set up that money offered to him for one purpose he has wrongfully retained for another: see a learned article by Mr. J. F. Clerk [4] ; Foa's General Law of Landlord and Tenant 7th ed. (1947) p. 608, note (o). But even if, in a state of affairs unaffected by statute, proof of an acceptance of rent in respect of a period after the expiration of a notice to quit is conclusive at common law to establish the creation of a new tenancy, it is clear enough that it cannot be conclusive when the period in question is one in which the former tenant is protected by statute from being dispossessed. In England there is no such provision as is made in New South Wales by s. 80; yet the fact that because of protective legislation the landlord has no choice but to leave the former tenant in possession has been consistently held, except in Hartell v. Blackler [5] where the effect of the statutory provisions was not brought to the court's attention, to create a situation in which of necessity the inquiry must always be whether a contract of tenancy in respect of a period after the expiration of the notice to quit was formed by an actual agreement between the parties: Shuter v. Hersh [6] ; Felce v. Hill [7] ; Morrison v. Jacobs [8] ; Marcroft Wagons Ltd. v. Smith [9] . See also the Australian cases cited by Davidson J. in Long v. Fairbank [10] , and the more recent cases of Piggott v. Seeberg [1] and Christopher v. Wright [2] . What is said in these cases in relation to payments of rent illustrates the broader proposition, that words and conduct upon which a former tenant relies as having created a new tenancy must be considered and interpreted in the context of the statutory situation as known to the parties at the time.
1. (1920) 3 K.B. 428, at p. 439.
2. (1920) 3 K.B. 428.
3. (1950) 1 K.B. 104.
4. (1921) 37 L.Q.R. 203.
5. (1920) 2 K.B. 161.
6. (1922) 1 K.B. 438.
7. (1923) 92 L.J.K.B. 974.
8. (1945) 1 K.B. 577.
9. (1951) 2 K.B. 496.
10. (1947) 64 W.N. (N.S.W.) 205.
11. (1949) 66 W.N. (N.S.W.) 198, at pp. 199, 200.
12. (1949) V.L.R. 145, at pp. 148, 149.
It is necessary, then, to consider the correspondence, remembering that the appellant was at all material times in possession of the land and paying rent, and to see whether, interpreted in the light of what appears to have been understood of the effect of the Landlord and Tenant (Amendment) Act as applied to the case, a new relationship of tenancy was formed between Mrs. Keen and Towers. The inquiry is not, of course, whether any particular form of words was used. It is simply whether the parties at any stage came to be ad idem in mutual manifestations of intention that a relationship of landlord and tenant should exist between them notwithstanding any effect which the notice to quit had produced. I express the question in this way because there was room at the relevant period for difference of opinion as to whether or not the expiration of the notice to quit had terminated the tenancy which arose by holding over. On the view which had been expressed by the Full Court of the Supreme Court in one case it had: Richardson v. Landecker [3] . On the view which had been expressed by the same court in two other cases it had not: Krupa v. Zacabag Pty. Ltd. [4] ; Furness v. Sharples [5] . And what the High Court had had occasion to say on the point in Anderson v. Bowles [6] had not been decisive. The evidence does not reveal whether the solicitors who wrote the letters were aware of any of these cases, or what views they held as to the state of the relevant law.
1. (1950) 50 S.R. (N.S.W.) 250; 67 W.N. 149.
2. (1950) 50 S.R. (N.S.W.) 304; 67 W.N. 221.
3. (1950) 51 S.R. (N.S.W.) 13; 68 W.N. 18.
4. (1951) 84 C.L.R., at p. 320.
The first of the letters which needs to be noticed was written by Mrs. Keen's solicitors to Towers's solicitors on 3rd July 1952, the notice to quit being then current. They referred to a written acknowledgment by Towers that the covenant (scil. as to the structural alterations) had been broken and a statement that the breach had been rectified. After asking whether Towers was prepared to vacate the premises on or before 18th July in accordance with the notice to quit, they threatened ejectment proceedings if he should not. The reply, dated the next day, was that Towers was definitely not prepared to vacate the premises. Apart from payments of rent, which in the circumstances must be regarded as equivocal, nothing more was said or done by either side until some communication of an undisclosed nature occurred between Towers and Mrs. Keen which led to a letter being written by Towers's solicitors to Mrs. Keen's solicitors on 19th September 1952. This letter referred to "previous correspondence in connection with premises (describing the subject premises) in respect of which our client, Mr. James Towers, is the Tenant of Mrs. M. I. Keen of a Butcher Shop". It stated that Towers was contemplating a sale of his business, enclosed references in respect of the proposed purchasers, and requested Mrs. Keen's approval "to the transfer of the existing tenancy" to the purchasers. This was, clearly enough, an assertion that Towers had an assignable tenancy of some unspecified description. The reply, dated 21st September 1952, said "We confirm the fact that your client desires either an assignment of his present weekly tenancy or a fresh weekly tenancy granted in favour of the purchasers"; and it added that the client's instructions had been asked for. The words quoted were regarded by Maguire J. as merely a recapitulation of what was understood by the request for approval of a "transfer of the existing tenancy"; but it is to be noticed that they not only speak of an "existing tenancy" but describe it as a weekly tenancy. The addition of this description makes the words more than a recapitulation; they show that Mrs. Keen's solicitors either were under the impression that because of the operation of the Landlord and Tenant (Amendment) Act the weekly tenancy in respect of which the notice to quit had been given was undetermined, or that the Act had given rise to new rights in Towers which might be described as a weekly tenancy. But whichever it was, two things are clear: the letter evinces no intention on the part of the writer to affect in any way the legal situation existing between his client and Towers, and so far as appears the writer had no authority from Mrs. Keen, who as yet knew nothing of the inquiry to which the letter was a reply, to express for her any intention or to make for her any promise concerning the property. In truth the letter is no more than an admission, which turns out to have been misconceived on any view of its meaning. It was not contractual in character. It was not a response to anything which sought a declaration of Mrs. Keen's intention as to whether or not a tenancy should be taken to exist. There seems to me to be a wide distinction between, on the one hand, an assent by one party to an assertion by the other that a consensual tenancy is to be taken to exist between them, and, on the other hand, an assent by one party to an assertion by the other that a tenancy exists between them in consequence of the operation of a statute and independently of any consensus. The former may have the effect of an acceptance of an offer. The latter cannot be, or be understood as, anything more than an admission of an existing fact; it leaves unaltered the relation of each party to the property, and, subject to any question of estoppel, it may later be withdrawn. Of the latter kind is the admission in the letter of 23rd September 1952. It does not support a conclusion that a tenancy was created "by two assenting minds": cf. Maconochie Bros. Ltd. v. Brand [1] .
1. (1946) 2 All E.R. 778, at p. 779.
Mrs. Keen's solicitors wrote again on 1st October 1952, saying that subject to certain conditions being fulfilled their client was prepared to grant to the purchasers a lease of a reduced area at a weekly rental of £4. Apparently a few days later they altered this offer by telephone, reducing the area still further, increasing the rent to £4 10s. 0d., and requiring a premium of £200. To this the solicitors for Towers replied on 10th October 1952, placing on record that neither they nor the proposed tenants had requested a lease but in fact had requested approval to (they quoted) "the transfer of the existing tenancy". They said they could only assume that Mrs. Keen had refused to consent to the proposed assignment, and that her consent had been withheld unreasonably. Mrs. Keen's solicitors answered this in a letter of 13th October 1952. Though not remarkable for clarity, this letter showed that the question whether the references which had been submitted in regard to the proposed purchasers were satisfactory had been considered from the point of view only of granting a new lease. A statement which Towers's solicitors had made, that Mrs. Keen might refer to a certain bank, was answered by saying that it was the purchasers' obligation to place the relevant evidence before the lessor in order that a decision might be arrived at. In the context, the only decision which this can be taken to have contemplated was a decision as to whether the purchasers were suitable to be given a fresh lease. But there followed two paragraphs which plainly admitted that Towers had an assignable tenancy. One said that "any assignment without consent will be the subject of immediate ejectment proceedings", and the other said that "should the purchasers wish to obtain an assignment, if the usual documentary evidence as required in these cases is submitted to us we shall forward the same to our clients with a request for further instructions". This admission, like the admission in the letter of 23rd September 1952, must mean either that the weekly tenancy under the holding-over provision of the old lease was thought to be, by reason of the statute, undetermined by the notice to quit, or that after the determination of that tenancy an assignable statutory tenancy had arisen in favour of Towers. But here again it must be recognised that the admissions, occurring as they do in a discussion of possible future dealings, disclose no intention to produce by their own force any effect upon the existing situation, either by creating a tenancy or by confirming or continuing a tenancy. And, as I have pointed out, admitting in the course of a discussion as to future action that a tenancy exists as a consequence of the operation of a statute is a very different thing from expressing an intention to join in creating or keeping on foot a consensual tenancy.
Towers's solicitors next submitted some additional references, and on 15th October 1952 Mrs. Keen's solicitors wrote that, provided Towers was prepared "to have his tenancy varied by reason of having the dwelling portion of the premises excluded from the area previously outlined to you", subject to formalities being attended to Mrs. Keen would be prepared "to grant a lease" in favour of the purchasers. They added that the references were not satisfactory and indicated generally what was required. The expression "to have his tenancy varied" admits once more that Towers had some form of tenancy; but it adds nothing to the case. What was said in the letter about further references obviously referred only to the question of granting a new lease.
Mrs. Keen's solicitors wrote no other letter before Towers executed the assignment under which the appellants claim to retain possession. Nothing that happened thereafter can be relied upon as having created a tenancy, for the issue to be tried before Maguire J. related only to any tenancy between Mrs. Keen and Towers. Even when the correspondence which subsequently passed between Mrs. Keen's solicitors or Mrs. Mann's solicitors and the solicitors for the purchasers is searched for possible admissions, there is little to be considered and nothing to which the observations already made do not apply. There were silences at some points where denials of a tenancy might have been expected if the true legal position had been realised, but whether it was realised or not there is nothing to indicate.
The conclusion to be drawn from the correspondence as a whole seems to me to be that neither party addressed his or her mind either to creating a new tenancy or to continuing the old. Each took a view as to what was the situation which had arisen out of the application of the Landlord and Tenant (Amendment) Act to the case. Each seems to have thought that that situation was more favourable to Towers than it really was, but neither is shown to have had the slightest intention of either creating a new tenancy or giving a new consensual force to their existing relationship. Towers continued at all times to insist upon what he conceived that relationship to be, and Mrs. Keen admitted that she took the same or a similar view of it, except that she refused to concede that Towers had a right in the circumstances to make an assignment to the purchasers without her consent.
At least that is as high as the appellants seem to me to be able to put the case. In my opinion Maguire J. and the Full Court were right in concluding that the appellants had not discharged the onus that lay upon them of establishing the creation of a new tenancy between Mrs. Keen and Towers after the expiration of the notice to quit.
The appeal, in my view, should be dismissed. |
high_court_of_australia:/showbyHandle/1/11848 | decision | commonwealth | high_court_of_australia | text/html | null | Maguire v Makaronis [1997] HCA 23 | https://eresources.hcourt.gov.au/showbyHandle/1/11848 | 2024-09-13T22:57:19.028672+10:00 | High Court of Australia
Brennan CJ Gaudron, McHugh, Gummow and Kirby JJ
Maguire v Makaronis (FC 97/020)
[1997] HCA 23
ORDER
1. Appeal allowed with costs.
2. Set aside the orders of the Court of Appeal of the Supreme Court of Victoria and in lieu thereof order that the appeal to that Court be allowed with costs and the orders of the trial judge set aside.
3. Remit the matter to the Court of Appeal to make orders in or to the effect of the following (or otherwise by consent of the parties):
(i) the Mortgage (Registered No R116843W) and the Related Documents be set aside on condition that the respondents shall have paid to the appellants within thirty days of the pronouncement of the order of the Court of Appeal the whole of the moneys, representing principal due and owing under the Mortgage but unpaid, together with interest calculated by the Court of Appeal in accordance with this judgment;
(ii) in default of such payment, judgment be entered for the appellants for possession of the Radford property, being land comprised in Certificate of Title vol 4808 folio 484;
(iii) the counter-claim be dismissed save that there be judgment entered against the appellants for $2,500;
(iv) there be liberty to apply to a judge of the Supreme Court of Victoria; and
(v) the respondents pay the costs of the appellants of the action in the Supreme Court, including the counter-claim.
Cur adv vult
The following written judgments were delivered:—
25 June 1997
Brennan CJ, Gaudron, McHugh and Gummow JJ.
The first appellant, Mr J D Maguire, was admitted to practice in 1974 as a barrister and solicitor of the Supreme Court of Victoria. The second appellant, Mr D M Tansey, was so admitted in 1978. At all material times each appellant was a partner in two firms, Lynch & MacDonald, which carried on practice from premises in Collins Street, Melbourne, and Birch Ross & Barlow, which carried on practice, outside the metropolitan area, at Korumburra in Gippsland. During the relevant period in 1989 and 1990, Mr Tansey visited the Korumburra premises every Tuesday but otherwise was fully engaged in the practice at Collins Street.
The respondents, Mr and Mrs Makaronis, were former clients and the present litigation was precipitated by the attempted enforcement by the appellants of security over real property taken by them in the course of that relationship. Before this Court the issues have turned upon fiduciary aspects of that relationship.
The facts
Mr Makaronis was born in Greece in 1934 and settled in Australia in 1961. He left school at eight years of age. Mrs Makaronis was born in Greece in 1941 and settled in Australia in 1963, the year before she married Mr Makaronis. Mrs Makaronis left school when she was sixteen years of age. At the trial in the Supreme Court of Victoria, Mr and Mrs Makaronis both gave evidence through an interpreter. The trial judge (Ashley J) found that both misrepresented their actual respective abilities to understand and communicate in English. Ashley J concluded that Mr Makaronis had a limited understanding of English but that he could understand legal concepts associated with property transactions if they were simply explained. His ability to read English was very limited. His Honour was satisfied that Mrs Makaronis was able to read some English and to write English to a limited extent; her spoken English was considerably better than that of her husband and she was able, with greater facility than he, to understand explanations in English of legal documents. On a number of occasions before the transactions giving rise to the litigation, Mr and Mrs Makaronis had bought and sold properties, borrowed moneys and executed mortgages. They had a family trust, the trustee of which was Nezday Pty Ltd (Nezday).
The primary judge formed a very poor view of Mr and Mrs Makaronis as witnesses. In many instances, he rejected their testimony, finding that each of them made sustained attempts to persuade the Court of a poorer understanding of relevant transactions than was in fact the case and that a good deal of their evidence of those transactions was inaccurate. Largely for these reasons, the trial judge rejected claims made by Mr and Mrs Makaronis other than those of breach of fiduciary duty by the appellants.
On 21 March 1980, Mr and Mrs Makaronis became registered proprietors of property at 85 Radford Road, Reservoir (the Radford property), being the land comprised in Certificate of Title vol 4808, folio 484. They also owned property at 96 Summerhill Road, Reservoir (the Summerhill property). A contract to sell the Summerhill property for $90,000 was signed in May 1990 but, of the proceeds of sale on subsequent completion, some $80,000 went to pay out a mortgagee. The result was that the Radford property was their major asset, although the title was subject to a registered mortgage to the Commonwealth Savings Bank of Australia (later discharged on 16 August 1990) and to two caveats by Avco Financial Services Ltd (both withdrawn on 16 August 1990). Mr Makaronis also had an interest or entitlement in the Dunlop Olympic Superannuation Fund, apparently established by his employer. In mid-1990, Mr Tansey believed this interest then had a value in the order of $30,000. Mr Makaronis worked with Dunlop as a tyre-builder for sixteen years before he resigned in May 1990.
In 1989 Mr and Mrs Makaronis became interested in purchasing the business and freehold of a poultry farm at Loch in Gippsland. After a number of vicissitudes, the purchases were settled on 8 June 1990 with the aid of a short term loan of $250,000 at 24 per cent interest, reducible to 22 per cent on prompt payment. That rate appears high but Ashley J found that it was not out of line with those then charged by banks on short term loans of this nature. The trial judge also found that the business was mismanaged by the respondents and they quickly lost money on the venture, becoming, if they were not already, insolvent. A number of cheques drawn by Nezday were dishonoured and it was wound up by the Supreme Court of Victoria on 16 October 1991, on the application of a supplier to the business. The last of the poultry stocked in the business had been taken away by the Royal Society for the Prevention of Cruelty to Animals in April 1991.
To secure the short term loan, Mr and Mrs Makaronis executed a mortgage in standard form of the Radford property (the Mortgage) in favour of Mr Maguire and Mr Tansey as mortgagee. The Mortgage recited:
The Mortgagor hereinafter described being registered as the proprietor of an estate and interest in fee simple in the land described subject to the encumbrances affecting the land including any created by dealings lodged for registration prior to the lodging of this instrument in consideration of the advance hereinafter described lent or agreed to be lent to the mortgagor by the mortgagee for better securing the payment of the moneys hereby secured mortgages to the mortgagee the said estate and interest in the said land (Emphasis added.)
The Mortgage stated an advance of $250,000 and the due date of repayment as 8 December 1990 with the first interest payment to be made on 8 July 1990. It was registered on 30 November 1990 (Registered No R116843W), after the clearance of the title on 16 August 1990 by the steps we described. The Mortgage was stated to contain covenants contained in a particular Memorandum of Common Provisions retained by the Registrar of Titles (the Memorandum). Clause 1(1) and (2) of the Memorandum obliged the mortgagor to pay to the mortgagee at the time or times agreed upon "the moneys hereby secured" and rendered the whole of the moneys secured, at the option of the mortgagee, immediately due and payable if the mortgagor, amongst other things, defaulted in the payment of any moneys payable under the Mortgage. The Mortgage thus created a security interest in the Radford property and contained a broadly drawn covenant to pay. The phrase "moneys hereby secured" was defined in cl 31(1)(e) as meaning:
the principal moneys secured and each and all sums of money in which the Mortgagor may now or hereafter be indebted or liable or contingently indebted or liable to the Mortgagee in any manner or on any account whatever including interest, whether capitalised as provided in clause 6(2) or not, except such moneys (if any) as the parties in writing agree do not form part of the moneys hereby secured.
Mr Makaronis also provided to the appellants a signed but undated instrument which was addressed to "The Trustees, Dunlop Olympic Superannuation Fund" and stated that in favour of "my Solicitors, Messrs Lynch & MacDonald ", "I, Con Makaronis Hereby Assign all my entitlement and interest in any superannuation benefit". Mr and Mrs Makaronis also provided a signed but undated instrument stating that they thereby assigned to Lynch & MacDonald "all moneys received by ourselves", being proceeds of the sale of the Radford property. It is accepted that the fate of the further security provided by these instruments (the Related Documents) follows that of the Mortgage itself. Accordingly, it is unnecessary to say anything further with particular reference to them.
The only payment made by or on behalf of the respondents in respect of the moneys secured by the Mortgage was $1,967. On 15 October 1990, Birch Ross & Barlow deposited that amount in an account with the Commonwealth Bank of Australia styled "BRB Rf Makaronis Bridging Loan".
On 22 November 1990, Birch Ross & Barlow, identifying themselves as "Solicitors and Agents for John David Maguire and David Michael Tansey" issued to the respondents a notice which identified Mr Maguire and Mr Tansey as mortgagees of the Radford property and stated that Mr and Mrs Makaronis had made default in payment of interest due under the Mortgage. The notice went on to demand immediate repayment of the whole of the moneys secured by the Mortgage.
The litigation
On 1 February 1991, the appellants instituted a proceeding in the Supreme Court of Victoria claiming possession of the Radford property. The respondents countered with a defence and counter-claim seeking, amongst other relief, a declaration that the Mortgage "is void and of no effect" and "[d]amages". In their defence to the counter-claim, the appellants admitted that the Mortgage was executed pursuant to a loan from the appellants to the respondents. At no stage thereafter did the appellants seek leave to withdraw that admission and to replead.
Clause 31(10) of the Memorandum stated:
A certificate purporting to be signed by the Mortgagee or by any of its solicitors, directors, secretaries, managers or other duly authorised officers stating all or any of the following matters, facts or things —
(a) the moneys hereby secured or the principal moneys secured at any date;
(b) the date of making default in performing or observing any covenant or agreement to be observed by the Mortgagor;
(c) whether such default has continued between specified dates;
(d) anything else relevant to the establishment of any right or remedy of the Mortgagee or of the liability of the Mortgagor;
shall be prima facie evidence of such matter, fact or thing stated in such certificate.
In their case at the trial, the appellants tendered a certificate expressed as given on 17 March 1993 and pursuant to cl 31(10) of the Memorandum. The certificate was issued by the Office Manager of Birch Ross & Barlow and Lynch & MacDonald. It recited the advance of $250,000 pursuant to the Mortgage between the appellants and the respondents and certified as currently outstanding pursuant to the Mortgage the sum of $476,586.90, with interest accruing at the rate of $298.83 per day. The certificate thus was drawn and tendered by the appellants on a footing consistent with the above admission.
The relief sought by the respondents upon their counter-claim was put on numerous grounds, including breaches of contract, of a "common law duty of care", and of fiduciary duties owed by the appellants. Allegations were also made of undue influence, "unconscionable conduct", and contravention of s 11 of the Fair Trading Act 1985 Vic [1] . There was no claim as such that the Mortgage had been executed by the respondents under any mistake as to the identity of the mortgagee. Rather, the alleged lack of awareness of the respondents as to the significance of the appearance of the appellants as mortgagees on the Mortgage, was an aspect of other claims made by the respondents.
1. Section 11 reads: "(1) A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. (2) Nothing in the succeeding provisions of this Part shall be taken as limiting by implication the generality of sub-section (1)."
In their defence to the counter-claim, the appellants pleaded (in par 49) that, in so far as it was contended that the Mortgage ought to be set aside, the respondents were not entitled to that relief without first paying to the appellants all amounts of principal advanced under and pursuant thereto. In so doing, the appellants sought to invoke the principle, recently affirmed and applied by this Court in Vadasz v Pioneer Concrete (SA) Pty Ltd [2] that, as the respondents were seeking equitable relief to have the Mortgage set aside, they in turn must do equity and that required the court to look at what was practically just for both parties, not only the respondents.
1. (1995) 184 CLR 102 at 115-116.
The primary judge held that the respondents succeeded on their counter-claim but only in respect of the alleged breach of fiduciary duties owed them by the appellants. The appellants' claim for possession was dismissed. Upon the counter-claim his Honour made various orders, including an order that the Mortgage "be set aside" and that the Registrar of Titles (who was not a party to the litigation) remove the registration thereof from Certificate of Title vol 4808, folio 484. In granting relief of this character unconditionally, Ashley J did not advert to the pleading to the contrary by the appellants in par 49 of their defence to the counter-claim. His Honour also ordered the appellants to pay to the respondents "damages" of $2,500. This had been paid by Mr and Mrs Makaronis to Lynch & MacDonald upon an invoice dated 15 June 1990 which stipulated $2,500 as a "procuration fee" representing 1 per cent of an advance of "bridging finance". In this Court, the appellants do not seek to disturb that order.
An appeal by the appellants to the Appeal Division was dismissed (Nathan and Smith JJ, Brooking J dissenting) on 17 August 1995 [3] . Brooking J pointed out that the Mortgage had a dual character, both creating a security interest in the Radford property and obliging the respondents as a matter of contract to pay the moneys secured. The order setting aside the Mortgage "meant that it disappeared not only as a security interest in the land but also as a contract for the repayment of the loan". His Honour would have varied the orders of Ashley J by making the relief conditional upon payment by the respondents to the appellants of the amount of the advance together with interest thereon at the rate of 9 per cent per annum from 8 June 1990 to the date of repayment of the principal, calculated with half-yearly rests. Brooking J added:
The evidence in the present case, and the findings of the judge already mentioned, strongly suggest that there is no prospect of the respondents' being able to satisfy the condition as to payment upon which the grant of relief must be made to depend. It is tempting to say that, since the respondents are in a practical sense unable to restore the appellants to the position they were in before the impugned transaction, it should not be undone. I consider that the appropriate course, however, was and is to grant them relief, conditioned in the usual way upon payment, with a direction which will have the result that relief is withheld from them and possession is given to the solicitors unless payment is made by the respondents within a specified time.
1. On 7 June 1995 the Appeal Division was replaced by the Court of Appeal of the Supreme Court of Victoria which was established by the Constitution (Court of Appeal) Act 1994 Vic.
The appeal to this Court should be allowed. In reaching that conclusion, it is necessary to begin by further reference to the nature of the short term finance of $250,000 which was advanced to the respondents.
The bridging finance
The respondents pleaded that the appellants had owed them a fiduciary duty not to act in a conflict of interest or for their own benefit and that, at the time of the execution by the respondents of the Mortgage, the appellants had failed to disclose to them that the loan of $250,000 was being made by the appellants personally. In that setting, Mr Maguire and Mr Tansey suggested in the course of their oral evidence that, in fact and to the knowledge of their clients, the moneys were advanced to the clients by "the Commonwealth Bank". It was not made clear whether by this it was meant the Commonwealth Bank of Australia, the Commonwealth Development Bank of Australia or the Commonwealth Savings Bank of Australia. There is reference to all three in the documentary evidence. None is a party to this litigation. However, it is clear that there was an arrangement between one or other of the Commonwealth Bank institutions (hereafter "the Commonwealth Bank") and the appellants whereby bridging finance was provided for their clients. And it is clear that the respondents knew that the Commonwealth Bank was in some way the source of the money advanced to them pursuant to the Mortgage.
Whatever the arrangements between the appellants and the Commonwealth Bank, the very terms of the Mortgage itself, and the other matters to which we have referred, indicate the establishment of a direct relationship of debtor and creditor between the respondents and the appellants, and the securing of this indebtedness to the appellants by the Mortgage which they sought to enforce in their action in the Supreme Court against the respondents. In his examination-in-chief, Mr Tansey was questioned as to the provision of a clear title to the Radford property in support of the bridging finance. There was the following exchange:
Was it necessary to obtain a clear title in order to obtain bridging finance? — Yes. It was necessary to clear the title and hand those, the documents, to the Commonwealth Bank at Leongatha, before they, at the time of them advancing funds to us. They wouldn't accept something which had a prior charge over it.
Leongatha is near Korumburra. Later, in answering a question as to the registration of the Mortgage (which did not take place until 30 November 1990), Mr Tansey said:
The normal practice was for the Commonwealth Bank to hold the documents as security, without registration. This is because it was bridging finance, and if the property sold, it was much easier to hand over the documents at settlement in return for the funds, rather than have to go through a discharge of mortgage and — or even a control order situation, if documents were delayed in the Titles Office.
The trial judge rejected the allegation that the respondents had been enticed to execute the Mortgage by misrepresentations by the appellants that the loan was secured over the goodwill and assets of the poultry business and was not secured over any real estate. His Honour then referred to the contentions of the respondents' counsel, departing from the pleadings, that there were other misrepresentations "as to who the lender was, and as to the nature of the loan". Ashley J continued:
If it was proper to consider those matters, and I should say that departure from very expansive pleadings, frequently amended, is not to be encouraged, then on the view I have taken of the facts the [respondents] would not be advantaged.
Later, in dealing with the evidence bearing upon the claims in contract and tort, his Honour said that he:
found that [Mr Tansey] did not draw to the [respondents'] attention the fact that he and Maguire were to be the mortgagees; nor advise the [respondents], in light of this fact, or in light of the fact that a procuration fee was to be charged, that they should obtain independent legal advice. These matters were a focus of Mr Jones' [counsel for the respondents] submissions.
[I]t was necessary that the [respondents] understood the exact nature of the transaction they were concluding. That demanded that they be informed who the mortgagees were, and why. No such information was provided. I am not prepared to conclude, from the fact that the [respondents] signed the mortgage, that they read or understood the significance of the [appellants'] names appearing as mortgagees.
However, the trial judge went on to dismiss the claims in contract and tort because he did not conclude that the misconduct in question was a cause of loss or damage to the respondents.
Nevertheless, as has been indicated, his Honour went on to set aside the Mortgage as a consequence of finding a breach of fiduciary duty. In effect, the trial judge found that neither of the appellants had, at the time they took the Mortgage from the respondents, any clear understanding of the legal nature and incidents of the relationship with the bank pursuant to which bridging finance was made available to their clients. His Honour concluded that it was likely that when the Mortgage was executed Mr Tansey believed that there was but one loan, from the "Commonwealth Bank" to the respondents, and that the bank required two forms of security, the Mortgage in which the appellants were but "nominees" for the bank, together with a "guarantee" from Birch Ross & Barlow and Lynch & MacDonald. The trial judge relied upon that conclusion concerning Mr Tansey's state of mind as rendering it improbable that Mr Tansey would have drawn the attention of the respondents to any alleged relationship between such a guarantee and the Mortgage.
Contrary to the submissions for the respondents which were pressed upon this Court, there is no firm ground supplied in the findings of the trial judge for the submission that the case now should be approached in an appellate court on the footing that, at odds with the admission on the pleadings and the other matters to which we have referred, the Mortgage secured a direct indebtedness of the appellants to the banking institution which was the source, in a practical sense, of the bridging finance. Rather, the evidence and the conclusions of the trial judge are consistent with the proposition that there was an indebtedness of the respondents to the appellants, and that the financier relied for its security upon an equitable mortgage by the appellants, being the deposit of the securities taken by the appellants from the respondents.
Fiduciary duties
Upon that foundation it is appropriate now to turn to consider the nature of the fiduciary duties owed by the appellants to the respondents and the particular breaches thereof which found the claim of the respondents to relief. In that latter regard, each side put to this Court an argument of some novelty. The respondents sought to uphold the setting aside of the Mortgage, but without the imposition of any term as to the repayment of principal or payment of interest. This would produce the result that the status quo was not restored. The appellants would be left with the bare covenant to pay in cl 1 of the Memorandum, but shorn of the supporting security.
For their part, the appellants submitted that, in respect of their breach of fiduciary duties to the respondents, there was no equity in the respondents for a remedy of rescission in the absence of proof by the respondents of loss by reason of entry into the transaction. In particular, it is said that there could be no loss in the necessary sense because the respondents would have gone ahead with the transaction even if the appellants had not failed in their fiduciary obligations by omitting to disclose their identity and interest as mortgagee.
It is appropriate to begin the evaluation of these submissions with reference to the significance of the fiduciary element in the solicitor-client relationship.
The claims which, from the relationship of solicitor and client, may arise in favour of the client include claims founded in contract, tort, and for breach of fiduciary duty. In so far as the solicitor has held moneys or other property on trust for the client there may be an allegation of breach of trust. Each cause of action may have its own strengths and weaknesses so that the client may fail in one and succeed in another. In particular, periods of limitation may differ. The courts and legislatures have tended to save from the imposition of arbitrary time limits complaints of breach of trust or other fiduciary duty [4] . Thus, in Nocton v Lord Ashburton [5] , the framing of the claim against the solicitor in respect of the original mortgage transaction of 1904 as one for breach of fiduciary duty "was probably deliberately done in order to endeavour to get over the difficulty occasioned by the Statute of Limitations as regards any mere case of negligence" [6] .
1. Nelson v Rye [1996] 1 WLR 1378 at 1389[1996] 2 All ER 186 at 197-198
2. [1914] AC 932.
3. Nocton v Lord Ashburton [1914] AC 932 at 957, per Viscount Haldane LC. The reference to "negligence" is to an action in contract for negligent performance of the solicitor's retainer.
In Hospital Products Ltd v United States Surgical Corporation [7] , Gibbs CJ said:
The archetype of a fiduciary is of course the trustee, but it is recognised by the decisions of the courts that there are other classes of persons who normally stand in a fiduciary relationship to one another — eg, partners, principal and agent, director and company, master and servant, solicitor and client, tenant-for-life and remainderman. There is no reason to suppose that these categories are closed.
The present case is not one in which there is a need to specify criteria by which it may be determined whether parties, not being within the accepted categories referred to by Gibbs CJ, stand in a fiduciary relationship. The solicitor is classically a fiduciary to the client and as such owes certain duties in each particular case [8] .
1. (1984) 156 CLR 41 at 68.
2. Clark Boyce v Mouat [1994] 1 AC 428 at 437
From various decisions in recent years there appear attempts to throw a fiduciary mantle over commercial and personal relationships and dealings which might not have been thought previously to contain a fiduciary element. In some instances the forensic advantage sought to be gained has been that already referred to — less stringent time limitations. In others, the advantage sought has been the remedial constructive trust with the edge thereby conferred over unsecured creditors in an insolvent administration of the affairs of a defendant. A notable instance of such an attempt, in the end unsuccessful, is the litigation arising from dealings in bullion which was determined by the Privy Council in In re Goldcorp Exchange Ltd [9] . In Hospital Products, the apparent advantage to the plaintiff over counts in contract and deceit of the fiduciary duties said to arise from the exclusive distribution agreement was that specific equitable relief would enable the plaintiff to take over those businesses [10] . In Canson Enterprises Ltd v Boughton & Co [11] , the claim to recover pecuniary loss from the solicitors was framed as one for breach of fiduciary duty rather than for breach of contract or in tort (for negligence or deceit) because of the apprehension that on none of those other bases could there be the recovery of a substantial sum [12] .
1. [1995] 1 AC 74.
2. A category of case referred to by Professor Goode, The Recovery of a Director's Improper Gains: Proprietary Remedies for Infringement of Non-Proprietary Rights, in McKendrick (ed), Commercial Aspects of Trusts and Fiduciary Obligations (1992) 137, at pp 140-141.
3. [1991] 3 SCR 534.
4. See the judgment of La Forest J in Canson Enterprises [1991] 3 SCR 534 at 565.
The present case stands apart from those just mentioned because it involves both a fiduciary relationship within a well-recognised category as well as the claim to a well-established remedy. Nevertheless, even here, to say that the appellants stood as fiduciaries to the respondents calls for the ascertainment of the particular obligations owed to the respondents and consideration of what acts and omissions amounted to failure to discharge those obligations [13] .
1. Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 73, 102; In re Goldcorp Exchange Ltd [1995] 1 AC 74 at 98; Breen v Williams (1996) 186 CLR 71 at 82-83
The appellants were retained to act for the respondents on the purchase of the business and freehold of the poultry farm at Loch and in relation to the obtaining of finance to support that purchase. The provision of the bridging finance secured by the Mortgage was at the heart of the solicitor and client relationship.
In Clark Boyce v Mouat [14] , the Privy Council referred to the judgment of Lord St Leonards LC in Lewis v Hillman [15] as authority for the proposition:
The classic case of the [fiduciary] duty arising is where a solicitor acts for a client in a matter in which he has a personal interest. In such a case there is an obligation on the solicitor to disclose his interest and, if he fails so to do, the transaction, however favourable it may be to the client, may be set aside at his instance.
1. [1994] 1 AC 428 at 437. See also Sims v Craig Bell & Bond [1991] 3 NZLR 535 at 543-545, 546, 547; Witten-Hannah v Davis [1995] 2 NZLR 141 at 147
2. (1852) 3 HLC 607 at 630 [10 ER 239 at 249].
To this several points may be added in elaboration. First, the situation here is to be distinguished from an action in tort to recover damages for a pecuniary loss caused, for example, by fraudulent misrepresentation [16] . Equity intervenes, particularly where the fiduciary is a solicitor, not so much to recoup a loss suffered by the plaintiff as to hold the fiduciary to, and vindicate, the high duty owed the plaintiff [17] . Thus, whilst significant, inadequacy of the consideration or other improvidence of the transaction is not determinative. The approach taken by the Judicial Committee in the passage set out above is consistent with the reasoning underlying a number of decisions of this Court [18] . In CIBC Mortgages Plc v Pitt [19] , Lord Browne-Wilkinson referred to the considerations of general public policy which found what he identified as the long-standing principle whereby those in a fiduciary position who enter into transactions with those to whom they owe fiduciary duties labour under a heavy duty to show the righteousness of the transactions. Similar considerations are evident in the formulation by Lord St Leonards LC in Lewis v Hillman that, if a transaction between solicitor and client is to stand, it must be "open and fair, and free from all objection", not merely "fair" [20] .
1. Dobbs, Law of Remedies, 2nd ed (1993), vol 2, §9.3(2).
2. Warman International Ltd v Dwyer (1995) 182 CLR 544 at 557-558
3. Johnson v Buttress (1936) 56 CLR 113 at 134-135 Blomley v Ryan (1956) 99 CLR 362 at 405 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 394 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 475 Warman International Ltd v Dwyer (1995) 182 CLR 544 at 557cf National Westminster Bank Plc v Morgan [1985] AC 686 at 704 CIBC Mortgages Plc v Pitt [1994] 1 AC 200 at 207-209
4. [1994] 1 AC 200 at 209.
5. Lewis v Hillman (1852) 3 HLC 607 at 630[10 ER 239 at 249].
In the present case, the trial judge found that there had been a conflict between the duty of the appellants to the respondents and their personal interests in the transaction, in particular as mortgagee under the Mortgage. The conflict meant that the loyalty of the appellants to their clients had not remained undivided, with the result that they could not properly discharge their duties to their clients [21] .
1. See the formulation by Richardson J in Farrington v Rowe McBride & Partners [1985] 1 NZLR 83 at 90
The second matter concerns legislation which establishes a regime for control of the legal profession, including supervision of professional conduct. Where the question is one of professional conduct, the legislation may operate to qualify what otherwise would be the scope of the fiduciary principle. But it by no means necessarily follows that the legislation, upon its proper construction, limits the well-entrenched equitable jurisdiction, in matters of private law, to remedy, at the instance of the client, abuses of what equity regards as the fiduciary duties of solicitors [22] .
1. See Farrington v Rowe McBride & Partners [1985] 1 NZLR 83 at 91-92
The trial judge, correctly, concluded that compliance with the requirements of the Solicitors' (Professional Conduct and Practice) Rules 1984 (Vic) [23] would not necessarily satisfy the requirements of the fiduciary obligations of a solicitor to the client. Rule 10(2)(d) forbade a solicitor to act for both lender and borrower in connection with the loan of money unless and until the solicitor obtained written acknowledgment of the parties in or to the effect of Form 1. Rule 10(4) stated:
A solicitor may obtain a general authority from a client authorizing the solicitor to act for that client and for other parties to any matter or transaction, and such general authority in or to the effect of Form 2 in the Schedule will satisfy the requirements of sub-rule 10(2) insofar as that client is concerned.
Lynch & MacDonald took an instrument signed by Mr and Mrs Makaronis and dated 10 January 1990 headed "Form 2 General Authority ", which purported to authorise Lynch & MacDonald and Birch Ross & Barlow "to act for another party or parties to any transaction" in respect of which either firm was also acting on their behalf. Rule 10(2)(d) states a prohibition upon a solicitor acting for lender and borrower and goes on to qualify that prohibition. It does not restate, and therefore does not qualify, the fiduciary obligation to avoid a conflicting engagement where it is the solicitor who lends money to the client.
1. Made under the power conferred by s 88 of the Legal Profession Practice Act 1958 Vic.
Thirdly, in the circumstances disclosed above, if the appellants were to escape the stigma of an adverse finding of breach of fiduciary duty, with consequent remedies, it was for them to show, by way of defence, informed consent by the respondents to the appellants' acting, in relation to the Mortgage, with a divided loyalty [24] . What is required for a fully informed consent is a question of fact in all the circumstances of each case and there is no precise formula which will determine in all cases if fully informed consent has been given [25] . The circumstances of the case may include (as they would have here) the importance of obtaining independent and skilled advice from a third party [26] . On no footing could it be maintained that the appellants had taken the necessary steps of this nature to answer the charge of breach of fiduciary duty. However, it should be noted that, contrary to what appeared to be suggested by the respondents in argument, there was no duty as such on the appellants to obtain an informed consent from the respondents. Rather, the existence of an informed consent would have gone to negate what otherwise was a breach of duty.
1. Birtchnell v Equity Trustees, Executors & Agency Co Ltd (1929) 42 CLR 384 at 398 Parkinson (ed), The Principles of Equity (1996), p 357.
2. Life Association of Scotland v Siddal (1861) 3 DeG F & J 58 at 73 [45 ER 800 at 806]; In re Pauling's Settlement Trusts [1962] 1 WLR 86 at 108; [1961] 3 All ER 713 at 730; Spellson v George (1992) 26 NSWLR 666 at 669-670, 673-675, 680.
3. Commonwealth Bank of Australia v Smith (1991) 42 FCR 390 at 393
Fourthly, the breach of fiduciary duty having been established without satisfactory answer by the appellants, it then became necessary to determine the appropriate remedy. The nature of the case will determine the appropriate remedy available for selection by a plaintiff [27] . Here the range of remedies was exclusively equitable in nature, the obligation which had been broken, that of a fiduciary, having been equitable in nature [28] . Where the breach of duty was in a solicitor acting for a client in a transaction in which the solicitor had a personal interest, the court may order the solicitor "to replace property improperly acquired from the client" [29] and achieve this by an order for rescission, unless it be shown that restitutio in integrum is no longer possible [30] .
1. Spence v Crawford [1939] 3 All ER 271 at 288
2. The distinction between an action at law on rescission by a party and a suit in equity for rescission is explained in Alati v Kruger (1955) 94 CLR 216 at 223-224, a passage adopted in O'Sullivan v Management Agency Ltd [1985] QB 428 at 457See also Dobbs, Law of Remedies, 2nd ed (1993), vol 1, §4.8, where the United States authorities to the same effect are discussed.
3. Nocton v Lord Ashburton [1914] AC 932 at 956-957
4. McKenzie v McDonald [1927] VLR 134 at 146
Rescission and "causation"
This equity to a decree of rescission is immediately generated by the preceding breach of fiduciary duty. Contrary to submissions by the appellants, issues of "causation", by analogy with those found with the recovery of damages in tort or contract, do not emerge in this case. The fiduciary duty forbade, in the circumstances of the case, entry by the appellants into the transaction of which the giving of the Mortgage was a central part. There was no response by the appellants which showed, in the necessary sense, a fully informed consent. Subject to the need for restitution, the Mortgage was liable to be set aside at the suit of the respondents. The breach of the duty was patent at the creation of the very thing which is to be set aside.
Where the subject matter of the transaction is, for example, the sale of a business, intervening changes may render more complex the decree for rescission. In some circumstances, the purchaser seeking rescission by reason of fraudulent misrepresentations by the vendor, may be entitled to an indemnity for trading losses incurred, both before the purchaser disavowed the transaction and thereafter whilst the business was maintained for the benefit of the vendor; but the indemnity will extend only to that part of the trading losses which were "directly occasioned" by the falsity of the vendor's misrepresentations [31] . To this extent issues of "causation" may arise in cases of rescission for fraudulent misrepresentation. But that is not this case.
1. See McAllister v Richmond Brewing Co (NSW) Pty Ltd (1942) 42 SR(NSW) 187 at 191-192; Munchies v Belperio (1988) 58 FCR 274 at 282-286
Different considerations arise where the plaintiff seeks one or other of the further remedies referred to by the Lord Chancellor in Nocton v Lord Ashburton [32] , namely an account of profits, as a personal rather than proprietary remedy [33] , or, as another personal remedy, compensation for that which the plaintiff has lost "by [the fiduciary] acting", to use the Lord Chancellor's phrase, in breach of duty. Likewise where what is sought is a proprietary remedy in the nature of a constructive trust. In these instances, there directly arises a need to specify criteria for a sufficient connection (or "causation") between breach of duty and the profit derived, the loss sustained, or the asset held.
1. [1914] AC 932 at 956-957.
2. Warman International Ltd v Dwyer (1995) 182 CLR 544 at 556-558
Where the plaintiff seeks recovery of a profit, the necessary connection has been identified in this Court by asking whether the profit was obtained "by reason of [the defendant's] fiduciary position or by reason of his taking advantage of opportunity or knowledge derived from his fiduciary position" [34] . Particularly where a complex course of dealing is in issue, minds reasonably may differ as to the outcome of the application of these principles. The point is illustrated by the narrow division of opinion in the House of Lords in Phipps v Boardman [35] , as to the liability of the appellants, advisers to certain trustees, in respect of their profits on share dealings.
1. Warman International Ltd v Dwyer (1995) 182 CLR 544 at 557
2. [1967] 2 AC 46.
However, what is clear is that the principles by which liability to account for profits is assessed against errant fiduciaries express the policy of the law in holding fiduciaries to their duty. In the joint judgment of this Court in Warman International Ltd v Dwyer [36] , after making this point, their Honours continued:
Thus, it is no defence that the plaintiff was unwilling, unlikely or unable to make the profits for which an account is taken or that the fiduciary acted honestly and reasonably. So, in Regal (Hastings) Ltd v Gulliver , although the directors acted in good faith and in the interests of the company of which they were directors in taking up shares in a subsidiary which the company could not afford to take up, they were held accountable for the profit made on the sale of the shares. And, in Phipps v Boardman , the solicitor was held accountable for the profit he made, notwithstanding that he acted bona fide and in the interests of the trust and that the opportunity would not have been availed of but for his skill and knowledge.
1. (1995) 182 CLR 544 at 558 (citations omitted).
Where the plaintiff seeks to trace in equity moneys which have been mixed by the errant fiduciary with his or her own moneys, the same interest is sought to be advanced by particular principles. Notably, there is the presumption (or, more accurately, the rule), famously formulated and applied in In re Hallett's Estate [37] . This is that, wherever an act "can be done rightfully, [the fiduciary] is not allowed to say, against the person entitled to the property or the right, that he has done it wrongfully", so that as to any balance remaining in a mixed account, the fiduciary is taken to have drawn from it and to have dissipated first the fiduciary's own moneys.
1. (1879) 13 Ch D 696 at 727. See also the authorities collected by Kearney J in Hagan v Waterhouse (1991) 34 NSWLR 308 at 341
Recovery is sought in respect of a loss. There, the same principle underlying Hallett should be understood as attending any exposition of the phrase used by Lord Haldane LC in Nocton v Lord Ashburton [38] , "by [the fiduciary] acting". It is appropriate to begin with those fiduciaries who are trustees. The obligation of a defaulting trustee is essentially one of effecting restitution to the trust estate. In Target Holdings Ltd v Redferns [39] , Lord Browne-Wilkinson said:
The equitable rules of compensation for breach of trust have been largely developed in relation to such traditional trusts, where the only way in which all the beneficiaries' rights can be protected is to restore to the trust fund what ought to be there. In such a case the basic rule is that a trustee in breach of trust must restore or pay to the trust estate either the assets which have been lost to the estate by reason of the breach or compensation for such loss. Courts of Equity did not award damages but, acting in personam, ordered the defaulting trustee to restore the trust estate. [40]
His Lordship continued [41] , with reference to decisions of Lord Eldon (when Master of the Rolls) in Caffrey v Darby [42] , Lord Cottenham LC in Clough v Bond [43] , Street J in Re Dawson (deceased) [44] and Brightman LJ in Bartlett v Barclays Trust Co [Nos 1 and 2] [45] :
If specific restitution of the trust property is not possible, then the liability of the trustee is to pay sufficient compensation to the trust estate to put it back to what it would have been had the breach not been committed Even if the immediate cause of the loss is the dishonesty or failure of a third party, the trustee is liable to make good that loss to the trust estate if, but for the breach, such loss would not have occurred.
Thus, there is no translation into this field of discourse of the doctrine of novus actus interveniens [46] .
1. [1914] AC 932 at 956-957.
2. [1996] 1 AC 421 at 434.
3. His Lordship referred to Nocton v Lord Ashburton [1914] AC 932 at 952, 958. As is implicit in the above remarks, the Court of Chancery awarded compensation in these cases in the exercise of its inherent jurisdiction and independently of the jurisdiction received by Lord Cairns' Act (Chancery Amendment Act 1858 UK) to award damages in lieu of or in addition to injunctions or decrees for specific performance, where what was at stake were legal not equitable rights: see Underhill and Hayton, Law Relating to Trusts and Trustees, 15th ed (1995), p 827 and Perell, The Fusion of Law and Equity (1990), pp 75-83.
4. Target Holdings Ltd v Redferns [1996] 1 AC 421 at 434
5. (1801) 6 Ves Jun 488 [31 ER 1159].
6. (1838) 3 My & Cr 490 [40 ER 1016].
7. [1966] 2 NSWR 211.
8. [1980] Ch 515.
9. See Bennett v Minister of Community Welfare (1992) 176 CLR 408 at 426-427
Until restitution is made, it is presumed that the default continues [47] . In Guerin v The Queen [48] , the Crown, in what was held to be breach of a fiduciary duty to the plaintiffs, leased certain land for a term of seventy-five years and on other unsatisfactory terms. The Supreme Court of Canada evaluated the loss to the plaintiffs by presuming against the Crown that the plaintiffs would have made the most profitable use of the land by letting it for residential development not, as had the Crown, for use by a golf club. Thus, the presumption assisted in indicating the extent of the loss by relieving the plaintiffs from the need to prove that they would have let the land for such development.
1. Bartlett v Barclays Trust Co [No 2] [1980] Ch 515 at 543
2. [1984] 2 SCR 335.
In all of these instances, presumptions, some elevated to rules, operate in aid of the underlying policy of the law in holding trustees to their duties and thereby protecting the interests of beneficiaries [49] .
1. Note, Liability of Trustee in the Absence of Causal Relation between Wrongdoing and Loss, Harvard Law Review, vol 50 (1936) 317, at p 320; see also Scott on Trusts, 4th ed (1988), vol 3, §§205-208, 212.
Brickenden
It is against this background of principle developed to deal with defaulting trustees that there is to be understood the decision of the Privy Council, dealing with the relationship of solicitor and client, in Brickenden v London Loan & Savings Co [50] .
1. [1934] 3 DLR 465.
In the present appeal the appellants sought to distinguish Brickenden , or to confine its operation, in response to what they perceived to be reliance upon it by the respondents. The respondents in turn had enlisted Brickenden to meet an apprehended submission by the appellants that the respondents would have gone ahead with the transaction and given the Mortgage even if the appellants had not been in breach of their fiduciary obligations by failing to disclose their identities as the mortgagees under the Mortgage. The respondents countered that such speculation, as to what course might or might not have been taken by them, was not relevant. They relied upon what the Judicial Committee had said in Brickenden .
In Brickenden the Judicial Committee affirmed the decision of the Supreme Court of Canada [51] . This had been that, where Brickenden, solicitor for a finance company, had benefited from a loan made by the company to Biggs (by receiving, out of the proceeds of the loan, payment of certain mortgages taken by Brickenden from Biggs and certain commissions and fees in connection with those mortgages), Brickenden was in breach of fiduciary duty to the company; he was liable to it for the loss suffered through the transaction, being the full amount of the loan and interest less certain deductions. The Privy Council held that, there having been breach by Brickenden of his duty by non-disclosure of material facts of which his client had been entitled to know in connection with the transaction, Brickenden could not [52] :
be heard to maintain that disclosure would not have altered the decision to proceed with the transaction, because the [company's] action would be solely determined by some other factor, such as the valuation by another party of the property proposed to be mortgaged. Once the Court has determined that the non-disclosed facts were material, speculation as to what course the [company], on disclosure, would have taken is not relevant.
1. London Loan & Savings Co of Canada v Brickenden [1933] SCR 257
2. Brickenden [1934] 3 DLR 465 at 469
The reasoning in Brickenden has been applied by intermediate courts of appeal in Australia [53] and by the New Zealand Court of Appeal [54] in cases where the plaintiff has sought to recover loss caused (in most of these cases) by the plaintiff's solicitor having acted in breach of fiduciary duty.
1. Commonwealth Bank v Smith (1991) 42 FCR 390 at 394 Gemstone Corporation v Grasso (1994) 62 SASR 239 at 243, 252.
2. Farrington v Rowe McBride & Partners [1985] 1 NZLR 83 at 93 Sims v Craig Bell & Bond [1991] 3 NZLR 535 at 545-546 Witten-Hannah v Davis [1995] 2 NZLR 141 at 148, 157; Haira v Burbery Mortgage Finance & Savings [1995] 3 NZLR 396 at 407-408
Once the true issues on this appeal are perceived, it is apparent that it does not provide any occasion for testing the reasoning in Brickenden . The judgments both in the Supreme Court of Canada [55] and in the Appellate Division of the Supreme Court of Ontario [56] demonstrate that the Brickenden litigation was concerned with the recovery of compensation for loss suffered as a result of the solicitor having acted in breach of fiduciary duty and with the application of Nocton v Lord Ashburton . In particular, the case turned upon whether the loss claimed could properly be said, within the meaning of Nocton v Lord Ashburton , to have been sustained "by" the solicitor having acted in breach of duty. That is not this case. As indicated earlier in these reasons, their fiduciary duty forbade the appellants, in the circumstances of this case, to enter into the transaction and the equity for rescission was immediately generated by breach of that fiduciary duty.
1. London Loan & Savings Co of Canada v Brickenden [1933] SCR 257 at 258
2. Biggs v London Loan Co (1932) 41 OWN 48 at 49
It may be added that the scope of the equity for rescission may be determined by the nature and extent of the conduct giving rise to the equity for rescission. Here rescission is not sought by reason of any alleged misrepresentation. The case is not put forward as one where there is an equity for rescission by reason of a misrepresentation by the defendant which was a cause of the plaintiff entering the transaction [57] . The reliance is upon fiduciary duty, in breach of which the appellants took the Mortgage in their favour. The equity of the borrowers, to apply the terms used by Dixon CJ [58] , was to have the whole transaction rescinded so as to remit the parties to the original position, and for that reason they must submit to payment of the moneys in question. The situation thus differs from that in Vadasz v Pioneer Concrete (SA) Pty Ltd [59] . There a guarantee had been executed by reason of a particular fraudulent representation. An appropriate order partially set aside the guarantee so as to leave it standing as to so much of the indebtedness which the surety would have been prepared to guarantee independently of the misrepresentation.
1. Nicholas v Thompson [1924] VLR 554 at 564-566 Wilcher v Steain [1962] NSWR 1136 at 1140 Australian Steel & Mining Pty Ltd v Corben [1974] 2 NSWLR 202 at 207-208
2. Mayfair Trading Co Pty Ltd v Dreyer (1958) 101 CLR 428 at 452
3. (1995) 184 CLR 102.
In any event, any submission which seeks to enlist the reasoning in Brickenden lacks the necessary foundation in factual findings by the trial judge. In the course of dealing with claims in contract and tort, the trial judge indicated that he was satisfied that, had the identity of the mortgagees been revealed, the Mortgage would "still have been signed by the [respondents]", saying that the moneys "were urgently needed and the terms of the loan were not disadvantageous in the market-place of the day". However, as Smith J pointed out on appeal, the trial judge did not address the question of what would have happened if all the details of the transaction and its ramifications had been explained to the respondents, in particular, "the quite different picture that would have been given to them if they had been told that the solicitors were requiring security".
Several matters appropriately will be taken into account when there falls for consideration, in an action against a fiduciary arising other than out of breach of trust, the criteria which supply an adequate or sufficient connection between the equitable compensation claimed and the breach of fiduciary duty. First, breach of trust cases present particular characteristics. Whilst the trustee is the archetype of the fiduciary, the trust has distinct characteristics. In particular, where a trust is created by will or settlement in traditional form, the trustee holds title to property on behalf of beneficiaries or for charitable purposes. If the trust be still subsisting, the objective of an action to recover loss upon breach of trust is the restoration of the trust fund. The right of the beneficiaries is to have the trust fund reconstituted and duly administered [60] , rather than to recover a specific sum for the sole use and benefit of any beneficiary. Indeed, no one particular beneficiary may have sustained a present and individual loss. This may be so if the trust is a discretionary trust [61] or no interest vests, either in interest or possession, before the termination of a prior interest.
1. Target Holdings Ltd v Redferns [1996] 1 AC 421 at 435
2. cf Gartside v Inland Revenue Commissioners [1968] AC 553 at 605-606
Further, the particular breach of which complaint is made may be consequent upon failure in observance of one or other of the duties which attend trust administration, such as those to make only authorised investments, and to use due diligence and care in the administration of the trust. Nineteenth century authorities such as Caffrey v Darby [62] and Clough v Bond [63] concerned failure to observe these rules for due administration rather than that disloyalty and conflict between interest and duty which was considered in Nocton v Lord Ashburton [64] .
1. (1801) 6 Ves Jun 488 [31 ER 1159].
2. (1838) 3 My & Cr 490 [40 ER 1016].
3. See Breen v Williams (1996) 186 CLR 71 at 137 Bristol and West Building Society v Mothew [1997] 2 WLR 436 at 448-449[1996] 4 All ER 698 at 710-711and cf as to company directors, Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285 at 289-290 Permanent Building Society v Wheeler (1994) 11 WAR 187 at 237-238
The stringency apparent in some of the nineteenth century breach of trust cases displayed what Lord Lindley MR called "a very hard state of the law, and one which shocked one's sense of humanity and of fairness" [65] . The result was what his Lordship called the deliberate relaxation of the law by s 3 of the Judicial Trustees Act 1896 UK. This conferred a power of curial relief in respect of breach of trust where the trustee had acted "honestly and reasonably" and "ought fairly to be excused" [66] . There is no such general power of dispensation in respect of loss caused by breach of duty owed by other fiduciaries. [67]
1. Perrins v Bellamy [1899] 1 Ch 797 at 800
2. Now represented in Victoria by s 67 of the Trustee Act 1958 Vic. In s 3(1) thereof, "Trust" is defined so as to extend to implied and constructive trusts and to the duties incident to the office of a personal representative. See also Trustee Act 1925 NSW, s 85; Trusts Act 1973 Q, s 76; Trustee Act 1936 SA, s 56; Trustees Act 1962 WA, s 75; Trustee Act 1898 Tas, s 50.
3. But see s 1318 of the Corporations Law.
Yet the policy of the law to hold the trustee up to the obligation to perform the trust is strongly manifested in cases where loss is occasioned upon breach arising from conflict between duty and interest. What one might call that heightened concern is manifested also, as we have sought to indicate earlier in these reasons, in the treatment of disloyalty by non-trustee fiduciaries. It may be that concern with respect to the apparent rigour of the reasoning in Brickenden reflects what has been seen [68] as a tendency apparent in some recent decisions too readily to classify as fiduciary in nature relationships which might better be seen as purely contractual or as giving rise to tortious liability. Whilst that be so, it is not self-evident that the response should rest in a general denial of the applicability of the reasoning in Brickenden to delinquent fiduciaries, particularly solicitors and other professional advisers.
1. Breen v Williams (1996) 186 CLR 71 at 83, 94-95, 110-114, 136-137; Bristol and West Building Society v Mothew [1997] 2 WLR 436 at 447-448[1996] 4 All ER 698 at 710 McCamus, Prometheus Unbound: Fiduciary Obligation in the Supreme Court of Canada, Canadian Business Law Journal, vol 28 (1997) 107, at pp 128-136.
Doing equity
There remains for consideration the submission by the appellants that the majority of the Appeal Division erred in upholding the granting of the remedy of rescission so as to set aside the Mortgage and amend accordingly the registered title of the Radford property, but without calling upon the respondents first to do equity by honouring their contractual obligations to pay the money and interest secured by the Mortgage.
To an extent, the majority appears to have proceeded on the footing, supported before this Court by the respondents, that the respondents had not taken their advance from the appellants and had not created a relationship of debtor and creditor between them. We have indicated earlier in these reasons that so to conclude would be to depart from the admission on the pleadings and from the documentary and certain of the oral evidence. Moreover, the Mortgage itself, in its terms, both contained covenants by the respondents to pay to the appellants principal and interest, and created the security for that indebtedness. The order made at first instance and upheld by the Full Court that the Mortgage "be set aside" and the registration thereof be removed from the title carries with it the destruction not only of the security but of the covenants therein. As Brooking J pointed out in his dissenting judgment, that result would go beyond the result in such cases as Barron v Willis [69] . There the plaintiff sought and obtained relief which had the effect of declaring void certain deeds only in so far as they deprived her of a power of appointment, this being the matter concerning which she had not properly been advised. That case may be compared with Vadasz v Pioneer Concrete (SA) Pty Ltd [70] , a misrepresentation case, to which we have referred.
1. [1900] 2 Ch 121, affd [1902] AC 271.
2. (1995) 184 CLR 102.
Here, given the undisclosed role of the appellants as mortgagee, the breach of duty went to the identity of the parties having the benefit under the Mortgage both of the security and of the covenants to pay money. To set aside the Mortgage purely in its operation as a security, without conditioning that upon repayment, would be to reform the transaction in an impermissible fashion. It would be to strike down the security interest without ensuring repayment of that which was paid in return for it. The respondents would be left with the fruits of the transaction of which they complain, whereas their equity was to have the whole transaction rescinded and, so far as possible, the parties remitted to their original position [71] .
1. Mayfair Trading Co Pty Ltd v Dreyer (1958) 101 CLR 428 at 452
Interest
As we have indicated earlier in these reasons, this is not a case where the effecting of restitution in integrum is made more difficult by intervening changes in the subject matter of the transaction, for example, business as in Alati v Kruger [72] . Nor is it a case where the subject matter of the rescission is reconveyance of land at the instance of the vendor who must repay not only the purchase price but, as a condition of relief, pay to the purchaser reasonable interest upon the moneys of which the vendor has had the use.
1. (1955) 94 CLR 216.
Brooking J, with whose reasons we are respectfully in general agreement, would have made the grant of relief to the respondents conditional upon payment by them to the appellants of the amount of the advance, together with interest thereon at the rate of 9 per cent per annum from the settlement date of 8 June 1990 to the date of repayment, calculated with half-yearly rests. As we have indicated, the Mortgage stipulated a rate of 24 per cent reducible to 22 per cent for prompt payment and the trial judge held that the terms of the loan "were not disadvantageous in the market-place of the day". Brooking J determined upon the lower rate of 9 per cent as a rate which reflected that obtainable on authorised trustee investments [73] . The trustee rate was taken as that which also is usually allowed upon the setting aside of a conveyance at the suit of the vendor. His Honour indicated that he was adopting this as an appropriate analogy.
1. It is this rate for which a trustee who, by breach of trust, has occasioned loss to the trust estate is liable when making good the loss: Hagan v Waterhouse (1991) 34 NSWLR 308 at 391-393
However, in our view, there was no occasion for application of any analogy. When a contract of sale is set aside at the suit of a vendor, the vendor is obliged, as we have indicated, to repay to the purchaser that which has been received on or on account of the price and, the purchaser having been kept out of his or her money, relief is conditioned upon the payment of interest. There is no legal right otherwise existing in favour of the purchaser to recover interest. Here, the Mortgage conferred such a right. The question then becomes whether the transaction should be reformed, as a condition of relief, adversely to the parties suffering rescission by reduction in the rate of interest otherwise due and secured to them.
There was a well-developed body of principle in suits in which borrowers sought equitable relief in respect of contracts rendered void by the old usury laws. Equity intervened, but on terms that the plaintiff pay the defendant what was "bona fide due" after disallowing the interest above the permitted statutory rate [74] .
1. Nelson v Nelson (1995) 184 CLR 538 at 562 Earl of Aylesford v Morris (1873) 8 Ch App 484 at 490
In Langman v Handover [75] , Rich and Dixon JJ cited a passage in the judgment of Lord Selborne LC in Jervis v Berridge [76] . There, in the course of dealing with a bill in Chancery for delivery up and cancellation of an agreement, the Lord Chancellor said:
There are, indeed, certain cases where a defendant has incurred forfeitures or penalties, or where the controversy relates to usurious or other unlawful transactions, in which the whole locus standi in curia of the plaintiff is dependent on an election, which must be declared by the bill, to forego legal rights for the sake of equitable remedies.
Rich and Dixon JJ went on [77] to consider the decision to the same effect of Chancellor Kent in Fanning v Dunham [78] . There the Chancellor held that, where a borrower seeks relief in equity (such as delivery up and cancellation) in respect of a security on the ground of illegal usury, the plaintiff must, before being entitled to relief, pay or offer to pay the principal and so much of the interest as is lawfully due. There also are authorities which indicate that unconscientious transactions, particularly mortgages of reversionary interests, stipulating an exorbitant, albeit not illegal, rate of interest may be set aside on terms that the plaintiff pay interest at a reduced and reasonable rate [79] .
1. (1929) 43 CLR 334 at 356.
2. (1873) 8 Ch App 351 at 358.
3. Langman v Handover (1929) 43 CLR 334 at 357
4. (1821) 5 Johns Ch 122; 9 Am Dec 283. See also Pomeroy, Equity Jurisprudence, 5th ed (1941), vol 2, §391.
5. Maloney v Trustees Executors & Agency Co Ltd (1898) 24 VLR 297 at 301-303 Earl of Aylesford v Morris (1873) 8 Ch App 484 at 490-491
In the present case there is no suggestion that the rate exceeded any legal maximum, or that the terms of the loan were disadvantageous in the market-place of the day. Indeed, there were findings by the trial judge that, whilst the rate appears high, it was not out of line with those then charged by banks on short term loans of this nature. That being so, there is no footing for the imposition of a condition as to payment by the respondents which is disadvantageous to the appellants. To impose such a qualification would be to distort the equity of the respondents on their counter-claim.
It would, however, be contrary to principle for the appellants to profit by being allowed a higher rate of interest than that payable by them to the Commonwealth Bank for the money ultimately advanced to the respondents. The evidence as to the arrangement which existed between the appellants and the Commonwealth Bank is far from satisfactory. And there is no evidence as to the interest actually paid by them with respect to the money which was advanced to the respondents. However, there is evidence that the rate payable by the appellants at the time the Mortgage was executed was 22 per cent, ie 2 per cent less than the penalty rate stipulated in the Mortgage. And it is a matter of common knowledge that interest rates have fallen since. It would, thus, seem likely that to impose a condition on the grant of relief requiring payment of interest at the rate stipulated in the Mortgage would result in a profit to the appellants.
The appellants cannot take advantage of their failure to lead evidence as to the arrangement which they had with the Commonwealth Bank. And it is not appropriate that they be given a further opportunity to lead evidence of that matter. Rather, the appropriate course is to grant relief to the respondents conditional upon the payment of interest by them on the principal sum outstanding under the Mortgage at commercial rates as allowed from time to time by the Supreme Court of Victoria, calculated at half-yearly rests.
Conclusion
The appeal should be allowed with costs. The orders of the Court of Appeal should be set aside. In lieu thereof it should be ordered that the appeal to that Court be allowed with costs and the orders made by the trial judge set aside. The matter should be remitted to the Court of Appeal to make orders in or to the effect of the following terms (or otherwise by consent of the parties):
(i) the Mortgage (Registered No R116843W) and the Related Documents be set aside on condition that the respondents shall have paid to the appellants within thirty days of the pronouncement of the order of the Court of Appeal the whole of the moneys, representing principal due and owing under the Mortgage but unpaid, together with interest calculated by the Court of Appeal in accordance with this judgment;
(ii) in default of such payment, judgment be entered for the appellants for possession of the Radford property, being land comprised in Certificate of Title vol 4808 folio 484;
(iii) the counter-claim be dismissed save that there be judgment entered against the appellants for $2,500;
(iv) there be liberty to apply to a judge of the Supreme Court of Victoria; and
(v) the respondents pay the costs of the appellants of the action in the Supreme Court, including the counter-claim.
Kirby J.
This appeal concerns a case of breach of fiduciary duty. It raises the question whether persons claiming equitable relief must affirmatively prove that their loss was caused by the breach. It also raises the question whether, in rescinding a transaction made in breach of fiduciary duty, a court affording equitable relief must, or should, require restitution although to do so could effectively ensure that the provision of relief will be denied, thereby sanctioning the enforcement of the transaction despite the proved breach.
Solicitors fail to disclose their interest as mortgagees
The facts were complex. However, those central to the issues before this Court are relatively simple. I leave out of account unnecessary complications, issues no longer in contest and findings not relevant to my conclusions.
Mr Con Makaronis and Mrs Toula Makaronis (the respondents) are Greek Australians, each in their fifties. As found by the primary judge in the trial in the Supreme Court of Victoria [80] (Ashley J) each had certain difficulties with spoken and written English; although Mrs Makaronis was found to have less difficulty and to be more intelligent and shrewd than her husband. During his life in Greece and Australia Mr Makaronis had worked in a number of vocations, including on a poultry farm and for sixteen years, until May 1990, in a factory. The couple's children were growing up. They had acquired an interest in two parcels of real estate at Radford Road and Summerhill Road, Reservoir. In advance of Mr Makaronis' resignation from the factory, the couple began looking around for a rural business in which they could live and work after his retirement. In August 1989 they agreed orally to purchase a freehold property with an egg farm and poultry business belonging to Mr and Mrs Halliburton at Loch in South Gippsland, Victoria. The property and business had been on the market for some time. Mr Halliburton had his own reasons to effect an early sale. He wanted a property settlement with his wife. Mr and Mrs Makaronis immediately applied for finance to support the purchase. They approached the Commonwealth Banking Corporation and the National Australia Bank. Their proposal was to sell their two properties and to contribute about $300,000 of their own moneys to fund the purchase. However, their plans ran into difficulties with the banks. Such problems were compounded by delays in achieving the sale of the properties.
1. Digested as Maguire v Makaronis [1995] ANZConv R 457.
Initially, Mr Halliburton agreed to sell the freehold of his farm to Mr and Mrs Makaronis for $300,000 and the poultry business for $200,000. Mr and Mrs Makaronis at first proposed to retain a solicitor who was Greek-speaking but they did not do so. They executed contracts for the purchase of the farm and business. The contracts contained protective conditions entitling them to avoid completion if finance were not obtained, if each of the contracts was not completed and if an application to the Licensing Committee of the Victorian Egg Marketing Board for a licence under s 17 of the Egg Industry Stabilization Act 1983 Vic was not successful. The contracts were drawn up in the office of Mr John Maguire (the first appellant). He was acting for Mr and Mrs Halliburton. A small deposit was paid conditional upon each of the contracts going ahead.
Initially, Mr and Mrs Makaronis met Mr David Tansey, a solicitor (the second appellant) in relation to the raising of finance rather than for legal advice. Mr Tansey was practising in a different office under a different firm name but he was in partnership with Mr Maguire. Eventually, he was retained, as Ashley J found, to act as solicitor for Mr and Mrs Makaronis in the purchase and to assist them, as required, in obtaining the necessary finance. In the original contracts the nominated completion date was 9 December 1989. However, that date came and went, Mr and Mrs Makaronis having failed to achieve the sale of either of their two properties.
In January 1990, following direct contact between Mr and Mrs Makaronis and Mr Halliburton, it was agreed that each of the contracts previously executed would be altered to reduce the purchase price of the farm by $10,000; to alter the settlement date to 1 May 1990, or earlier by agreement; and to render both contracts unconditional. It was this last variation which was critical. It seriously affected the rights of Mr and Mrs Makaronis. It subjected them to a pressure to settle which had previously been absent.
Sometime in January 1990, a meeting took place between Mr and Mrs Makaronis and Mr Tansey. What occurred was sharply contested at the trial. It was not easy for Ashley J to unravel the facts. On this, and on most other matters, his Honour rejected the evidence of Mr and Mrs Makaronis. He had doubts about the evidence of Mr Tansey. Such doubts were not allayed by the production of file notes. Mr Halliburton, who might have thrown some light on the matter and whom the appellants had promised to call as a witness, did not give evidence. The presence at the meeting in January 1990 of a Greek-speaking ex-employee of Mr Tansey was denied by that witness (whose evidence the judge accepted). Unlike Mr Tansey, she was given to keeping proper file notes. Nevertheless, Ashley J ultimately accepted that Mr Tansey had explained the variations thoroughly to Mr and Mrs Makaronis and that they understood the changes to which they were agreeing. In particular, they realised that they could no longer walk away from the contracts and that thereafter they were liable to lose one of the properties in damages if they were sued for non-completion. The deeds of variation were duly executed in February 1990.
Mr and Mrs Makaronis continued the attempt to sell their two properties. Notwithstanding the variation, Mr Halliburton consented to postpone settlement to the end of May 1990. Early in that month, the Summerhill Road property was sold for $90,000. But the Makaronis' equity in it was little more than $10,000. It therefore fell far short of providing the funds with which to persuade a lending institution to afford the financial support which they needed before the looming settlement date.
On 5 June 1990 there was a further variation of the contracts between the parties. This extended the completion date for the purchase of the land to 1 June 1991. But by now, with multiple extensions, unconditional contracts and vendors subject to their own pressures, the need for Mr and Mrs Makaronis to raise funds to effect their purchases was extremely acute. An inquiry to the Commonwealth Development Bank, supported by each of the appellants as respective solicitors for the vendors and purchasers, came to nothing. As found by Ashley J, it was in mid-May 1990 that Mr Tansey mentioned to Mr Makaronis the connection which his firm had with the Leongatha branch of the Commonwealth Banking Corporation (the Bank) whereby the Bank would provide clients of the firm with short-term bridging finance. It was found to be likely that Mr Tansey told Mr Makaronis that such finance would be provided on terms similar to those which other banks required, including the giving of security, the payment of fees for the necessary documents, the levying of bank charges, stamp duty and a 1 per cent procurement fee charged by Mr Tansey's firm for access to the facility. Although an explanation of the high rate of interest then found to be normal for such bridging finance (22 per cent) and the other costly incidents of the transaction was vehemently denied by Mr and Mrs Makaronis, the trial judge found that these matters had been explained with sufficient simplicity to be understood, particularly by Mrs Makaronis whom the judge specifically found to have good understanding. He found that, shortly before the execution of the necessary documentation, Mr Tansey told Mr and Mrs Makaronis, and they understood, that the amount of bridging finance was to be $250,000 and that a fee quantified at $2,500 (1 per cent) was to be paid to his firm for procuring the finance. Ashley J was also satisfied that Mr Tansey told Mr and Mrs Makaronis that the "Commonwealth Bank" was providing the money and that his firm was obliged to guarantee payment to that Bank.
On 6 June 1990 Mr and Mrs Makaronis executed a mortgage. They did so to gain access to the bridging finance referred to. The mortgage was over their unsold property on Radford Road which was the Makaronis' family home. However, the mortgage was not given to the "Commonwealth Bank" but to Messrs Tansey and Maguire, who were named as mortgagees. Ashley J found that it was neither explained to, nor understood by, Mr and Mrs Makaronis that Mr Tansey and his partner Mr Maguire were the mortgagees. Mr and Mrs Makaronis also executed in favour of Mr Tansey's firm an assignment of the proceeds of the future sale of the Radford Road property and an assignment of Mr Makaronis' anticipated superannuation entitlements. Provided with the resulting funds, settlement of the purchase of the business went ahead on 8 June 1990. Mr and Mrs Makaronis went into possession of the land. They were obliged to pay $4,583.33 a month interest on the bridging loan. Additionally, they were required to pay $3,033 a month interest on the real estate contract.
It soon became clear that the outgoings of Mr and Mrs Makaronis far exceeded their income from the poultry farm. Effectively, after settlement, Mr and Mrs Makaronis made only one payment of interest in the sum of $1,967 on 15 October 1990. Contrary to their evidence, Ashley J found that they ran the farm inefficiently, would not take advice, did not secure the licence necessary to permit direct sales of eggs to the public, failed to sell the Radford Road property and discovered that the superannuation payment, when received, was smaller than expected.
In default of receipt of the agreed payments, Mr Halliburton gave Mr and Mrs Makaronis notice to pay. There was no compliance and a writ for possession was issued out of the Supreme Court of Victoria. The appellants, as mortgagees, gave notice to pay on 22 November 1990. Again, there was no compliance. A writ was issued on 1 February 1991. Mr and Mrs Makaronis did not dispute that they were in default of payment of moneys under the mortgage to the appellants. Nor did they dispute that such default was continuing. Instead, by a counter-claim, they sought orders for the setting aside of the instrument of mortgage and "loan documents". The latter were identified as the assignment to the appellants of Mr Makaronis' interest in his superannuation and the assignment of the interest of the couple in the proceeds of sale of the Radford Road property. Relief was sought upon the basis of claims at common law for the alleged breach by the solicitors of their contractual obligation under the retainer given by Mr and Mrs Makaronis and for negligence. There were also allegations of undue influence, unconscionable conduct and breach of the Fair Trading Act 1985 Vic. All of these claims failed. None of them has been agitated in this Court.
However, Mr and Mrs Makaronis also relied upon their solicitor's breach of fiduciary duties owed to them. It was that claim which Ashley J upheld. He ordered that the mortgage given to the appellants and the loan documents be set aside; that the Registrar of Titles (although not joined as a party to the proceedings) remove the registration of the mortgage from the certificate of title in respect of the Radford Road property; and that the solicitors repay to Mr and Mrs Makaronis as "damages" the sum of $2,500, being the procurement fee paid for obtaining the funds which the mortgage secured.
In the Appeal Division of the Supreme Court of Victoria, Nathan and Smith JJ, with Brooking J dissenting, upheld the orders of Ashley J and dismissed the appeal. By special leave, Mr Maguire and Mr Tansey now appeal to this Court.
Decisions in the Supreme Court
The foundation for the orders made by Ashley J was his Honour's finding that the solicitors were in breach of their fiduciary duty to Mr and Mrs Makaronis. Many breaches were asserted at the trial, including deception as to the very nature of the relationship; breaches arising out of accepting the retainer for the vendors as well as for the purchasers; and breaches along the way in failing adequately to safeguard the financial, as well as the legal, interests of Mr and Mrs Makaronis. All of these were rejected and may be ignored. But that left the undoubted fact, as found by Ashley J and not disputed in the appeal, that neither of the appellants had disclosed to Mr and Mrs Makaronis that they were the named mortgagees in the instrument of mortgage and, in the case of Mr Tansey, that such mortgage was being taken from Mr and Mrs Makaronis, his clients, without prior advice that he, their solicitor, was placing himself in a situation where his own interests conflicted, or might conflict, with the interests of the clients. At no stage did Mr Tansey reveal that he stood to, and did in fact, make a profit from the arrangement. Had he disclosed the nature of the transaction he could have afforded the clients the opportunity to secure independent advice, thereby ensuring that the transaction was one which had their "fully informed consent" [81] . He failed to do any of this. Mr Maguire did not repair the defaults.
1. Mouat v Clark Boyce [1991] ANZConv R 578 at 589.
Various attempts were made at the trial to excuse the failure of the solicitors, and specifically of Mr Tansey, to draw to the attention of the clients, the fact that the mortgage which they were asked to execute named the solicitors as the mortgagees. Thus, it was urged that the arrangement was merely a "paper transaction" which gave effect to the relationship between the solicitors and the Bank which had been fully disclosed to the clients. The funds actually came from the local branch of the Bank and the solicitors were no more than "nominees" of the Bank. Mr Tansey was found to have explained the Makaronis' financial obligations under the mortgage carefully and properly. In such circumstances, so it was argued, the failure to reveal the interest of the solicitors, which Ashley J found Mr and Mrs Makaronis had reasonably not noticed when executing the mortgage, was in the nature of a technicality. It was not a breach of a "true fiduciary obligation" [82] .
1. cf Permanent Building Society (In liq) v Wheeler (1994) 11 WAR 187 at 246, 248.
Arguments of this kind were effectively demolished in the Appeal Division, including by Brooking J. The fiduciary duty cast upon the appellants as solicitors imposed upon them an obligation of full and frank disclosure of all material facts [83] . They had failed to make that disclosure. They had failed, on the basis of full disclosure, to secure the express concurrence of the clients for the involvement of their personal interest [84] . By reason of the arrangements (of which the mortgage was part) under which the funds were procured from the Bank, the solicitors had entered into a relationship with the Bank which was in conflict with their duties to Mr and Mrs Makaronis, the clients of Mr Tansey and of the firm. Brooking J was clearly right when he observed [85] :
It was in the [Makaronis'] interests that the mortgage should be on terms that were liberal in every respect from the borrowers' point of view. It was in the interests of the solicitors as mortgagees that the terms of the mortgage should favour the lenders in every respect. And if it be said that the solicitors were, on the evidence and on his Honour's findings, mere nominees of the Commonwealth Bank, so as not to be personally interested in the mortgage, then, quite apart from their special position as persons liable to indemnify the bank, the solicitors, as agents for the bank, owed it a duty with regard to the mortgage transaction which conflicted with their duty to the [Makaronis]. The case was in this regard an example of what has been called "conflict of duty and duty". [86]
As the starting point for the ascertainment of the respective entitlements and duties of the parties, it should be accepted that the solicitors were in breach of their fiduciary obligation to Mr and Mrs Makaronis. So far as the content of that obligation is concerned, Mr and Mrs Makaronis submitted that, to the considerations which Brooking J mentioned were to be added the failure of the solicitors, in the circumstances, to ensure that they were separately and independently advised before allowing and inducing them to execute a mortgage over their property to their own solicitors without full awareness of the implications of that act, of the arrangements with the Bank that lay behind it, of the vulnerability of their position to be inferred from its necessity and of the lack of wisdom of going ahead. Let all of the foregoing be accepted. The issues that remain, which have concerned this Court, are whether:
1. The breach of fiduciary duty found had no relevant consequences in the facts of this case in that other findings made by Ashley J demonstrated that such breaches of fiduciary duty did not cause the losses which Mr and Mrs Makaronis went on to suffer. According to this argument, the breaches should be viewed as legally insignificant, having no relevant result and requiring no relief at all in the facts of this case (The causation issue); and
2. If, notwithstanding this argument, some relief were proper to restore or reinstate Mr and Mrs Makaronis to the position they would have been in but for the appellants' breach of fiduciary duty, general equitable principles would impose upon them the obligation themselves to do equity when seeking its assistance. According to this argument, Mr and Mrs Makaronis would be obliged to bring into court the principal sum which they obtained as a result of the mortgage together with reasonable interest thereon. Otherwise, it was put, they would secure the benefit of an effective gift of $250,000. They would have had the opportunity to venture upon their failed poultry business entirely at the risk of the funds provided by the solicitors. In respect of those funds, it was common ground that the solicitors were obliged, as guarantors, to repay the same, with interest, to the Bank (The relief issue).
1. Maguire v Makaronis [1995] VConv R ¶54-533 at 66,319, per Brooking J, citing New Zealand Netherlands Society Oranje Inc v Kuys [1973] 1 WLR 1126[1973] 2 All ER 1222cf Ford and Lee, Principles of the Law of Trusts, 3rd ed (1996), pars [18130], [22150].
2. cf Gray v Dalgety & Co Ltd (1914) 19 CLR 356 at 365, 373. See also Gray v Dalgety & Co Ltd (1916) 21 CLR 509 at 535
3. Maguire v Makaronis [1995] VConv R ¶54-533 at 66,318-66,319.
4. Finn, Fiduciary Obligations (1977), Ch 22.
Ashley J and the Appeal Division saw no merit in the causation issue. Upon these arguments all judges in the Supreme Court were unanimous. In applying the reasoning of the Judicial Committee of the Privy Council in Brickenden v London Loan & Savings Co [87] , all judges considered that questions about the causation of the Makaronis' losses did not arise. Smith J acknowledged the criticisms of Brickenden [88] . These notwithstanding, his Honour considered that the Brickenden principle should be applied. It was not, therefore, for the Court to speculate what might have happened if the solicitors had fully discharged their duties to Mr and Mrs Makaronis. In the course of dismissing the common law claims, Ashley J had found that Mr and Mrs Makaronis would not have altered their decision to proceed with the transaction even if all necessary disclosures and advice had been given to them. However, in accordance with Brickenden , this did not avail the appellants. So far as the claim resting on the breach of fiduciary duty was concerned, the Court would not concern itself with whether the breach actually caused the losses suffered by the clients. Nathan J expressed the view that this conclusion followed because the law sustaining the integrity of fiduciary relationships rested upon a "higher principle than that of restitutio in integrum". This was that the courts would not permit a fiduciary in breach to prosper from the breach. This was a rule founded both in law and policy.
1. [1934] 3 DLR 465 at 469.
2. Maguire v Makaronis [1995] VConv R ¶54-533 at 66,344-66,345.
It was upon the relief question that differences emerged in the Supreme Court. It was amply demonstrated that the point was properly put to Ashley J in the course of the trial. However, his Honour failed to address the argument that any relief by way of rescission of the mortgage (and associated documents) should only be upon terms requiring Mr and Mrs Makaronis to bring into court the sum borrowed by them with reasonable interest. The submission is not mentioned in his reasons. It appears to have been overlooked.
The majority of the Appeal Division (Nathan and Smith JJ) did not consider that any such condition should be imposed. Nathan J explained his reasons on the footing that fiduciaries, such as solicitors, should not be permitted to prosper from their own breaches because their clients cannot make restitution. The duty of the Court, breach of fiduciary obligation being established, was to make orders which achieved practical justice. This requirement imported a flexible rule. If Mr and Mrs Makaronis were required to bring into court the sum borrowed on the mortgage (together with interest) as a condition for gaining relief from the mortgage, the practical result would be that no relief at all would be afforded to them. Thus, the fiduciary in breach would be effectively excused. The breach would be condoned.
Smith J came to a similar conclusion. However, he took into account two considerations which have proved controversial. The first was that the solicitors' acts in breach of their fiduciary duty facilitated the acquisition of the poultry business and thus aided the respondents "in their course of financial destruction" [89] . Smith J concluded that the solicitors knew, or ought reasonably to have foreseen, that the bridging finance would be lost because, properly and impartially analysed, the poultry business would never have been able to generate the income necessary to service the mortgage and the contract payments. They therefore made what happened inevitable. Secondly, Smith J concluded that the Bank would have remedies against Mr and Mrs Makaronis. The Bank could sue them upon a count framed in indebitatus assumpsit for moneys had and received. This was upon the footing that the consideration of $250,000 provided by the appellants to Mr and Mrs Makaronis had wholly failed or "simply on the basis that otherwise there would be an unjust enrichment", Alternatively, the solicitors, having to the knowledge of Mr and Mrs Makaronis acted as their guarantors, would be entitled to pursue them to recover the principal debt. To the extent that the foregoing remedies were available, the simple orders made by Ashley J, setting aside the mortgage instrument, would leave neither the Bank nor the solicitors without remedy for the recovery of the debt of Mr and Mrs Makaronis. Any such remedy would have to await other proceedings.
1. Maguire v Makaronis [1995] VConv R ¶54-533 at 66,351.
Brooking J disagreed strongly with both of these approaches. He disputed that the requirement of equity to do what is "practically just between the parties" afforded a wholly undisciplined discretion. He considered that it was necessary to apply the principle that, in general, equity will not set aside a transaction unless restitution is possible [90] . In the way in which the trial had been conducted between the parties, he did not agree that it would have been open to Ashley J to make any findings as to the extraneous entitlements of the Bank or the solicitors to recover the funds paid. In Brooking J's opinion, as a condition to the setting aside of the mortgage, the proper application of settled equitable principles required that Mr and Mrs Makaronis offer to bring into court the sum borrowed and interest at an "appropriate rate". He fixed that rate at 9 per cent. Brooking J rejected as impossible in the circumstances, the severance of the security provisions of the mortgage and the personal covenants contained in it for the repayment of the debt. Setting the one aside would relieve the respondents of the personal covenant to repay which would not be equitable. The only "effective restitution" which could be ordered would require Mr and Mrs Makaronis to offer to restore the sum borrowed but at a lower rate of interest. It would not serve "practical justice" to relieve the mortgagors entirely of the mortgage, leaving the mortgagees to attempt to recover the sum remaining as a personal debt. Clearly Mr and Mrs Makaronis were insolvent. That would give them a windfall benefit, which was no part of the function of the equitable relief.
1. Maguire v Makaronis [1995] VConv R ¶54-533 at 66,323-66,324.
Before this Court the arguments advanced in the Supreme Court have been repeated. The solicitors urged the Court to excuse them entirely for the breach of fiduciary duty on the basis that, in the findings made, it had not caused any loss to Mr and Mrs Makaronis. Alternatively, they sought variation of the orders, at the least along lines similar to those favoured by Brooking J. Mr and Mrs Makaronis defended the orders of Ashley J and the reasoning of the majority in the Appeal Division.
Relevant factual findings
The appellants relied upon a number of factual findings made by Ashley J together with inferences which, they submitted, flowed from those findings. Essentially, these were that Mr and Mrs Makaronis had consulted Mr Tansey as a solicitor to act for them in a legal capacity and not specifically to provide financial advice save as that advice was incidental to his functions as their solicitor [91] . It was the appellants' case that Mr and Mrs Makaronis had, by their own actions, put themselves into an impossibly urgent position which demanded that they find finance with which to settle their unconditional promise to purchase the poultry business, at the latest by early June 1990. If they did not, it had been explained to them, they ran the risk of proceedings for breach of that promise. Such proceedings could result in the loss of their hard-won assets without their ever having had the chance to make the poultry business a success, as they thought they could. On Ashley J's findings, the variation of the agreement to delete the original conditions which had protected Mr and Mrs Makaronis was entirely of their own doing. It was agreed for a paltry saving of $10,000. They had been warned of its consequences by Mr Tansey. Yet they had gone ahead notwithstanding.
1. Hawkins v Clayton (1988) 164 CLR 539 at 578-579 Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 at 652-657
As I have said, Ashley J found that, if Mr Tansey had recommended against the raising of bridging finance in June 1990 Mr and Mrs Makaronis would nevertheless have insisted upon its proceeding. His Honour was convinced that Mrs Makaronis, particularly, considered herself to be astute in business and that she would not have been dissuaded from a course that she had determined should be followed.
Ashley J specifically dismissed the claim for damages for breach of the contract of retainer on the footing that such breach was not the cause of the loss and damage suffered by Mr and Mrs Makaronis. He expressed himself satisfied that "had the identity of the mortgagees been revealed, the mortgage would still have been signed by the defendants". He explained this finding thus:
The moneys were urgently needed and the terms of the loan were not disadvantageous in the market-place of the day. Taking the matter a little further, and assuming (without deciding) that it was a breach of retainer or of common law duty not to advise the defendants to seek independent legal advice before signing the mortgage, I would not conclude that those assumed breaches were a cause of loss and damage to the defendants. There was no evidence, direct or inferential, that would enable me to conclude that the defendants, if advised to do so, would have consulted another solicitor about the matter; or, if they had done so, that such a solicitor would have advised against signing the mortgage; or, if such advice had been given, that the defendants would have acted upon it. And, in any event, the defendants must have obtained bridging finance — if not from the source actually accessed, then from another source on similar terms.
Later, his Honour went on:
All the evidence suggests that the defendants were anxious to proceed, and believed that they had funds and a potential income stream adequate to permit them to do so.
Although these findings were made in the context of other claims of the respondents, the appellants argued that they were findings of fact which were equally available to the elucidation of the consequences of the finding of a breach of fiduciary duty. If Mr and Mrs Makaronis would have suffered the losses complained of in any event, because they would have been indifferent to, or would have ignored, advice and independent warnings, it was submitted that it was neither rational nor just to burden the solicitors with the consequences of their headstrong financial dealings. Mr and Mrs Makaronis should be denied relief entirely, including equitable relief. If they were provided with relief, it should be conditional upon their repaying the sum advanced by the solicitors from the funds provided by the Bank and guaranteed by the solicitors, as Mr and Mrs Makaronis knew and had agreed.
The causation issue — relevant authority
To support the decisions below on the causation issue, Mr and Mrs Makaronis relied on the principle stated by Lord Thankerton for the Privy Council in Brickenden v London Loan & Savings Co [92] . As in this case, that case involved a situation where a solicitor had breached his fiduciary duty to a client by failing to reveal his interest in certain mortgages. Lord Thankerton expressed the applicable rule thus [93] :
When a party, holding a fiduciary relationship, commits a breach of his duty by non-disclosure of material facts, which his constituent is entitled to know in connection with the transaction, he cannot be heard to maintain that disclosure would not have altered the decision to proceed with the transaction, because the constituent's action would be solely determined by some other factor, such as the valuation by another party of the property proposed to be mortgaged. Once the Court has determined that the non-disclosed facts were material, speculation as to what course the constituent, on disclosure, would have taken is not relevant.
The appellants challenged this principle as too widely stated and too absolute in its expression. It may be true as O W Holmes observed in a letter to Sir Frederick Pollock that "the average lawyer wants the absolute" [94] . But this rule was said to be neither rational nor justified by equitable principle. No party to legal process should be held liable for consequences of which it was not the cause. In this sense, equity should accept, by analogy, the principle which had been developed by the common law in working out the recovery of damages in contract and tort. Although a breach of fiduciary duty was serious, not least when it occurred on the part of a solicitor who owed special duties to the court as one of its officers [95] , it was unjust to burden a solicitor, as fiduciary, with consequences which a rational analysis of the evidence demonstrated had been caused by other considerations having nothing but a temporal connection with the breach.
1. [1934] 3 DLR 465.
2. Brickenden [1934] 3 DLR 465 at 469
3. The Holmes-Pollock Letters cited by Gummow J, Compensation for Breach of Fiduciary Duty, in Youdan (ed), Equity, Fiduciaries and Trusts (1989) 57, at p 58.
4. Farrington v Rowe McBride & Partners [1985] 1 NZLR 83 at 89
I leave aside in this analysis the debate concerning whether, for the purposes of the law in Australia, the rules of common law and equity have merged so that they now mingle and can readily draw, by analogy, upon each other. Support for this theory is found in the decisions of Commonwealth courts of the highest authority in England [96] , Canada [97] and New Zealand [98] . I am content to proceed in this appeal on the basis that decisions of this Court have assumed that the fundamental doctrines of equity have not lost their identity as a coherent body of law [99] .
1. United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904 at 924
2. Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534 at 584, 588.
3. Day v Mead [1987] 2 NZLR 443 at 451
4. See Gummow, Compensation for Breach of Fiduciary Duty, in Youdan (ed), Equity, Fiduciaries and Trusts (1989) 57, at p 85 referring to Commercial Bank of Australia v Amadio (1983) 151 CLR 447 Legione v Hateley (1983) 152 CLR 406 Calverley v Green (1984) 155 CLR 242 United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 Muschinski v Dodds (1985) 160 CLR 583and AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170
Approaching the matter in that way the question is this: Should the sixty-year-old rule pronounced by Lord Thankerton continue to be accepted by this Court as part of the body of equitable principle applicable in Australia? Or should a different rule be fashioned, and if so what?
In recent years, the rule in Brickenden has become the subject of judicial and academic commentary and qualification. A useful analysis of the case and a summary of the criticism of Lord Thankerton's dictum can be found in the note by Mr J D Heydon, "Causal Relationships between a Fiduciary's Default and the Principal's Loss" [100] . The rule is criticised as originating in obiter dicta; as suffering from decades of "forensic oblivion"; as being stated with a width unnecessary to the proper resolution of the case; as unsupported by previous authority; as propounded in obscure terms; and as producing the potential to occasion positive injustice [101] :
[I]t is one thing to strip a fiduciary of profit without much inquiry; it is another to hold him accountable for all loss without inquiry into relative causes.
Nevertheless, the author acknowledges that, especially lately, the decision has been followed in Australia by federal [102] and State [103] courts. It has received approval from Australian judges speaking and writing extracurially [104] . Recent dicta in this Court also suggest that the Brickenden test should be accepted [105] . It has been applied by the Supreme Court of Canada in a recent decision [106] . In New Zealand it has been applied repeatedly in recent decisions [107] . Cooke P (as Lord Cooke then was) described it as a rule which is "one of strictness, and, indeed, severity" [108] . The rule has been ascribed to the policy decision that fiduciaries should be held to strict standards and not simply limited to the disgorgement of personal gain [109] . This view of fiduciary duties, and the strict consequences of their breach, also finds an echo in opinions expressed in this Court on connected matters [110] .
1. Law Quarterly Review, vol 110 (1994) 328. See also Parkinson, The Principles of Equity (1996), pp 795-797.
2. Law Quarterly Review, vol 110 (1994) 328, at p 332.
3. Commonwealth Bank of Australia v Smith (1991) 42 FCR 390 at 393-394 Wan v McDonald (1992) 33 FCR 491 at 519-521 Stewart v Layton (1992) 111 ALR 687 at 713
4. Hill v Rose [1990] VR 129 at 142 Gemstone Corporation v Grasso (1994) 62 SASR 239 at 243, 245, 253.
5. Handley, Reduction of Damages Awards, in Finn (ed), Essays on Damages (1992) 113, at p 127; Meagher, Gummow and Lehane, Equity, Doctrines and Remedies, 3rd ed (1992), par 2304.
6. Bennett v Minister of Community Welfare (1992) 176 CLR 408 at 426-427
7. Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534See also Gray v New Augarita Porcupine Mines Ltd [1952] 3 DLR 1
8. Farrington v Rowe McBride & Partners [1985] 1 NZLR 83 at 93, 99; Mouat v Clark Boyce [1991] ANZConv R 578 at 583, 590-591; Estate Realties Ltd v Wignall [1991] 3 NZLR 482
9. cf Estate Realties Ltd v Wignall [1991] 3 NZLR 482 at 493 Gathergood v Blundell & Brown Ltd [1991] 1 NZLR 405
10. Mouat v Clark Boyce [1991] ANZConv R 578 at 590.
11. See, eg, Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 393, per Gibbs J; Chan v Zacharia (1984) 154 CLR 178 at 198-199, per Deane J.
Nevertheless, in response to criticisms of this kind, or simply in resolving particular cases in just and practical ways, courts have offered various alternative principles to mollify the absoluteness of the rule in Brickenden :
(a) Some decisions, particularly in Canada, have suggested that the rule is no more than an evidentiary principle. Where a breach of fiduciary duty is proved, the consequence is that a court of equity will presume that all adverse events which follow are the result of the fiduciary's breach. Courts will not "speculate" about other possible causes or what might have been. But the rule can be displaced by evidence to the contrary. In such circumstances a heavy onus lies on the fiduciary to prove that events which followed the breach were causally unrelated to it such that they should fairly and justly be laid at the door of others rather than the defaulting fiduciary [111] ;
(b) Other, more recent authority in Australia has sought to draw a distinction between a case of a breach of a "true fiduciary obligation" and one which lacks "the stench of dishonesty — if not of deceit then of constructive fraud" [112] . This was a distinction made by Ipp J (with the concurrence of Malcolm CJ and Seaman J) in Permanent Building Society (In liq) v Wheeler [113] . It was a distinction founded upon a suggested difference between "breaches of fiduciary obligations" and "honest but careless dealings" [114] ; and
(c) A third variant may be traced to a decision of Street J in the New South Wales Supreme Court in Re Dawson (deceased); Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [115] . In that opinion, which made no reference to Brickenden , Street J accepted, as the touchstone in repairing the proved default of a trustee, that of effecting restitution to the estate. His Honour, after citing authority, concluded that "[t]he principles do not appear to involve any inquiry as to whether the loss was caused by or flowed from the breach. Rather the inquiry in each instance would appear to be whether the loss would have happened if there had been no breach" [116] . This "but for" test resonates with observations in this Court both before [117] and after [118] Re Dawson . The approach taken in Re Dawson has been cited with approval in Canada [119] . It appears lately to have attracted the approbation of the House of Lords [120] . Writing extracurially, Sir Anthony Mason has gone even further than Re Dawson . He has suggested that a fiduciary will not be liable for losses that do not flow from the breach [121] .
1. See, eg, Commerce Capital Trust Co v Berk (1989) 57 DLR(4th) 759 at 764. Care must be observed in the application of Canadian authority in this field of discourse given the different history and development of equitable principles in that country and in the United States. See Breen v Williams (1996) 186 CLR 71 at 110-113, 137, discussed in Swanton and McDonald, Patients' right of access to medical records — a test case, Australian Law Journal, vol 71 (1997) 332.
2. Girardet v Crease & Co (1987) 11 BCLR(2nd) 361.
3. (1994) 11 WAR 187 at 246.
4. Permanent Building Society (1993) 11 WAR 187 at 247.
5. [1966] 2 NSWR 211.
6. Re Dawson [1966] 2 NSWR 211 at 215
7. Mills v Mills (1938) 60 CLR 150 at 186
8. Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285cf Gummow, Compensation for Breach of Fiduciary Duty, in Youdan (ed), Equity, Fiduciaries and Trusts (1989) 57, at p 90.
9. Guerin v The Queen (1984) 13 DLR(4th) 321 at 365; cf Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534 at 552, per McLachlin J, dissenting.
10. Target Holdings Ltd v Redferns [1996] 1 AC 421 at 438-439 Swindle v Harrison (unreported, Court of Appeal (Eng); 25 March 1997) at pp 12, 22-23, 29, digested "The Times", 17 April 1997, p 197.
11. Mason, The Place of Equity and Equitable Remedies in the Contemporary Common Law World, Law Quarterly Review, vol 110 (1994) 238, at p 244. See also Dal Pont and Chalmers, Equity and Trusts in Australia and New Zealand (1996), p 627.
Fiduciaries' liability and the causation issue — the rule
Although there are some distinctions between this case and the facts in Brickenden I am not persuaded that the essential holding is inapplicable. I do not believe that this is the way Brickenden has been understood and applied, including in this country.
I acknowledge the force of the criticisms of Brickenden . On the other hand, a purely causative approach, which relieved a defaulting fiduciary of liability unless it were positively shown that such liability was caused by the breach of fiduciary duty would have several disadvantages. It would involve courts in the embarrassing and difficult task of untangling the multiple causes of losses which have followed an undoubted breach. Such a task would be specially difficult where further transactions and new interests had intervened. It would present the risk, although such breaches were proved, of effectively sanctioning or at least ignoring the breach by affording no relief to the beneficiary. It would undermine the Brickenden rule which has the advantage of simplicity and the prophylactic consequence of discouraging fiduciary default. Such default is inherent in the temptations to which people in the position of fiduciaries are commonly exposed. It is a rule which helps to fulfil the purposes of equity, which are somewhat different from those of the common law. These include, relevantly, ensuring the strict loyalty and good faith to beneficiaries, the dutiful enforcement of obligations; the deterrence of breaches by fiduciaries of their powers, and, where such occurs, the ready restitution and reinstatement of the beneficiary to the fullest extent possible [122] .
1. Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534 at 547-548, per McLachlin J, dissenting, citing Ex parte Adamson; In re Collie (1878) 8 Ch D 807 at 819. In Target Holdings Ltd v Redferns [1996] 1 AC 421 at 438-439Lord Browne-Wilkinson approved as good law McLachlin J's minority judgment. See also Swindle v Harrison (unreported; Court of Appeal (Eng); 25 March 1997) at pp 12, 22-23, 29, digested "The Times", 17 April 1997, p 197.
The rule in Brickenden has survived a long time. It has been frequently applied, especially in recent years. It contains within its formulation words which adequately meet the need for there to be some connection to the breach so as to exclude events which are too remote. Thus it must be shown that any facts not disclosed by the fiduciary were "material". What is forbidden is "speculation". In my view, the rule in Brickenden can quite comfortably co-exist with the exposition of principle by Street J in Dawson . Facts will not be "material" if the relevant loss would have happened if there had been no breach. Both Lord Thankerton in Brickenden and Street J in Dawson were simply saying that, once a breach of fiduciary duty is shown, the inquiry is not a simple one as to what caused subsequent losses. Equity must strive to repair the breach of fiduciary duty lest the fiduciary in default could be exonerated too easily, the beneficiary suffer a double disadvantage: the courts being seen to wink at wrongdoing.
A further, practical, reason for adhering to the rule of "strictness" in Brickenden (breach of fiduciary duty being shown) is that it remains open to a court, in fashioning the remedies which it is apt for equity to provide, to consider most, if not all, of the matters which would otherwise be urged as a reason for excluding relief altogether on the ground of the alleged absence of a causal connection between the breach and the loss. The reason why equity may maintain a strict rule in relation to the events which follow a breach of fiduciary duty, whereas the common law developed principles of causation, remoteness and foreseeability to avoid unjust results, was explained by Cooke P in Day v Mead [123] . The passage from his Honour's reasons was approved by the majority of the Supreme Court of Canada in Canson Enterprises Ltd v Boughton & Co [124] . Cooke P said [125] :
Compensation or damages in equity were traditionally said to aim at restoration or restitution, whereas common law tort damages are intended to compensate for harm done; but in many cases, the present being one, that is a difference without a distinction. There is, however, the more significant historical difference that Courts of equity were regarded as having wider discretions than common law Courts. Equitable relief was said to be always discretionary. Its grant or refusal was influenced by ideas expressed in sundry maxims. He who seeks equity must do equity. He who seeks equity must come with clean hands. Delay defeats equity. These are merely examples. Further, relief could be granted on terms or conditions.
1. [1987] 2 NZLR 443.
2. [1991] 3 SCR 534 at 585, 589.
3. Day v Mead [1987] 2 NZLR 443 at 451
The wide variety of remedies available to a court of equity following proof of a breach of fiduciary duty permit the court to exercise very large powers to fashion orders apt to a full consideration of all the facts, as they are found. These include an order of rescission; the finding of a constructive trust [126] ; the application of tracing principles; the imposition of an account for profits; the award of equitable compensation, particularly where rescission is impossible [127] ; injunctive relief and so on. Controversially, it has been suggested that a way to avoid burdening the fiduciary in default with the consequences of the beneficiary's own unreasonable conduct is the application of an equitable principle of apportionment [128] . The importation of notions resting on the statutory principles of contributory negligence has been criticised strongly and repeatedly [129] . I shall say no more of it for it was not argued in this case.
1. Gummow, Compensation for Breach of Fiduciary Duty, in Youdan (ed), Equity, Fiduciaries and Trusts (1989) 57, at p 61.
2. Heydon, Causal Relationships between a Fiduciary's Default and the Principal's Loss, Law Quarterly Review, vol 110 (1994) 328, at p 335.
3. Day v Mead [1987] 2 NZLR 443 at 451, cited in Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534 at 585
4. Handley JA quoted in Meagher, Gummow and Lehane, Equity, Doctrines and Remedies, 3rd ed (1992), par 2304; cf Gummow, Compensation for Breach of Fiduciary Duty, in Youdan (ed), Equity, Fiduciaries and Trusts (1989) 57, at p 82.
The foregoing arguments suffice to show that adhering to Brickenden does not present the spectre, suggested for the appellants, that fiduciaries will be unfairly burdened with consequences that have no logical connection with their breach and which should properly be ascribed to other causes. If a breach occurs which has no real consequences, the pre-condition of the Brickenden formulation, in the case of a breach constituted by non-disclosure of material facts, will not be made out. The facts in question will not be classified as "material". Other remedies may lie against the fiduciary. But they will not include relief from the transaction. Where, however, the facts are "material", in the sense that, but for their existence the events which followed would not have occurred, a court exercising equitable jurisdiction is not concerned at the first stage of its inquiry to sort out issues of causation. But clearly, it will be relevant to the exercise of the discretion to provide relief at all, and if so, to determine the form of that relief, to take into account the actual impact of the fiduciary's default. Only in that way will the objects of the relief, principally restitution, be secured.
The primary judge and the Appeal Division were therefore right, in my opinion, to apply the rule in Brickenden . On the facts found, the non-disclosed interest of the solicitors in the mortgage was certainly material. The disastrous events which occurred would not have happened but for the breach. It resulted in the execution of a mortgage instrument which was flawed. The considerations urged to exempt the appellants from any liability are clearly relevant to the determination of the relief that is then appropriate. But they are not sufficient to take the case out of the provision of any relief at all. This is so fundamentally because, as the judges in the Supreme Court recognised, the rule in Brickenden upholds equitable purposes other than the mere adjustment of the position as between the fiduciary and the beneficiary.
The relief issue — terms for "practical justice"
In approaching the considerations which govern the provision of relief in this case, it is as well to remember a number of the rules which apply where the fiduciary in breach is a solicitor and the beneficiary is a client.
It is incontrovertibly established that the relationship of solicitor and client is a fiduciary one [130] . The relationship imposes on the solicitor the duty not to make a private profit at the client's expense unless otherwise expressly provided and agreed. It also requires that the solicitor will not allow himself or herself to be put in a position where the solicitor's interest and the duty to the client conflict [131] . These rules have been explained as based not so much on morality as on the estimation by courts of the susceptibility of human nature to temptation. They rest on the special duties of fidelity and loyalty owed by fiduciaries generally to beneficiaries [132] and the particular duties owed by solicitors as officers of the court [133] . Such duties are not lost by delegation. Still less are they lost by sharing the duties between solicitors operating in different branches of the same firm [134] . Not only must the duties be discharged by the fiduciary. They must be manifestly and undoubtedly discharged [135] . The fact that a fiduciary has acted without fraud, innocently, or has made no improper personal benefit will not, of itself, excuse the fiduciary from an established breach of fiduciary duty [136] . If the fiduciary fails to fulfil the duty to make full disclosure of personal interests where that is required, equity will provide a remedy where the default is a material one [137] .
1. Farrington v Rowe McBride & Partners [1985] 1 NZLR 83 at 89
2. Bray v Ford [1896] AC 44 at 51
3. Farrington v Rowe McBride & Partners [1985] 1 NZLR 83 at 91
4. Farrington v Rowe McBride & Partners [1985] 1 NZLR 83 at 89
5. cf Re Bannister; Ex parte Hartstein (1975) 5 ACTR 100
6. Spector v Ageda [1973] Ch 30 at 47, per Megarry J.
7. Nocton v Lord Ashburton [1914] AC 932 at 964-965
8. Nocton v Lord Ashburton [1914] AC 932
Where, however, the fiduciary's breach comprises non-disclosure, equity can be seen at what has been described as its "flexible pragmatic best (or worst) in dealing with fiduciaries" [138] . The general rule is that non-disclosure will vitiate the transaction affected, however fair that transaction might have been in all other respects [139] . To achieve the multiple objectives of equity in respect of breaches of fiduciary duties, a rule of strictness is applied. Otherwise, the simple rule will be eroded that fiduciaries must make sure that the beneficiary is fully informed of the real state of things [140] and secure a "fully informed consent" for any conduct which involves (relevantly) a private profit or a possibility of conflict of interest and duty [141] . Ordinarily, once the breach is established, it is the duty of the defaulting fiduciary to effect, so far as possible, a restitution or restoration of the beneficiary to the position which would have obtained if the fiduciary's duties had been fulfilled. The elasticity of equitable remedies comes to the aid of a fiduciary whose default is judged to be technical rather than deliberate and fraudulent and whose failures cannot really be said to have produced all of the losses which follow, in point of time, the non-disclosure. The purpose of equity's relief is not punishment. So far as possible, it is to restore the status quo ante [142] . For this reason, the remedies will be fashioned according to the exigencies of the particular case so as to do what is "practically just" as between the parties [143] . The fiduciary must not be "robbed"; nor must the beneficiary be unjustly enriched [144] . Given the ample discretion afforded to primary judges and the advantages conventionally attributed to them in conducting a trial, appellate courts will exercise restraint in disturbing such orders unless it is shown that the judge has made an error of a kind that authorises appellate intervention to correct discretionary decisions.
1. Underhill's Law of Trusts and Trustees, 13th ed (1979), p 10, cited Farrington v Rowe McBride & Partners [1985] 1 NZLR 83 at 94
2. Blair v Martin [1929] NZLR 225, applied in Estate Realties Ltd v Wignall [1991] 3 NZLR 482 at 491
3. Gray v New Augarita Porcupine Mines Ltd [1952] 3 DLR 1 at 14
4. Mouat v Clark Boyce [1991] ANZConv R 578 at 589.
5. Spence v Crawford [1939] 3 All ER 271 at 288 Alati v Kruger (1955) 94 CLR 216 at 223-224 Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 at 111-112
6. See, eg, Soulos v Korkontzilas (1995) 126 DLR(4th) 637 at 639-641.
7. Brown v Smitt (1924) 34 CLR 160
In the present case, there can be no doubt that the Appeal Division was authorised to disturb the orders made by Ashley J. This is because his Honour did not address the defence that, as a matter of law or discretion, he should withhold relief from Mr and Mrs Makaronis until they offered to refund the benefit they had secured as a result of the mortgage flawed by their solicitors' non-disclosure. But has it been shown that the orders which were confirmed were wrong?
The relief issue — requirement of restitution
The obligation to offer, or the imposition of a condition to exact, the benefits obtained under a contract which is set aside in the provision of equitable relief may either be seen as an aspect of the achievement of the equitable objective of restitutio in integrum [145] or as the inevitable application of the discretion to provide (or withhold) relief, importing notions of equal justice, as between the parties [146] . Whatever the rationale, and whether or not it is a species of the equitable maxim that those who seek equity must do equity, the ordering as a condition of rescission of a contract flawed by breach of fiduciary duty, that the party seeking relief should restore to the other what was secured under the contract, is neither new nor surprising. It is ancient and very common. Where the contract impugned involved the payment of money, the beneficiary seeking relief from a contract is ordinarily required, as a term of such relief, to repay the moneys actually advanced, together with reasonable interest [147] . If such condition is not, or cannot be, offered, the court may refuse relief altogether [148] . Alternatively, other and different relief may be fashioned to do "practical justice".
1. Federal Commissioner of Taxation v Jaques (1956) 95 CLR 223
2. Automobile & General Finance Co Ltd v Hoskins Investments Ltd (1934) 34 SR(NSW) 375 at 391.
3. See, eg, Hay v Rafferty (1899) 2 F(Ct Sess) (5th) 302 at 308.
4. Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 256
With respect, I consider that the conclusion reached by Smith J in the Appeal Division was affected by a consideration of matters which were not available, or which were irrelevant to the provision of relief, in the way in which the trial was conducted. In particular, the conclusion of his Honour that there was a loan agreement between the Bank and Mr and Mrs Makaronis to supplement the mortgage between those parties and the solicitors, was not in issue at the trial. It was not pleaded. Nor was it particularised under the counter-claim. The Bank was not a party to the proceedings. Although evidence was tendered to show that the solicitors explained that the source of funds was the Bank, express evidence to establish any direct agreement with the Bank was not called. This was unsurprising in the state of the pleadings. The existence of such a debt is inconsistent with the form of the mortgage. If it had been raised, and exploration of the issue permitted despite the pleadings, it would have been open to the solicitors and the Bank to call evidence to answer the assertion. It has not been shown that the existence of such a debt was agreed, still less were the terms of any such agreement proved. Accordingly, the consideration of the suggested debt ought not to have affected the conclusion of the Appeal Division about the provision of relief.
So far as Smith J's suggestion that the Bank could, in any case, recover the fund paid via the solicitors on a claim for moneys had and received on the basis that the consideration for the payment had wholly failed or on the basis that there would be an unjust enrichment, I am likewise unconvinced. The Bank received a guarantee which (in the absence of contrary evidence) would lead to the inference that its position is wholly protected as against the solicitors. The solicitors obtained from Mr and Mrs Makaronis the security and promises they bargained for. In so far as they were the Bank's "nominees", as the primary judge thought, they certainly received consideration which did not, therefore, wholly fail. I would refrain from exploring the possible application of the "unifying legal concept" of unjust enrichment [149] because this, too, was simply not litigated. As a matter of practicalities, the Bank is hardly likely to pursue Mr and Mrs Makaronis. This is because it holds a valid guarantee from the solicitors for the entirety of the advance and the agreed interest. In order to recover their debt, the solicitors relied on the instrument of mortgage with its security provisions and personal covenants which the orders below wholly set aside. Such orders therefore effectively released Mr and Mrs Makaronis, who are insolvent. The prospect of the solicitors' recovering anything from them, absent access to the security, is chimerical. Everyone appreciated that the real subject matter of the litigation was the control of the sole remaining asset which survived the Makaronis' disastrous poultry farm venture. This was expressed most clearly by Nathan J [150] . Understandably, he and Smith J were concerned that a requirement that Mr and Mrs Makaronis, as a condition of relief, bring into court their last remaining asset, namely their home, would effectively confirm the mortgage. It would restore the security to the solicitors. This would be so despite the breach of fiduciary duty found. This result was unacceptable to the majority, hence Nathan J's conclusion [151] : "The burden of the breach must be carried by the solicitor in default not the hapless client."
1. Maguire v Makaronis [1995] VConv R ¶54-533 at 66,352.
2. Maguire v Makaronis [1995] VConv R ¶54-533 at 66,327.
3. Maguire v Makaronis [1995] VConv R ¶54-533 at 66,328.
Although I acknowledge the dilemma which was presented in this case concerning the provision of relief and would reject the appellants' suggestion of an absolute rule that a party seeking relief in circumstances such as the present must offer full restitution as a condition, the outcome of the orders under appeal does not represent "practical justice" as between the parties. The findings of the primary judge make it absolutely clear that Mr and Mrs Makaronis were determined to embark upon their business venture. By their own foolish conduct, without advice, they put themselves in a position of serious disadvantage by agreeing to the first deed of variation. They were then locked into the urgent necessity to raise a substantial sum of capital. They eventually obtained that capital through the solicitors. They did so at what was found to have been the then current market price for bridging finance. Even if they had been informed that the solicitors were the mortgagees and had been afforded independent advice, the primary judge decided that they were determined to proceed with the venture come what may. He was in the best position to evaluate this matter. The probabilities favour the conclusions which he reached. Following the variation, as Mr Tansey had warned Mr and Mrs Makaronis, their unconditional contract and agreed time for settlement exposed them to a liability to the vendors after a very short time conducting the poultry business in which they had such misplaced confidence.
To allow Mr and Mrs Makaronis to have had that chance, substantially at the expense of the solicitors, does not amount to "practical justice". Although the precise terms of the guarantee by the solicitors to the Bank were not in evidence, it seems reasonable to assume that it was in the form of an indemnity for the obligations which Mr and Mrs Makaronis accepted to the solicitors under the terms of the mortgage. Even if the solicitors then had access to the Radford Road property, it does not take much imagination to appreciate that its value of about $250,000, with or without appreciation, would fall far short of the accumulated debt of Mr and Mrs Makaronis under the mortgage and, by inference, of the solicitors as guarantors to the Bank. On 17 March 1993 the total capital and interest outstanding was calculated at $476,586.90. By now it would be considerably more. Requiring Mr and Mrs Makaronis to bring the sum actually advanced on the mortgage ($250,000) together with reasonable, but lower, interest would relieve them of the greater debt to the solicitors, owing under the terms of the personal guarantees in the mortgage. By inference, such relief would still leave the solicitors with a guarantee to the Bank of the Makaronis' debt in terms of the mortgage. In this way, each party would be left bearing a just part of the total indebtedness incurred.
By the burden which would then fall on the solicitors they, and other fiduciaries, would be reminded of the duty of fiduciaries, and specifically of solicitors; the fiduciary obligation would be upheld; and the ordinary requirements of restitution would be observed. Mr and Mrs Makaronis could secure release from the much greater debt as provided in the mortgage instrument. But only on condition that they restore the actual sum borrowed and a reasonable rate of interest. The fact that this would be difficult for them, given the large accumulation of interest even at a reduced rate, does not warrant providing to them a windfall benefit. Such a benefit would neither be practical nor just.
Orders
For the purpose of my orders, I am content to accept the approach favoured by the other members of this Court, although I was initially attracted to the practical solution offered in the Appeal Division by withholding the "mercantile rate" of interest [152] . Brooking J found, on inquiry of a Senior Master of the Supreme Court of Victoria, that the average rate of interest on trustee investments for the period from the date of the making of the advance, with half-yearly rests, was 9 per cent. However, that rate might distort the interest properly payable as a requirement for relief, given the nature and purpose of the borrowing. I am not prepared to dissent from the conclusion that it would distort the equity of Mr and Mrs Makaronis to impose a condition so disadvantageous to the appellants. This litigation has already consumed nearly three weeks before the courts. To bring it to a close, I consider that orders can, and should, now be made.
1. Ford and Lee, Principles of the Law of Trusts, 3rd ed (1996), par [17140].
I therefore agree in the orders proposed by Brennan CJ, Gaudron, McHugh and Gummow JJ. |
high_court_of_australia:/showbyHandle/1/9573 | decision | commonwealth | high_court_of_australia | text/html | null | R v Byrnes [1995] HCA 1 | https://eresources.hcourt.gov.au/showbyHandle/1/9573 | 2024-09-13T22:57:20.315672+10:00 | High Court of Australia
Brennan, Deane, Toohey, Gaudron and McHugh JJ
R v Byrnes
[1995] HCA 1
ORDER
The Queen v Byrnes
1. Appeal allowed.
2. Set aside the order of the South Australian Court of Criminal Appeal quashing the conviction on the count based on s 229(4) of the Companies (South Australia) Code.
3. Remit the matter to the South Australian Court of Criminal Appeal to be dealt with in accordance with the reasons for judgment of this Court.
The Queen v Hopwood
1. Appeal allowed.
2. Set aside the order of the South Australian Court of Criminal Appeal quashing the conviction.
3. Remit the matter to the South Australian Court of Criminal Appeal to be dealt with in accordance with the reasons for judgment of this Court.
Byrnes v The Queen The application for special leave to appeal to this Court is stood over generally.
Cur adv vult
The following written judgments were delivered:—
23 August 1995
Brennan, Deane, Toohey and Gaudron JJ.
Jeffcott Investments Ltd (Jeffcott), a public company listed on the Adelaide Stock Exchange, was in need of cash to repay its borrowings. By early December 1988 it owed the Normandy group of companies about $4.2 million and on 15 December 1988 a loan by Mr and Mrs Douglas-Hill ($2 million plus interest) was to fall due for repayment. Jeffcott's directors, including Mr Byrnes and Dr Hopwood (the present respondents), resolved that Jeffcott should make an issue of $1 convertible notes to its shareholders. If fully subscribed, the issue would raise slightly more than $6 million which could be used to repay these debts. The underwriter to the issue, Jarden Morgan Australia Ltd, required Jeffcott to procure a sub-underwriter for 100 per cent of the issue. This appeal relates to the steps which Byrnes and Hopwood took to satisfy Jarden Morgan's requirements and to ensure the success of the issue of the convertible notes.
Background facts
The following summary is derived from the findings of fact made by the trial judge and adopted by the Court of Criminal Appeal.
On 30 June 1988, Jeffcott (through a wholly-owned subsidiary) had acquired either directly or through an intermediate company, Ausmintec Ltd, a significant shareholding in Magnacrete Ltd. Byrnes and Hopwood were appointed to the board of Magnacrete in July 1988 and, in September 1988, Byrnes became the chairman of Magnacrete. Both men also became directors of Ausmintec. The Jeffcott investment in Magnacrete and Ausmintec was described by the trial judge as "imprudent and ill-considered".
However, Magnacrete had cash reserves of about $5 million. By early October 1988, Byrnes and Hopwood saw a reverse takeover of Jeffcott by Magnacrete as being "the best way in which they could resolve the financial predicament of Jeffcott". Byrnes discussed the proposal with the other directors of Magnacrete, namely, Messrs Douglas-Hill, Young and Paior. Mr and Mrs Douglas-Hill had been the vendors of the interests in Ausmintec and Magnacrete which Jeffcott acquired and it was in those transactions that Jeffcott had incurred the debt of $2 million plus interest. A Magnacrete takeover of Jeffcott was not attractive unless Jeffcott's debts were paid out of the sum raised by a successful convertible notes issue. The key to the success of the issue was a scheme for sub-underwriting.
In early December 1988, Byrnes devised a sub-underwriting scheme after consulting Mr Stephen Chapman, a director of Baron Partners Ltd, a merchant bank. A company, Vicksburg Pty Ltd, was set up with shares held by Magnacrete — 45 per cent, Baron Fund Managers Ltd ("Baron Managers", a subsidiary of Baron Partners) — 45 per cent, and Mr Chapman — 10 per cent. Vicksburg was to borrow $1.7 million from the Commonwealth Bank and lend the money to Baron Managers. Baron Managers would subscribe for the convertible notes not taken up and assign them to Vicksburg as security for the money lent by Vicksburg. As at 21 November 1988, Jarden Morgan had expected a shortfall in subscriptions for the notes issue of $1.2 million to $1.5 million, an estimate that was later increased to a maximum of $1.6 million. The loan from the Commonwealth Bank to Vicksburg was to be supported by Magnacrete's guarantee and by its depositing with the Bank at interest $2 million of its cash reserves. Magnacrete was to receive a fee of $40,000 from Vicksburg. A condition of Baron Partners' participation in the scheme was that it did not incur any liability on the bank loan to Vicksburg. The scheme was to be contained in an agreement between the Vicksburg shareholders and in an agreement between Vicksburg and Magnacrete that Magnacrete would provide a guarantee and other security to the Commonwealth Bank in respect of the proposed loan to Vicksburg.
On 13 December 1988, the offer of the convertible notes was despatched by Jeffcott to its shareholders. Dr Hopwood's family company owned about 50 per cent of the Jeffcott shares and it borrowed $2.4 million from its banker to subscribe for the convertible notes on the understanding that the reverse takeover of Jeffcott was imminent and that, after the takeover, Magnacrete's cash reserves would be available to redeem the convertible notes. Thus the loan could be repaid. Dr Hopwood's family company subscribed promptly and its prompt subscription allowed Jeffcott to pay $2,111,000 on 16 December 1988 to discharge its liability to Mr and Mrs Douglas-Hill.
On 15 or 16 December 1988, an agreement between Magnacrete and Vicksburg was executed whereby Magnacrete undertook to guarantee the proposed Commonwealth Bank loan of $1.7 million to Vicksburg and Vicksburg undertook to pay Magnacrete a fee of $40,000 for the guarantee. An agreement was also executed between the Vicksburg shareholders relating to the constitution of the Vicksburg board and the conduct of its business. Both agreements were executed under Magnacrete's seal and were signed by one of Byrnes and Hopwood and countersigned by the other as directors. Magnacrete's other directors had no knowledge of these agreements.
The trial judge found that Byrnes and Hopwood could not risk putting the scheme before the Magnacrete board for approval because of the likelihood that Douglas-Hill would challenge the proposal. "Therefore, they decided to take a chance and to execute the Shareholders' Agreement and the Agreement to Guarantee under the common seal of Magnacrete in the hope that what they had done would not come to light before the takeover [that is, the Magnacrete takeover of Jeffcott] was completed, and in the expectation that once the takeover was completed it could be successfully covered up or ratified."
On or about 18 January 1989 Byrnes and Hopwood, without consulting the other directors, affixed the seal of Magnacrete to a deed of guarantee of $2 million to the Commonwealth Bank as security for the loan to Vicksburg. They signed and countersigned the deed as directors of Magnacrete. Similarly, they affixed the Magnacrete seal and countersigned the affixation to an authority to the Bank to deduct from Magnacrete's term deposits any moneys due to the Bank as the result of the loan to Vicksburg. Finally, Byrnes wrote a letter to the bank on behalf of Magnacrete authorising it to purchase some bank bills held by Magnacrete, the proceeds of which were to be lodged as term deposits subject to the authority earlier given. On this security the Bank granted a facility for the borrowing by Vicksburg of $1.7 million.
Towards the end of January 1989 the secretary of Magnacrete discovered the existence of the Vicksburg borrowing facility and notified Douglas-Hill. On 31 January 1989 Douglas-Hill sent a fax to Byrnes requesting "immediate advice, "if any significant transactions, which in the normal course of events would warrant discussion at board level, are contemplated" ". In response Byrnes sent a memorandum dated 3 February 1989 to all directors of Magnacrete. It described Vicksburg as a joint venture between Baron Partners and Magnacrete. The memorandum described the proposal thus:
Baron's contribution to the joint venture will be to identify and make available to Vicksburg opportunities which cross its path, which are suitable for secure, short term gains. Magnacrete's contribution will be to procure overdraft facilities for Vicksburg. We have in mind 1.5 to 2 million dollars in facilities. In return, Magnacrete will be paid a facility fee. As you will see from the proposal, Magnacrete will not provide any money to Vicksburg. Rather it will simply procure that Magnacrete's bankers provide the facility to Vicksburg. The fee is in effect a fee for Magnacrete guaranteeing Vicksburg's overdraft. Obviously Magnacrete continues to earn interest on its monies which are not touched.
The joint venture company will only invest in opportunities specifically agreed to by both Magnacrete and Baron. Thus there will be no investments or commitments made unless both sides agree.
The memorandum sought "formal authority to proceed" from the directors. It did not mention the participation of Vicksburg in the Jeffcott notes issue. The trial judge found that "Byrnes had expressed the memorandum in futuristic terms to hide the fact that Vicksburg was already committed to financing the purchase of the Jeffcott notes".
A meeting of the Magnacrete board was called on 3 February 1989. Hopwood was not present. The minutes of the meeting show that there was no reference to the Jeffcott convertible notes issue. The meeting accepted the proposal for the making of investments by Vicksburg as a joint venture with Baron Managers, but the directors (other than Byrnes and Hopwood) did not know that Vicksburg had already agreed to Baron Managers drawing up to $1.7 million under its agreement with Vicksburg in order to purchase Jeffcott convertible notes. The trial judge found that although the Vicksburg joint venture was "dressed up so as to make it appear that it encompassed general investment opportunities which Baron could generate for Vicksburg, it was only ever intended, and pursued, as a vehicle to provide de facto sub-underwriting for the shortfall in the Jeffcott note issue Such a de facto underwriting, albeit disguised, was its sole purpose, and the only reason for its existence".
The convertible notes issue was partially subscribed by the Jeffcott shareholders. In early February 1989, a shortfall of 2,035,575 notes was taken up by Baron Managers and other minor sub-underwriters. The reverse takeover of Jeffcott by Magnacrete was approved at a shareholders' meeting on 9 March 1989. The takeover was successful but Magnacrete went into liquidation in late 1989.
The trial judge rejected a submission that the whole scheme was a " "scam" as if it was inherently improper". He found:
On the evidence before me, and assuming that there was no breach of s 129 (a company dealing in its own shares) and s 230 (impermissible loans to a company related to a director), there appears to be no reason in law why the Vicksburg joint venture could not have been used to underwrite the convertible note issue of Jeffcott if the boards of Magnacrete and Vicksburg had acted properly in authorising the necessary transactions.
He concluded:
Thus any improper conduct of the accused must relate to the manner in which the transactions were carried out and not to the nature of the transactions themselves.
Charges
Byrnes and Hopwood were charged with an offence under s 229(4) of the Companies (South Australia) Code. Byrnes was also charged on two counts of furnishing misleading information under s 564(1) of the Code. This appeal concerns only the count based on s 229(4). That sub-section provides as follows [11] :
An officer or employee of a corporation shall not make improper use of his position as such an officer or employee, to gain, directly or indirectly, an advantage for himself or for any other person or to cause detriment to the corporation.
Penalty: $20,000 or imprisonment for five years or both.
The particulars of the offence were as follows:
Martin Francis Byrnes and Timothy Paul Hopwood between about the 12th day of December, 1988 and about the 1st day of February, 1989, at Adelaide in the said State, being directors of Magnacrete Limited, ("Magnacrete") made improper use of their positions as directors by (a) executing for Magnacrete a Shareholders Agreement and an Agreement to Guarantee relating to a joint venture between Magnacrete and Baron Fund Managers Limited; (b) executing for Magnacrete a Deed of Guarantee whereby Magnacrete guaranteed to the Commonwealth Bank of Australia, the repayment of a loan made by the said bank to Vicksburg Pty Ltd; (c) authorising the term deposit of $2,000,000 of the funds of Magnacrete with the Commonwealth Bank of Australia to support the guarantee referred to in paragraph (b) herein; to gain an advantage for Jeffcott Investments Ltd.
Further particulars were given:
The conduct particularised in paragraphs (a), (b) and (c) of Count 1 of the Information ("the conduct") constitutes the use of position as director of Magnacrete Ltd.
That use of position was improper because:
(1) the purpose, or the substantial purpose, of the conduct was a purpose other than that of Magnacrete Ltd, namely to enable an issue of Jeffcott Investment Ltd convertible notes to be fully subscribed and thereby cause an advantage to Jeffcott Investments Ltd;
(2) the conduct occurred without the authority of the Board of Directors of Magnacrete Ltd and occurred without the knowledge of the members of the Board of Directors of Magnacrete Ltd, except Martin Francis Byrnes and Timothy Paul Hopwood;
(3) (Each accused) was a director of Jeffcott Investments Ltd and by engaging in the conduct, he put himself in a position where his interest in, and duty to, Jeffcott Investments Ltd and his duty to Magnacrete Ltd were in conflict or potential conflict.
The use of position was improper for each and every one of these reasons (1) to (3) separately and also in any combination of them.
Both respondents were convicted on this count after a trial before a judge alone in the District Court. Byrnes was also convicted on the two counts of furnishing misleading information. The respondents appealed to the Court of Criminal Appeal against their respective convictions on a number of grounds. Their appeals against conviction on the count of improper use of position as a director to gain an advantage for Jeffcott succeeded and their convictions on that count were quashed. Special leave to appeal to this Court was granted (Brennan and Dawson JJ, Deane J dissenting) in order to canvass the basis on which the Court of Criminal Appeal quashed the convictions. Byrnes' appeal on one of the counts of furnishing misleading information was allowed but his appeal on the other count was dismissed.
1. Section 229(4) of the Companies Code was superseded on 1 January 1991 by s 232(6) of the Corporations Law which commenced operation on that day. However, s 1317FA of the Corporations Law, which came into effect on 1 February 1993, requires proof of dishonesty or an intention to deceive or defraud for a conviction under s 232(6).
The judgment of the Court of Criminal Appeal
The judgment of the Court of Criminal Appeal (Legoe, Mohr and Bollen JJ) was delivered by Bollen J who accepted, for the purpose of the judgment, the findings made by the trial judge. Although some of those findings were challenged on the appeal to the Court of Criminal Appeal, it was not necessary for his Honour to dispose of that challenge. In his Honour's opinion, the findings made by the trial judge were inconsistent with convictions of the respondents on the first count. Bollen J said:
The learned trial Judge did not ignore intention. But, in my respectful opinion, he reached conclusions about intention which are inimical to conviction. I repeat the important fact that the idea that this was, as the Crown suggested, a total "scam" was rejected by the learned trial Judge. His Honour made these further findings, each vital to the result. His Honour said:
(i) "While accepting that each accused believed that what was done by him was not harming Magnacrete, and was likely to be for its ultimate financial profit, I am satisfied that each accused had significantly breached his fiduciary duty to Magnacrete in executing the documents in question and that in the light of that breach of fiduciary duty the actions of each were sufficiently morally blameworthy when assessed objectively to be properly categorised in law as improper." and
(ii) "I accept that each accused believed that it would be in the financial interests of Magnacrete to enter into the Vicksburg transaction for the purpose of underwriting the Jeffcott note issue because it would receive the $40,000 guarantee fee and 45 per cent of the profit made by Baron Managers on the execution fee on the purchase. They were reinforced in such a belief by at least informal advice from Chapman. However, their belief was undoubtedly coloured by their expectations for Jeffcott to make good its financial position and their determination to succeed in that without giving proper objective consideration to the risks involved in Magnacrete being called upon to honour its guarantee and in the risk of Vicksburg being left with unsecured Jeffcott notes if for other reasons Jeffcott should get into financial difficulties. On the evidence I am not prepared to find that Byrnes and Hopwood were mistaken in this belief that at the time of the transaction it was a good thing for Magnacrete. However, that does not go to the matters which are set out in the preceding paragraph as the bases of the breaches of duty. Magnacrete and Vicksburg were treated very generously in the transaction, and certainly better than the other sub-underwriters, because it would assist Byrnes and Hopwood in justifying their actions if they were ever brought to account. However, that could not cure the breach of duty which existed." I emphasise the italicised sentence.
(iii) Speaking of Hopwood —
"The fact that he expected that there would be a subsequent board meeting before the money was taken by Vicksburg from the Commonwealth Bank shows that he did not then believe that there was proper formal approval of the directors for what was being done. Rather he believed that when it was ultimately put before the board Young and Paior were likely to approve it even if Hill opposed it."
That is to say, Hopwood had a belief that a majority of the Board would ratify what had been done.
These findings including, as I repeat, the rejection of the idea of a "total scam" are, in my opinion, inconsistent with criminal intention on the part of either appellant. Intention is, I repeat, relevant. If we return to the first quoted finding above which begins "While accepting ", we see that His Honour has travelled to conclusion by the road of "moral blameworthiness". And he has assessed that objectively. In my opinion, both the use of that road and the assessing of moral blameworthiness (if it has any place here) was erroneous. The question was not whether there has been moral blame but whether, even granting the intention to do the relevant acts, either accused had the relevant mens rea, the relevant criminal intention. The finding that the transaction was not a total "scam", the belief that what was being done would not harm Magnacrete, the possibility that they were not mistaken and the belief on the part of Hopwood in likely ratification, together with the fact that any vice was said to have existed in how something was done and not what was done, all amount to an absence of criminal intent or at least to the reasonable possibility of that absence.
To answer the question now to be determined, it is helpful to identify the salient facts as they were found by the trial judge and adopted as correct by the Court of Criminal Appeal. First, it is clear that neither Byrnes nor Hopwood had the authority of Magnacrete or its board to do any of the acts specified in the particulars of the charge at the times when those acts were done. That is, they had no authority to execute the Vicksburg shareholders' agreement, the agreement by Magnacrete to guarantee the proposed Commonwealth Bank loan to Vicksburg and the deed guaranteeing the repayment to the Commonwealth Bank of its loan to Vicksburg, nor to authorise the making of a term deposit of $2 million of Magnacrete's funds with the Commonwealth Bank. The fact that Hopwood expected that these steps would be ratified confirms the absence of any prior authority. Second, it appears that Byrnes and Hopwood believed that Jeffcott would "make good its financial position" and, on that hypothesis, believed that the transaction "was likely to be for [Magnacrete's] ultimate financial profit". Thus the transaction was not a "scam".
The conclusion reached by the Court of Criminal Appeal purported to be based on, or at least to be consistent with, a passage taken from the majority judgment in this Court in Chew v The Queen [1] :
The accused's state of mind is relevant not only to the requirement of purpose but also to the element of improper use of his or her position. If, for example, an accused person reasonably but mistakenly believed that a particular transaction which he or she authorised was genuinely for the benefit of the corporation, that belief may, in an appropriate case, be material in determining whether the accused person can be held criminally responsible for using his or her position in a manner which would objectively be seen to be improper.
With respect, the Court of Criminal Appeal has misunderstood this passage.
1. (1992) 173 CLR 626 at 634.
In Chew, the question was whether the phrase in s 229(4) "to gain an advantage for himself or for any other person or to cause detriment to the corporation" imported a purpose on the part of the offender to effect either of those consequences as an element of the offence. A majority held that it did, saying [2] : "s 229(4) expressly declares purpose to be an element of the offence and purpose, in the context of that sub-section, is the equivalent of a specific intention." So construed, s 229(4) does not require proof that an advantage has in fact been gained by the offender or any other person or that detriment has in fact been caused to the corporation [3] .
1. Chew (1992) 173 CLR 626 at 633.
2. Chew (1992) 173 CLR 626 at 633.
In ascertaining whether an accused had one or other of the proscribed purposes in mind when he made use of his position, it is relevant to consider his appreciation of the circumstances at the relevant time. His appreciation of the circumstances may be relevant not only to the purpose for which he acted but also to the propriety of the use he made of his position in acting as he did. A vote on a proposal at a board meeting may be entirely proper though the proposal favours a third party, but if the director fails to consider the interests of the corporation and votes for the proposal merely in order to benefit a third party, his state of mind is relevant both to the propriety of his action and to the purpose for which he used his position as a director in voting for the proposal. In other words, impropriety in the use of a position may consist in an abuse of the power or authority which the position confers. If there be an abuse of power for the purpose of gaining an advantage for himself or another person or of causing detriment to the corporation, both elements of the offence are established albeit there is a single act voluntarily committed with a single state of mind. The passage above cited from the majority judgment in Chew points out that a single state of mind with which an act is done might establish both impropriety in the use of position and the proscribed purpose (or intention) with which the position was improperly used.
The Court of Criminal Appeal appears to have understood Chew as holding that, if there be no intent to cause detriment to the corporation, there is no improper use of position. There are two fallacies in that reasoning. The first fallacy flows from a failure to appreciate that "improper use" and purpose (or intention) are different elements of the offence and may be established by evidence of different circumstances. Although evidence of the same mental state may suffice in some cases to establish both elements, it does not follow that the element of improper use cannot be established unless there is evidence of a state of mind that detriment will be caused to the corporation.
The second fallacy is that an absence of purpose to cause detriment to the corporation negates the existence of a purpose to gain an advantage for the alleged offender or another person. In Edwards v The Queen [4] which was decided at the same time as Chew, the difference between the two proscribed purposes was clearly pointed out. Edwards had been convicted of being knowingly concerned in the commission by one Lloyd of an offence against s 229(4). Lloyd's purpose was said to have been to cause detriment to the relevant corporation. In allowing the appeal, Mason CJ, Brennan, Gaudron and McHugh JJ said [5] :
It would have been a different matter had Lloyd been charged under the other limb of s 229(4) with making improper use of his position for the purpose of gaining an advantage for Rothwells or the Bank and had the appellant been charged with being "knowingly concerned" in that offence. In that event, the Crown would have had no difficulty in establishing, on the facts of the present case, a purpose on the part of Lloyd to gain an advantage for Rothwells or the Bank and knowledge on the part of the appellant of that purpose.
1. (1992) 173 CLR 653.
2. Edwards (1992) 173 CLR 653 at 659.
Here, the Court of Criminal Appeal appears to have reasoned that the absence of a purpose to cause detriment to the corporation meant that the respondents ought not to have been convicted. That was erroneous. If the execution of the documents specified in the particulars and the authorising of the deposit of $2 million of Magnacrete's funds with the Commonwealth Bank amounted to improper uses of the respective positions of Byrnes and Hopwood, the purpose of gaining an advantage for Jeffcott — clearly found by the trial judge — meant that the offence was complete even though Byrnes and Hopwood did not intend to cause detriment to Magnacrete and did not expect that such detriment would be caused. That is not to say that the absence of an intent to cause detriment and a belief that the transaction would be to Magnacrete's advantage are irrelevant to the assessment of the gravity of the offence.
Improper use of position
"Improper" is an indefinite term, not commonly used in the criminal law. Counsel for Hopwood submitted that "improper use" should be understood to mean a deliberate use of position for a proscribed purpose "without giving any consideration at all to the interests of the company". No doubt such a use of position by a director would be improper: it would be an abuse of the power or authority conferred by the position. But, contrary to counsel's submission, that case does not exhaust the categories of impropriety.
Impropriety in the context of s 229(4) and its statutory antecedents has not been understood to be limited to conscious impropriety on the part of the offender. Thus in Grove v Flavel [6] , Jacobs J said:
The word "improper" is not a term of art. It is to be understood in its commercial context to refer to conduct which is inconsistent with the "proper" discharge of the duties, obligations and responsibilities of the officer concerned.
He also said:
It seems to me, therefore, that what is "improper" for the purposes of s 124(2) cannot be determined by reference to some common, uniform, or inflexible standard which applies equally to every person who is an officer, but rather must be determined by reference to the particular duties and responsibilities of the particular officer whose conduct is impugned.
In Chew [7] , Dawson J said in reference to "improper use" in s 229(4) that "an objective standard must be applied in determining what amounts to impropriety". His Honour added:
It is clear enough that a director of a company may act improperly with no intention of acting dishonestly or otherwise than in the best interests of the company as a whole.
He gave Whitehouse v Carlton Hotel Pty Ltd [8] as an example. Also in Chew, Toohey J said [9] :
The expression is, as the appellant accepted, one to be determined objectively; essentially the issue is whether the conduct impugned is inconsistent with the proper discharge of the duties of the office in question. To resolve that issue it will be necessary to look at all relevant circumstances, including, for instance, the extent of a director's awareness of the financial stability of the corporation [10] . But that does not mean that the test of "improper use" is subjective; it simply indicates the range of considerations that may have to be taken into account.
It was unnecessary for the other judgments to expound the meaning of "improper use" [11] but that case has rightly been taken to approve an objective test of impropriety [12] . Impropriety does not depend on an alleged offender's consciousness of impropriety. Impropriety consists in a breach of the standards of conduct that would be expected of a person in the position of the alleged offender by reasonable persons with knowledge of the duties, powers and authority of the position and the circumstances of the case. When impropriety is said to consist in an abuse of power, the state of mind of the alleged offender is important [13] : the alleged offender's knowledge or means of knowledge of the circumstances in which the power is exercised and his purpose or intention in exercising the power are important factors in determining the question whether the power has been abused. But impropriety is not restricted to abuse of power. It may consist in the doing of an act which a director or officer knows or ought to know that he has no authority to do.
1. (1986) 43 SASR 410 at 420.
2. (1992) 173 CLR 626 at 640.
3. (1987) 162 CLR 285.
4. Chew (1992) 173 CLR 626 at 647.
5. See, by way of illustration, Wright v Frisina (1983) 7 ACLR 532; Kinsela v Russell Kinsela Pty Ltd (1986) 4 NSWLR 722.
6. See Chew (1992) 173 CLR 626 at 634, 636.
7. R v Yuill (1994) 34 NSWLR 179 at 193-194; see also R v Donald; Ex parte Attorney-General (Q) [1993] 2 Qd R 680.
8. Hindle v John Cotton Ltd (1919) 56 SLR 625 at 630-631.
In the present case, the conduct of the respective respondents which was specified in the particulars as an improper use of position consisted in "executing for Magnacrete" three instruments (the Vicksburg shareholders' agreement, the Vicksburg-Magnacrete agreement to guarantee and the Magnacrete guarantee to the Commonwealth Bank) and in "authorising" the term deposit of $2 million with the Commonwealth Bank to support the guarantee. The deposit of $2 million with the Commonwealth Bank was authorised by letter signed by Byrnes. Byrnes and Hopwood authorised the Bank to apply the deposit of $2 million to satisfy Magnacrete's obligations under the guarantee. That authority was contained in a document which they executed in the same manner as they had executed the other three instruments specified in the particulars. Magnacrete's articles of association contained the following:
80(2) The seal shall only be used by authority of the Directors, or of a committee of the Directors authorised by the Directors to authorise the use of the seal, and every document to which the seal is affixed shall be signed by a Director and be countersigned by another Director, a Secretary or another person appointed by the Directors to countersign that document or a class of documents in which that document is included.
On their face, the instruments executed by Byrnes and Hopwood under seal appear to have been executed in conformity with art 80. But neither of them had obtained the authority of the directors as a board nor the authority of a committee of the directors to execute any of the four instruments prior to their respective execution.
If, pursuant to the constitution of a corporation and the manner in which its business is conducted, a director has an authority to execute an instrument so as to bind the company but that authority is conditioned on the approval or concurrence of all or some other directors, it is improper to purport to exercise that authority without that approval or concurrence. Where prior authority is required for the execution of an instrument, the person executing the instrument may knowingly fail to obtain the authority for any of a number of reasons: that person may fail to seek the authority or the authority may be given by directors who, to the knowledge of the alleged offender, cannot effectively give the authority required (for example, where their powers are sterilised by a conflict of interests or duties), or where the authority, for some other reason known to the alleged offender, has not been effectively given by the person or persons empowered to give it. In any of these cases, the person executing the instrument, whether a director or officer, is guilty of impropriety. The test of impropriety is not whether the corporation would be bound by the instrument nor whether a third party would be entitled to rely on it [14] . It is the character of the conduct of the director or officer in relation to the internal management of the corporation that is in question.
1. See Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146.
In the present case, neither Byrnes nor Hopwood sought any approval save their own. Yet art 62(1) of Magnacrete's articles provided:
Subject to the Code and to any other provisions of these Articles, the business of the Company shall be managed by the Directors, who may exercise all such powers of the company as are not, by the Code or by these Articles, required to be exercised by the Company in general meeting.
The reference to "the Directors" in that article is clearly a reference to the board of directors acting as such. Even if it could be assumed in favour of Byrnes and Hopwood that, either by express resolution of the board or by the board's concurrence in the ordinary conduct of Magnacrete's business, Byrnes and Hopwood ordinarily had authority to affix and to attest the affixing of the Magnacrete seal, the assumption would be unavailing in this case since it would not extend to circumstances where, as the trial judge here found, the moving purpose [15] of the Vicksburg joint venture was the sub-underwriting of Jeffcott's issue of convertible notes.
1. Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285 at 293-294.
Each of Byrnes and Hopwood was in a position of conflicting fiduciary duties: they were directors of both Magnacrete and Jeffcott. The interests of those companies did not necessarily coincide. They devised the Vicksburg joint venture and they executed the relevant instruments in order to commit the resources of Magnacrete for the benefit of Jeffcott. Whatever authority Byrnes and Hopwood might otherwise have had to execute instruments under seal so as to bind Magnacrete, it was not an authority to be exercised for the moving purpose of benefiting Jeffcott. A company is entitled to the unbiased and independent judgment of each of its directors [16] . A director of a company who is also a director of another company may owe conflicting fiduciary duties [17] . Being a fiduciary, the director of the first company must not exercise his or her powers for the benefit or gain of the second company without clearly disclosing the second company's interests to the first company and obtaining the first company's consent. Nor, of course, can the director exercise those powers for the director's own benefit or gain without clearly disclosing his or her interest [18] . and obtaining the company's consent [19] . A fiduciary must not exercise an authority or power for the personal benefit or gain of the fiduciary or a third party [20] to whom a fiduciary duty is owed without the beneficiary's consent.
1. Imperial Mercantile Credit Association v Coleman (1871) LR 6 Ch App 558 at 567-568; Victors Ltd v Lingard [1927] 1 Ch 323 at 330; Richard Brady Franks Ltd v Price (1937) 58 CLR 112 at 137.
2. Ford v Andrews (1916) 21 CLR 317 at 322.
3. Liquidators of Imperial Mercantile Credit Association v Coleman (1873) LR 6 HL 189 at 205-207.
4. Chan v Zacharia (1984) 154 CLR 178 at 198, 204; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 103-104.
5. By "third party", we mean a party whose interests are not coincident with the interests of the fiduciary's beneficiary.
However, the articles of a company may permit — they frequently do permit — a director who is interested in a proposed transaction to take the benefit of the transaction if he discloses his interest to the other members of the board and takes no part in the decision of the board on the transaction. In such a case, the quorum of the board required to deal with the transaction will ordinarily be interpreted as excluding directors whose interests preclude them from voting [21] . If the director makes that disclosure and abstains from taking part in the decision, the validity of the transaction is not impaired. But a director who takes part in a decision to enter into a transaction in which the director or a third party in whom the director has an interest or to whom the director owes a fiduciary duty stands to gain an advantage or benefit but who does not make an adequate disclosure of his interest acts improperly.
1. A M Spicer & Son Pty Ltd (In liq) v Spicer (1931) 47 CLR 151 at 186-187; Richard Brady Franks Ltd v Price (1937) 58 CLR 112 at 140.
The respondents in this case failed to disclose their interests in Jeffcott which stood principally to gain the benefit of the Vicksburg joint venture. Nor did Byrnes abstain from voting at the board meeting on 3 February. However, that was not a particular of the offence charged. Both Byrnes and Hopwood exercised their powers as directors with respect to the affixing of the Magnacrete seal to the instruments specified in the particulars and they attested its affixation as directors without having any authority to do so. Even if their actions in executing the instruments could have been authorised by a resolution passed by the other members of the board of Magnacrete, they did not seek such authorisation. To the contrary, they sought to conceal the true nature of the Vicksburg joint venture from the other members of the board until the subscription to the Jeffcott issue of convertible notes had been made. When the Commonwealth Bank loan to Vicksburg became known and a meeting of directors was held on 3 February 1989, the approval then given to the loan to Vicksburg was obtained by concealing the purpose of the transaction. That was not an approval on which either Byrnes or Hopwood could rely as ratification of their antecedent conduct in executing the Magnacrete instruments for implementing the scheme for the sub-underwriting of the Jeffcott issue of convertible notes. Byrnes' letter to the Bank authorising the placing of $2 million on deposit was also unauthorised by Magnacrete. The moving purpose of the letter was the advancement of the Vicksburg joint venture — a venture which neither Byrnes nor Hopwood was authorised to advance by use of Magnacrete's assets.
The execution of those instruments was improper, and it was done for the purpose of gaining an advantage for Jeffcott. The elements of the offence created by s 229(4) were thus established by the findings of the trial judge on which the judgment of the Court of Criminal Appeal was based. The appeal must be allowed.
However, it does not follow that the conviction must be restored. Both Byrnes and Hopwood, by the grounds attached to their respective applications for leave to appeal to the Court of Criminal Appeal against their convictions, challenged findings of fact made by the trial judge. The challenge related not only to the conviction of the respondents on the first count but also to the conviction of Byrnes on that count of furnishing misleading information for which his conviction still stands. As the Court of Criminal Appeal allowed the appeals of both respondents against their convictions on the first count (offences against s 229(4) of the Companies Code) without determining the challenges to the findings of fact, the allowing of the appeal to this Court must result in a remittal to the Court of Criminal Appeal of the appeal to it against convictions on the first count. That Court must determine whether the material facts found by the trial judge and hitherto adopted by the Court of Criminal Appeal were correctly found. Following on that determination, the Court of Criminal Appeal must decide whether on the facts as that Court determines them to be, the principles expressed in the reasons for judgment of this Court require the convictions to be quashed or affirmed.
If, in the light of these reasons for judgment and the order now made, the parties are in agreement that the matter of the conviction of Byrnes on the remaining count of furnishing misleading information should also be remitted to the Court of Criminal Appeal for the purpose of determining the challenge to the trial judge's findings of fact, an appropriate consent order can be filed and will be made by this Court. Otherwise, Byrnes' application for special leave to appeal in that matter must be listed for further argument.
McHugh J.
The question in this appeal is whether the Full Court of the Supreme Court of South Australia erred in setting aside convictions of the respondents for breaches of s 229(4) of the Companies (South Australia) Code. That sub-section provides:
An officer or employee of a corporation shall not make improper use of his position as such an officer or employee, to gain, directly or indirectly, an advantage for himself or for any other person or to cause detriment to the corporation.
The Full Court held that the respondents had not made improper use of their positions as directors of a corporation because of "an absence of criminal intent". In my opinion, the Court erred in setting aside the convictions on this ground, and the appeal must be allowed.
The charge against the respondents was heard without a jury by Judge Lunn in the District Court of South Australia. The charge alleged that they had made improper use of their positions as directors of Magnacrete Ltd (Magnacrete) by executing two documents and authorising a term deposit of $2 million of funds of Magnacrete for the purpose of gaining an advantage for Jeffcott Investments Ltd (Jeffcott), a company of which they were also directors. The prosecution alleged that the purpose, or the substantial purpose, of their conduct in executing the documents and authorising the term deposit was not a purpose, or substantial purpose, of Magnacrete. The purpose of their conduct was identified by the trial judge as maximising the chance that an issue of Jeffcott convertible notes would be fully subscribed. The prosecution also alleged that the respondents engaged in the conduct without the authority of the board of directors of Magnacrete and without the knowledge of the members of that board, except the respondents. The particulars of the charge alleged that each respondent had put himself in a position where his interest and duty to Jeffcott and his duty to Magnacrete were in conflict or potential conflict.
One of the respondents was also charged with two offences of furnishing misleading information under s 564(1) of the Code. But those charges are not relevant in this appeal.
The learned trial judge found that each respondent made use of his position "for the purpose of gaining directly or indirectly an advantage for Jeffcott". His Honour also found that the execution of the documents was an integral and essential part of a wider scheme, the purpose of which was to give an advantage, directly or indirectly, to Jeffcott. The judge held that each respondent intended that the result of the use of his position would be for the advantage of Jeffcott. However, Judge Lunn rejected the prosecution's submission that the whole scheme was a scam. He made the following findings:
1. Each respondent was in a situation of conflict of interest. Each actively promoted the interests of Jeffcott against the interests of Magnacrete which he had a duty to protect. Each respondent was well aware of the situation of conflict. His clear duty was to allow the remainder of the Board of Magnacrete — which was independent of Jeffcott — to make the decision whether it was in the best interests of Magnacrete to enter into the transactions in the circumstances.
2. The purpose of each respondent was to maximise the chance that Jeffcott would obtain the finance that it needed through the convertible note issue.
3. Under the articles of Magnacrete, the respondents "had no right to act unilaterally and independently of the Board as a whole as they did".
4. The other Board members had the right to know what each respondent was doing in the name of Magnacrete. But the respondents deliberately did not inform them of what they were doing.
His Honour said that, while he accepted "that each accused believed that what was done by him was not harming Magnacrete, and was likely to be for its ultimate financial profit each [respondent] had significantly breached his fiduciary duty to Magnacrete in executing the documents in question and that in the light of that breach of fiduciary duty the actions of each were sufficiently morally blameworthy when assessed objectively to be properly categorised in law as improper".
His Honour held that the mere fact that a director reasonably but mistakenly believed that a particular transaction was for the benefit of the company did not necessarily mean that his conduct was not improper. It was only a matter to be taken into account in an appropriate case. He said that he accepted that each accused believed that it would be in the financial interests of Magnacrete to enter into the transactions for the purpose of underwriting the Jeffcott note issue. He also said that on the evidence he was "not prepared to find that Byrnes and Hopwood were mistaken in this belief that at the time of the transaction it was a good thing for Magnacrete". His Honour said, however, that that did not affect the respondents' breaches of duty. Accordingly, his Honour found the charge against each of them had been proved.
The Full Court set aside the convictions. Bollen J, who gave the leading judgment, said that the trial judge did not ignore intention but that he had reached conclusions about intention which were "inimical to conviction".
Bollen J held that the following findings of the trial judge meant that the appellants were not guilty of the "improper use" of their position:
1. The scheme was not a total scam.
2. Each respondent believed that what was done by him was not harming Magnacrete and was likely to be for its ultimate profit.
3. Each respondent believed that it would be in the financial interest of Magnacrete to enter into the transaction for the purpose of underwriting the Jeffcott note issue.
4. Judge Lunn was not prepared to find that the appellants "were mistaken in this belief that at the time of the transaction it was a good thing for Magnacrete".
Bollen J said:
The question was not whether there had been moral blame but whether, even granting the intention to do the relevant acts, either accused had the relevant mens rea, the relevant criminal intention. The finding that the transaction was not a total "scam", the belief that what was being done would not harm Magnacrete, the possibility that they were not mistaken and the belief on the part of Hopwood in likely ratification, together with the fact that any vice was said to have existed in how something was done and not what was done, all amount to an absence of criminal intent or at least to the reasonable possibility of that absence.
I do not think that either appellant should have been found guilty of an offence against s 229(4).
In its context, this passage suggests that Bollen J thought that it is a condition of liability under s 229(4) that the accused intended to cause detriment to the corporation or believed that what he or she was doing was improper. However, such an intent or belief is not a condition of liability under the sub-section. The essential elements of the offence are an improper use of position by an officer or employee of a corporation and a purpose of obtaining gain or causing detriment. In Chew v The Queen [22] , counsel for the accused accepted, correctly in my view, that the question whether the use of a position was improper was an objective one [23] . In my opinion, it will be improper if the officer or employee uses his or her position in a way that is inconsistent with the discharge of the duties arising from that office or employment. In Grove v Flavel [24] , Jacobs J pointed out that what was improper had to be "determined by reference to the particular duties and responsibilities of the particular officer whose conduct is impugned".
1. (1992) 173 CLR 626.
2. In R v Yuill (1994) 34 NSWLR 179 at 193-194, the New South Wales Court of Criminal Appeal accepted that Chew was decided on the basis that the test of "improper use" is an objective one.
3. (1986) 43 SASR 410 at 416-417.
In determining whether the use of a position is improper, the mental state of the officer or employee is often relevant because the propriety of the use often depends on the purpose for which the office or employment is used. Many uses of an office or employment will be proper if done for one purpose and improper if done for another purpose. Purpose is as relevant on the issue of improper use as it is on the issue whether the use of the position was made to secure a gain or cause a detriment [25] . However, the use of an office or employment can be improper even though it is for the purpose or with the intention of benefiting the company. As Dawson J said in Chew [26] :
It is clear enough that a director of a company may act improperly with no intention of acting dishonestly or otherwise than in the best interests of the company as a whole.
His Honour gave Whitehouse v Carlton Hotel Pty Ltd [27] as an example. There the governing director of a company thought that an allotment of shares was in the best interests of the company. However, the allotment was improper because it was made for the impermissible purpose of defeating the voting power of the existing shareholders.
1. Chew (1992) 173 CLR 626 at 634.
2. (1992) 173 CLR 626 at 640.
3. (1987) 162 CLR 285.
It will often be difficult to determine whether or not a particular use of a position is improper. But, in my opinion, officers or employees who act in breach of their fiduciary duties to secure a gain for themselves or others or to cause detriment to the corporation always make improper use of their position unless they are honestly and reasonably mistaken as to the facts which give rise to the duties or their breach. In the absence of a mistake of that kind, it is difficult to see how officers or employees who use their positions in breach of fiduciary duty to secure such a gain or cause such a detriment can escape a finding of improper use of their position. Certainly, they cannot escape a finding of improper use of position merely because they believed that what they were doing was in the interests of the corporation. Nor can they escape that finding by claiming that they believed that the breach of fiduciary duty would be ratified any more than a clerk can escape a finding of embezzlement by claiming that he or she thought the employer would ratify the unlawful takings.
In the present case, the respondents put the property of the company at risk by executing the documents and placing the sum of $2 million on term deposit. They did this to advance the conflicting interests of Jeffcott of which they were directors and shareholders, and they did it without authority and without the knowledge of their fellow directors at Magnacrete. They were well aware of their conflict of duty. Yet each of them actively promoted the interests of Jeffcott against the interests of Magnacrete. Moreover, they deliberately refrained from informing the other board members of what they were doing in the name of Magnacrete. In doing these things, they were acting in breach of the fiduciary duties that they owed to Magnacrete in order to secure a gain for a company in which they had substantial interests. Given the findings of the learned trial judge, his conclusion that the respondents made improper use of their positions as directors of Magnacrete was inevitable.
The Full Court erred in thinking that the respondents' beliefs that the transactions were not contrary to the interests of the company prevented their conduct from being improper. In Chew [28] , Mason CJ, Brennan J, Gaudron J and I expressly said "that conduct could amount to improper use of that position even if the person concerned believed it to be in the interests of the company". The Full Court's finding that the respondents had not made improper use of their positions as directors appears to be the result of a misunderstanding of another passage that occurs in the joint judgment of Mason CJ, Brennan J, Gaudron J and myself in Chew [29] . In that passage we said:
The accused's state of mind is relevant not only to the requirement of purpose but also to the element of improper use of his or her position. If, for example, an accused person reasonably but mistakenly believed that a particular transaction which he or she authorised was genuinely for the benefit of the corporation, that belief may, in an appropriate case, be material in determining whether the accused person can be held criminally responsible for using his or her position in a manner which would objectively be seen to be improper.
1. (1992) 173 CLR 626 at 634.
2. (1992) 173 CLR 626 at 634.
However, this passage was intended to do no more than indicate that in some cases entry into a transaction that might appear objectively to be an improper use of position will not be an improper use if the director or employee was acting to benefit the company but made an honest and reasonable mistake as to what would be the commercial effect of the transaction. An example is a case where the directors of a public company enter into a fixed term contract to purchase goods from one of their number at prices that are well in excess of the current market value of such goods. Objectively, making such a contract appears to be an improper use of the directors' powers for the benefit of one of the directors. If it were established, however, that the directors had entered into the contract only because of the mistaken but honest and reasonable belief that the contract was necessary to ensure the supply of such goods to the business, a finding that they had made improper use of their position probably could not be sustained.
The passage from Chew has no relevance in the present case where the respondents, in breach of their fiduciary duties, intended to benefit Jeffcott. The fact the respondents also believed that the transaction was for the benefit of Magnacrete, had no intent to harm that company and no belief in the impropriety of their actions could not convert what was done without authority, for an improper object, and in breach of fiduciary duty into a proper use of their position. This is not a case where there was an honest and reasonable but mistaken belief as to the commercial effect of a transaction entered into solely for the benefit of the company. Here the learned trial judge found that the respondents actively promoted the interests of Jeffcott against the interests of Magnacrete and that their purpose in entering into the scheme was to maximise the chance that Jeffcott would obtain the finance that it needed.
The appeal should be allowed. I agree that the outstanding grounds of appeal and the special leave application of Byrnes should be dealt with in accordance with the judgment of Brennan, Deane, Toohey and Gaudron JJ. |
high_court_of_australia:/showbyHandle/1/8676 | decision | commonwealth | high_court_of_australia | text/html | null | R v Joske; Ex parte Shop, Distributive & Allied Employees' Association [1976] HCA 48 | https://eresources.hcourt.gov.au/showbyHandle/1/8676 | 2024-09-13T22:57:22.199435+10:00 | High Court of Australia
Barwick C.J. McTiernan, Gibbs, Stephen, Mason, Jacobs and Murphy JJ.
R v Joske; Ex parte Shop, Distributive & Allied Employees' Association
[1976] HCA 48
ORDER
Orders nisi discharged.
Cur. adv. vult.
The following written judgments were delivered:—
Sept. 9
Barwick C.J.
In this matter I have had the advantage of reading the reasons for judgment prepared by my brother Stephen. I agree with him in thinking that the interim order made in proceedings No. 161 of 1974 was not made in relation to the matter to which those proceedings related within the meaning and operation of s. 141(2) of the Conciliation and Arbitration Act 1904, as amended ("the Act"). The power given by that section is not confined to the making of orders for the performance of or observance of rules of an organization: nor to orders germane to the relief claimed in the proceedings. The matter actually in dispute between the parties out of which the proceedings have arisen and to which they relate will satisfy the limitation contained in the final words of the sub-section. But even so, as my brother Stephen points out, the status of the applicant for prohibition was not in dispute: and it was to that status which the interim order itself related. For the reasons which my brother Stephen gives, I would make absolute the order nisi granted with respect to the interim order made in proceedings No. 161 of 1974.
I also agree with my brother Stephen's conclusion that the order nisi granted in relation to proceedings No. 295 of 1975 should be discharged. Section 171B of the Act does not afford any reason why an invalid act should not be restrained. That section does not purport to deprive a court of jurisdiction to restrain acts which, if they had been performed, would or might have fallen within the ambit of the operation of the section.
I also agree with my brother Stephen in his opinion that neither of the orders made in proceedings No. 300 of 1975 were beyond the power of the Industrial Court. I agree with my brother's reasons for that conclusion.
In the application for prohibition in relation to proceedings Nos. 301 and308 of 1975 respectively, an attack was made upon the constitutional validity of ss. 171C and 171D of the Act. The submitted ground of invalidity was that the sections purported to confer non-judicial power on the Industrial Court. This ground should be rejected because the nature of the relief which the sections auhorize is, in no sense, antithetic to the exercise of judicial power: indeed, on the contrary, it is of a kind which in other areas of the law courts are wont to give. I agree with my brother Stephen that the relief which a court is authorized to give consequentially upon its judicial determination of some situation can rarely, if ever, be denied the quality of an exercise of judicial power. I also agree with my brother that the authorized relief cannot, in any case, be regarded as of a non-judicial nature. I agree with his expressed reasons for that conclusion.
Being of this opinion, it is inappropriate in this matter to consider the propriety of the decision of the Court in Reg. v. Kirby; Ex parte Boilermakers' Society of Australia [1] .
1. (1957) 95 C.L.R. 529.
In my opinion, all the orders nisi other than that made in relation to proceedings No. 161 of 1974 should be discharged.
McTiernan J.
I heard argument only upon the question whether the interim orders made were within statutory power. I am of opinion that upon the true construction of s. 141(2) of the Conciliation and Arbitration Act 1904, as amended ("the Act"), it conferred power upon the Industrial Court to make such orders.
I agree with the conclusion of the other Justices who have dealt with the question that ss. 171C and 171D of the Act do not purport to confer on the Australian Industrial Court non-judicial functions. Such powers as those sections give to the Court are of a judicial nature or incidental to the exercise of judicial power.
Gibbs and Jacobs JJ.
In the course of argument before a bench of which we were not members it was contended by the respondents, in answer to the submission of the prosecutors that ss. 171C and 171D of the Conciliation and Arbitration Act 1904 as amended, are invalid in that they attempt to confer non-judicial power on a federal court, that the Boilermakers' Case [2] should not be followed. Because of their importance the matters raised by the respondents' contention were argued separately before all members of the Court then available. However, the Court as constituted to hear the application to make absolute the orders nisi hold that the applications should be refused, thereby determining that ss. 171C and 171D do not attempt to confer on the Industrial Court powers or functions which are not judicial. The attack on the validity of those sections therefore fails, whether or not the decision in the Boilermakers' Case was correct. In these circumstances it is unnecessary to consider whether it would be right to reopen the decision in the Boilermakers' Case and if so whether that decision was incorrect and we would express no opinion one way or another on either of those questions.
1. (1957) 95 C.L.R. 529.
Stephen J.
The complexities of this case are principally of fact, not law and may be largely disregarded in these reasons for judgment; my views concerning each of the five orders nisi which are before the Court will sufficiently appear without detailed reference to the facts.
Each of the orders nisi relates to a distinct proceeding before the Commonwealth Industrial Court concerning the affairs of a trade union, the Shop Distributive and Allied Employees' Association. In three of those proceedings interim orders were made under s. 141(2) of the Conciliation and Arbitration Act 1904, as amended, and the power of the Industrial Court to make those interim orders is now challenged, it being further asserted that the making of the orders involved errors of law. In one of those same three proceedings an order, purportedly under s. 187 of the Act, authorized the inspection of union record cards and again jurisdiction to make the order is denied. In a fourth proceeding the Industrial Court was asked, in exercise of power conferred upon it by s. 171C, to declare invalid certain rules of the union and it is now said that that section is unconstitutional since it purports to confer non-judicial power upon a federal court. In the fifth proceeding the Court was asked to validate, under s. 171C, certain union proceedings and also to approve, under s. 171D, a scheme for the re-organization of the affairs of the union; these two sections are attacked as unconstitutional upon the like ground.
Three questions thus arise; two of them involve matters of statutory interpretation, the construction of s. 141(2), including its interaction with s. 171B, and of s. 187, and their application, when properly construed, to the particular facts. The third question raises a constitutional question, whether s. 171C and s. 171D involve the exercise of non-judicial power.
Section 141 (so far as is relevant) is as follows:
141. (1) The Court may, upon complaint by any member of an organization and after giving any person against whom an order is sought an opportunity of being heard, make an order giving directions for the performance or observance of any of the rules of an organization by any person who is under an obligation to perform or observe those rules.
(2) At any time after proceedings under this section have been instituted (including proceedings instituted before the commencement of this sub-section), the Court may make such interim orders as it thinks fit in relation to the matters to which the proceedings relate.
(3) An order under the last preceding sub-section continues in force, unless expressed to operate for a shorter period or unless sooner discharged, until the completion of the proceedings under this section.
No. 161 of 1976
In proceedings No. 161 of 1974 the applicants, Egan and Davis, sought a large number of orders, none of them concerned with the status, as a financial member of the relevant union, of its New South Wales branch. Nevertheless the Court, on application by one of the individual respondents, made an interim order against the rest of the respondents that the branch "be deemed to be for all purposes of the organization a financial member of (the Union) for 36,741 members". In doing so it purported to be exercising powers under s. 141(2) but the prosecutors assert that in the circumstances that sub-section confers no such power; they add that in any event the order wrongly went against the union itself, it being one of the respondents and they also point to the fact that in the proceedings the applicants contended that none of the individual respondents other than those representing the New South Wales branch were members of the union.
In answer to the contention that there was no power to make the interim order, because it was not made "in relation to the matters to which the proceedings relate"—s. 141(2), it was said that even if the relief sought in the proceedings did not concern the status of the New South Wales branch, this requirement of the sub-section was nevertheless satisfied. To succeed, the proceedings required the making of orders against members of the union; according to the applicants there existed no valid membership other than that of the members of the New South Wales branch; it was therefore essential to the obtaining of relief that that branch be declared to be a member so that its own members might thereby be members of the union; this the interim order did. It is in this, so say the present respondents, that there is to be found the necessary relationship between the interim order and the "matters to which the proceedings relate".
No doubt were the New South Wales branch not a member of the union then, if the applicants were correct in denying membership of all others, there would exist no-one obliged "to perform or observe" the union's rules and against whom orders could be made. But this is a consideration quite unrelated to the meaning of the limiting words of sub-s. (2)—"matters to which the proceedings relate". Such "matters" must, I think, be found either in the "complaint by any member of an organization" by which proceedings are initiated or else, perhaps, in the substance of the dispute which underlies that complaint and which the relief sought seeks to resolve. It is as inappropriate to describe the branch's status as such a "matter" as it is to say of an action in tort or contract against a defendant that it "relates" to the fact of the defendant's existence as a legal person. Effect must be given to the concluding words of sub-s. (2). But for their presence interim orders might be made "as it (the Court) thinks fit"; as it is the sub-section restricts the Court's power in a quite specific manner. I find no warrant for departing from what I regard as the clear meaning of this restriction, that is, that the matters concerning which interim orders may be made must be coincidental with the matters to which the proceedings relate.
In the course of argument there emerged another possible answer to the principal attack made on this interim order. The respondent who applied for it might, it is said, have obtained a similar order had he instituted original proceedings under s. 141(1) instead of making application under sub-s. (2) in the course of the applicants' proceedings. In the light of reg. 155 of the Conciliation and Arbitration Regulations, which guards against proceedings being avoided for non-compliance with the regulations, any defect of form should not be regarded as affecting jurisdiction, particularly since no want of notice to other parties or of a fair opportunity to be heard could be made out.
In my view reg. 155(2) is not in point; it is concerned with non-compliance with regulations and no doubt would have authorized the Industrial Court to deal appropriately with any non-compliance with formalities required by regulation and which it encountered in the course of the application for the interim order. Perhaps it could thus have treated the application here in question as a substantive application proper to be dealt with under sub-s. (1) of s. 141, thus making an order under sub-s. (1) accordingly, but that would have been a final order, finally disposing of the complaint with which it originated. That is not at all the order which the Court in fact made, as it believed, under sub-s. (2); the order is in terms of an interim order and the reasons given by the Court for making it disclose, very naturally in the case of an interim order, a pre-occupation with the preservation of the status quo rather than with any ultimate resolution, by final order, of a complaint under sub-s. (1).
Accordingly, to disregard non-compliance with formal requirements so that the application may be treated as if made as a final order under s. 141(1) will only lead to the conclusion that the Court wholly misconceived its function when it made the order. An alternative would be to regard the Court as empowered to make an interim order, as it in fact did, still treating the actual application as if made under s. 141(1) but treating the order itself as if made under sub-s. (2), the absence of any separate application for it being accounted for by it being made by the Court of its own motion. Still another alternative would be to avoid altogether recourse to sub-s. (2), treating sub-s. (1) as itself authorizing interim orders. Neither of these suggestions will do; the unrealities they involve become manifest when the reasons given by the Court for the making of the order are examined. Were either of these alternatives to be accepted the Industrial Court would be being treated as if it had before it, when making the order, a situation quite different from that with which it was in fact presented; all else apart, it would be being asked to make the order not in the actual context of application No. 161 but in quite other circumstances. Whether in that case the interim order would ever have been made is problematic, but at least it is clear that the reasons for its making would not have been those which the Court in fact gave. This is, in my view, enough to dispose of these two alternatives.
I conclude accordingly that there was no power to make the interim order here in question and would accordingly make absolute the order nisi for prohibition. I need therefore not deal with such other arguments as were raised concerning proceedings No. 161 of 1974.
No. 295 of 1975
In the next proceedings, No. 295 of 1975, the interim order there made at the instance of the applicants, and in exercise of the power conferred by s. 141(2), is challenged on quite different grounds. That order required that certain respondents should not recognize other respondents as entitled to vote on particular motions moved at meetings of the national council of the union and that other respondents should not themselves vote on such motions.
The prosecutors contend that but for that order those motions might have been passed; and, even if invalid, would then have been proper subject matter for validation under s. 171B. The interim order, by ensuring that they were not passed, prevented a situation arising in which s. 171B might operate; the motions would, they say, have been passed "in good faith" and the invalidity affecting voting would only have been discovered "afterwards", both pre-requisites for the operation of s. 171B. The legislative intent is, it is said, that s. 141(2) should not be used so as to prevent advantage being taken of s. 171B in the very sort of case for which it is designed, yet a specific ground for the making of the interim order was precisely that, were it not made, advantage might be taken of s. 171B. Want of jurisdiction was said to arise because the Industrial Court was obliged not merely to take account of the existence of s. 171B in determining whether or not to make the interim order but positively to refuse the application because of its existence; its failure to do so meant that it acted without jurisdiction (Anisminic v. Foreign Compensation Commission, per Lord Reid [3] ).
1. [1969] 2 A.C. 147, at p. 171.
It is clear from the material before this Court that, while the Industrial Court did have s. 171B very much in mind in making its interim order it did not regard it as any bar to the making of that order. The prosecutors' proposition must be that s. 141(2) should never be applied to prevent acts which may, or, perhaps are likely to, become appropriate for the grounding of an application for validation under s. 171B.
The Act does not anywhere state this proposition; in particular s. 141(2) contains no such limitation and in its absence s. 171B is still capable of useful work. Sections 171B and 171C are not, I think, to be regarded as any exclusive code, alone applicable to cases of invalid acts and their consequences. Moreover, as was said on behalf of the present respondents, these sections are primarily concerned with existing acts of invalidity and not with prospective acts the occurrence of which may be prevented by recourse to an order under s. 141(2).
For these reasons I would discharge this order nisi.
No. 300 of 1975
The third order nisi relates to proceedings No. 300 of 1975 in which two orders were made, one an interim order under s. 141(2), the other an order said to be made under s. 187 of the Act. By the first of these orders a respondent, Tacon, was required to take no further steps to conduct the election for officials in the Newcastle and Northern branch of the union. The steps in question were the counting of votes by Tacon and the declaration of the result of the poll. The prosecutors would deny to the Industrial Court power to make the order it did, there being no rule of the union which would be breached by a counting of votes and the declaration of the result of the poll.
The Industrial Court made the order because it thought that a strong prima facie case had been made out that the rule under which the entire election was conducted was invalid. In those circumstances it was, I think, clearly within power to make the order; its terms were, in the words of Dixon J. in R. v. Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [4] , "well framed to bring about a compliance with the rules", in the sense that to forbid acts which, if undertaken, would not be authorized by the rules and would involve giving positive and practical effect to impugned rules clearly assists in procuring such compliance.
1. (1945) 70 C.L.R. 141, at p. 170.
In the case of this order reliance was also again placed upon s. 171B as limiting the power to make orders under s. 141(2). With that submission I have already dealt. I do not regard the prosecutors' adaptation of their previous argument to the circumstances of this order as any more persuasive than it was in matter No. 295 of 1975.
The order said to be made under s. 187 of the Act was an order entitling one Whalan "or any other agent of the parties" to inspect certain documents which were to be produced to the Court on subpoena duces tecum. Objection was taken to this order because s. 187, in referring to documents produced in evidence, speaks of their inspection by the Court and by "such of the parties as the Court allows" and neither Whalan nor "any other agent" would be such a party. The documents here in question have been produced to the Court and are now in its custody but they are not, and may never be, in evidence; accordingly s. 187 does not apply to them.
The purpose intended to be served by s. 187 is not clear; at least in so far as it entitles the Court to inspect documents in evidence before it it seems but to labour the obvious; whether its reference to inspection by "the parties" in fact limits the Court, in permitting inspection, to the parties themselves need not be determined. The fact is that the section is inapplicable to the present facts and the Court is, I think, then left with a discretion to allow inspection of documents which are in its custody but are not in evidence. It exercised that discretion in a particular manner and no question of want of jurisdiction or error of law arises.
I would accordingly discharge the orders nisi in this case.
No. 301 of 1975
No. 308 of 1975
In these two proceedings the applicants invoked the provisions of Part IXA of the Act. In the first of them declarations were sought, under s. 171C, that certain rules of the union were invalid and, under s. 171G, that to apply to those rules the validating power which s. 171B conferred would do substantial injustice. In the second proceedings a number of declarations were sought under s. 171D, coupled with an order approving a scheme for the reconstitution both of the branches and of the national council of the union.
The prosecutors now attack the constitutionality of ss. 171C and 171D; they assert that the power which those sections purport to confer upon the Industrial Court, a power which these two proceedings have sought to invoke, is non-judicial.
That the Industrial Court is a Court exercising the judicial power of the Commonwealth is common ground; the two further propositions, that such a Court may not have vested in it non-judicial powers and that the powers conferred by ss. 171C and 171D are in fact not judicial in character, are those on which the parties are at issue. To contest the first of these would involve a reversal of the decision in the Boilermakers' Case [5] and for that reason argument upon it was reserved for a bench of six Justices, which sat some time after the conclusion of the hearing of argument upon all other aspects of these proceedings. The second of these two contested propositions requires to be established by the prosecutors before any question concerning the first proposition can arise. I turn accordingly to examine this second contested proposition.
1. (1957) 95 C.L.R. 529.
Section 171C first of all empowers the Industrial Court, on application made to it, to determine whether "an invalidity has occurred in the management or administration" of an organization or otherwise in specified ways related to its affairs; if so the Court may make such declaration as it thinks fit—sub-s. (1). So far the power conferred is clearly judicial. Then under sub-s. (2) (a) the Court may, if it determines that such an invalidity has occurred, "make such order as it thinks fit to rectify or cause to be rectified the invalidity, or to negative, modify or cause to be modified the consequences in law of the invalidity, or to validate any act, matter or thing rendered invalid by or as a result of the invalidity"; and before doing so must, under sub-s. (2) (b), "satisfy itself that such an order would not do substantial injustice to the organization or to any member or creditor of the organization or to any person having dealings with the organization". It is upon these two quoted provisions that the prosecutors rely in contending that a grant of non-judicial power is involved.
Section 171D(1) empowers the Industrial Court to declare that a part of an organization has ceased to exist or to function effectively or that an office or position in an organization has become vacant, and that no effective means exists under the organization's rules to remedy this. Then sub-s. (2) empowers the Court, having made such a declaration, to approve a scheme "for the taking of action by a collective body of the organization or of a branch of the organization or by an officer or officers of the organization or of a branch of the organization for the reconstitution of the branch or part of the branch, or of the collective body, or to enable it to function effectively, or for the filling of the office or position" (sub-s. (2)) but it must first satisfy itself "that the order would not do substantial injustice to the organization or to any member of the organization" (sub-s. (3)).
It is the power to rectify, modify or validate as the Court thinks fit, and the power to determine whether an organization has ceased "to function effectively" and, if so, to sanction a scheme to rectify the position, in each case qualified only by the provision as to substantial injustice, that are particularly seized upon by the prosecutors as revealing in these sections that other than judicial power has been conferred on the Court.
These provisions are concerned exclusively with the nature of the remedies open to the Court once it has adjudicated upon matters which have been initiated by a party and the determination of which is an eminently judicial function. The particular nature of an available remedy, at least when it is one not unfamiliar as part of the traditional equipment of courts of law or equity, can seldom be such as of itself to involve a court in a non-judicial function.
The power in s. 171C(2) to relieve against what otherwise would be the invalidating effect of non-compliance with requirements of the law is a commonplace of our jurisprudence and can scarcely of itself involve any overstepping of the bounds of judicial power. To qualify, by reference to the avoidance of "substantial injustice", the exercise of the wide discretionary power conferred by the words "as it thinks fit" introduces a concept with which courts are familiar and which does nothing to suggest a non-judicial function. By directing attention to the effect of a proposed order upon all those likely to be affected by it the Court is required to have regard to all the circumstances of the case. What was said by members of this Court in Cominos v. Cominos [6] is sufficient to answer the present attack upon s. 171C(2). I need do no more than refer to what was said in the joint judgment of McTiernan and Menzies JJ. [7] and in the judgments of Walsh J. [8] , of Gibbs J. [9] and of Mason J. [10] . My own reasons for judgment [11] express views which I regard as applicable in large measure to the present case.
1. (1972) 127 C.L.R. 588.
2. (1972) 127 C.L.R., at p. 591.
3. (1972) 127 C.L.R., at pp. 593-594.
4. (1972) 127 C.L.R., at pp. 599-600.
5. (1972) 127 C.L.R., at p. 608.
6. (1972) 127 C.L.R., at pp. 602-606.
No different considerations appear to me to apply to s. 171D; when the Court has made a declaration under sub-s. (1) of that section a situation is disclosed in which some part of a registered organization has ceased to exist or has become moribund; the rules of the organization are found to provide no solution but some efficacious remedy is called for; the traditional response of the law in such a case has been to do very much what sub-s. (2) provides for, to empower the Court to supervise a scheme for reconstitution of the defunct or moribund organization. In the fields of charitable trusts and of companies the same concept has been employed in exercise of power eminently judicial in character. It is said that the reference in s. 171D(1) to an organization having ceased "to function effectively" invokes broad considerations of industrial policy such as are referred to in the recitation of the chief objects of the legislation in s. 2 of the Act. I regard the reference to effective functioning as much more limited in scope; it is concerned with the performance, by the "part of the organization" which has been found wanting, of its function as such a part. Whether it is, in this sense, functioning effectively is a matter which is entirely within the scope of determination by the exercise of judicial functions. My general observations concerning s. 171C apply equally to s. 171D.
It is for the foregoing reasons that I reject the submission that either of these two sections involves the purported conferring of non-judicial power upon the Industrial Court. I would accordingly discharge the orders nisi applicable to these two proceedings.
Mason and Murphy JJ.
There are before the Court five orders nisi made by Stephen J., all arising out of multifarious proceedings in the Australian Industrial Court, concerning the affairs of the Shop Distributive and Allied Employees' Association ("the Association"), an industrial organization of employees registered under the Conciliation and Arbitration Act 1904, as amended. In all but one of these proceedings final or interim orders were made by the Court relying upon the authority conferred by s. 141(1) and (2) of the Act. The prosecutors challenge the validity of a number of orders on various grounds, all of which, it is claimed, go to absence or excess of jurisdiction in the Court below and, accordingly, to attract relief by way of prohibition or certiorari. In the one case in which no order has yet been made prohibition or certiorari is sought on the ground that the Court below has no jurisdiction.
The prosecutors' argument in the main centres upon the provisions of s. 141 and ss. 171B, 171C and 171D which were introduced into the Act by the Conciliation and Arbitration (Organizations) Act No. 89 of 1974. Indeed, it was part of the prosecutors' case that ss. 171C and 171D are invalid in that they constitute an attempt to confer non-judicial power on a federal court contrary to the doctrine enunciated by the Boilermakers' Case [12] . By way of answer the respondents, apart from contending that the power conferred by the sections was judicial in character, submitted that the Boilermakers' Case was incorrect and should not be followed, this question being reserved for separate argument before the Court en banc.
1. (1957) 95 C.L.R. 529.
We begin, then, with s. 141 which provides, so far as it is material:
(1) The Court may, upon complaint by any member of an organization and after giving any person against whom an order is sought an opportunity of being heard, make an order giving directions for the performance or observance of any of the rules of an organization by any person who is under an obligation to perform or observe those rules.
(2) At any time after proceedings under this section have been instituted (including proceedings instituted before the commencement of this sub-section), the Court may make such interim orders as it thinks fit in relation to the matters to which the proceedings relate.
(3) An order under the last preceding sub-section continues in force, unless expressed to operate for a shorter period or unless sooner discharged, until the completion of the proceedings under this section.
The judgments of this Court in R. v. Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [13] make it perfectly clear that sub-s. (1) of s. 141 is not confined to the making of orders directing the performance or observance of a particular rule or particular rules of the organization, as the prosecutors would have it, and that it extends, as its words explicitly state, to the giving of directions for the performance or observance of any of the rules of an organization, that is, for the doing of acts which will conduce to the performance or observance of such rules. The Court was there concerned with the provisions of s. 58E of the Commonwealth Conciliation and Arbitration Act 1904-1934 which conferred upon the Arbitration Court power to make an order "giving directions for the performance or observance of any of the rules of an organization by any person who is under an obligation to perform or observe those rules", the very words now contained in s. 141(1).
1. (1945) 70 C.L.R. 141.
The power to make interim orders, given by sub-s. (2), is likewise not limited to the giving of directions to perform or observe rules. The terms of the grant to the Court of authority "to make such orders as it thinks fit in relation to the matters to which the proceedings relate" indicate that the Court has a wide discretion as to the form of order to be made. The exercise of this discretion cannot be restricted to the making of orders for the performance or observance of the rules, or for that matter to directions as to matters which will conduce to performance or observance of the rules. The history of sub-s. (2) suggests that in its present form it is designed to enable the Court to make any interlocutory order which will safeguard the position and interests of parties pending a final determination, provided that it bears a relationship "to the matters to which the proceedings relate". The judgments of this Court in Reg. v. Forbes; Ex parte Bevan [14] drew attention to the limitation attaching to the power to make interim orders given by sub-s. (2) in its then restricted form. Subsequently the sub-section was amended to overcome this limitation by Act No. 37 of 1972 which enacted the sub-section in its present form.
1. (1972) 127 C.L.R. 1.
The only relevant limitation on the Court's power to pronounce an interim order is to be found in the concluding words of the sub-section. Yet they are not susceptible of the construction which the prosecutors seek to place upon them. It is impossible to read "the matters to which the proceedings relate" as signifying no more than the relief claimed by the applicant in the proceedings, or, for that matter, than the issues which are raised for decision in the proceedings. The words, we think, signify the controversy between the parties to which the proceedings relate, whether or not it be crystallized as an issue in these proceedings or in the form of the relief sought.
Before departing from s. 141 we should refer to the provisions of Pt IXA because the existence of these provisions was relied upon by the prosecutors as a ground for confining the power given by s. 141(2), this being yet a further ground of attack on two of the interim orders which were made. Part IXA—ss. 171A to 171G—contains a series of validating provisions. Section 171B validates all acts done in good faith by the collective body or officeholder of an organization or branch, notwithstanding the subsequent discovery of invalidity in his or its election or appointment or in the making or the alteration of a rule. Section 171C enables the Industrial Court to make orders in respect of the consequences of invalidity in the affairs of an organization, in particular orders rectifying, negativing or modifying the invalidity or validating any act, matter or thing rendered invalid (sub-s. (2)). Section 171D empowers the Court to approve schemes for the reconstitution of an organization or part of an organization which has ceased to exist or to function effectively and there are no effective means under the rules by which it can be reconstituted or enabled to function effectively. Section 171F validates certain acts done by the collective body or an office-holder of an organization or branch upon the expiration of four years from the doing of the act. Section 171G enables the Court to make an order, where it is satisfied that the application of s. 171B or s. 171F would cause substantial injustice having regard to the interests of the organization, its members or creditors or persons having dealings with it, that neither section shall apply to an act specified in the Court's declaration.
In seeking to circumscribe power to make interim orders conferred by s. 141(2) the prosecutors submitted that ss. 171B and 171C are to be viewed as a comprehensive and exclusive code on the topic of invalidity—except in so far as final orders under s. 141(1) are concerned—and that therefore no interim order can be made under s. 141(2) to restrain the commission of an act prima facie invalid or flowing from an invalidity where it appears that the invalidity or its consequences could be cured subsequently by an order under ss. 171B or 171C. The argument is plainly misconceived. It is a misnomer to describe the sections as a code exclusively applying to all invalid acts and their consequences. Indeed, so much is conceded by the acknowledgment that the two sections do not trench upon an exercise of the power to make a final order under s. 141(1). And once it is accepted that the sections do not diminish the power to make an order under sub-s. (1), there is no reason to think that they diminish the power to make an order under sub-s. (2) of s. 141. Sections 171B and 171C deal with acts of invalidity which have already taken place and the consequences of such acts; there is no reason to suppose that they displace the power to restrain, whether by final or interim order, the commission of an invalid act, original or consequential, which lies in prospect only. In relation to such acts and consequences s. 141(1) and (2) operate according to their full flavour. No doubt in deciding whether to make an order under s. 141(2) the Court will take into account the existence of the powers conferred by Pt IXA, but in no sense is this a displacement of the Court's jurisdiction or of its power to grant relief under s. 141(2).
The provisions of Pt IXA are remedial and alleviating. They enable the Court to relieve against invalid acts and their consequences. But it is too much to say that the existence of the sections circumscribes the Court's jurisdiction and power to compel performance and observance of the rules of an organization by interim, as well as final, relief.
The prosecutors argue that ss. 171C and 171D confer on the Industrial Court non-judicial power. The attack upon s. 171C was supported largely by reference to the provisions of pars (a) and (b) of sub-s. (2) of that section. They follow sub-s. (1) which empowers the Court, on the application of an organization, a member or a person having a sufficient interest in respect of it, to hear and determine the question whether an invalidity has occurred in the affairs of the organization and to make such declaration as it thinks proper. The sub-section provides:
6C. (2) Where, in proceedings under sub-section (1), the Court finds that an invalidity of the kind referred to in that sub-section has occurred, the Court—
(a) may make such order as it thinks fit to rectify or cause to be rectified the invalidity, or to negative, modify or cause to be modified the consequences in law of the invalidity, or to validate any act, matter or thing rendered invalid by or as a result of the invalidity;
(b) shall, before making such order, satisfy itself that such an order would not do substantial injustice to the organization or to any member or creditor of the organization or to any person having dealings with the organization.
It involves, so the argument runs, the conferment on the Court of functions which differ markedly from the ascertainment and declaration of existing rights, involving as they do, the making of determinations by reference to criteria not enunciated and the making of orders creating new rights. In addition, it is urged that the concept of "substantial injustice" is so vague as not to lend itself to an exercise of judicial power. These considerations, it seems to us, are not enough to bring us within reach of the conclusion which the prosecutors seek to attain. Many examples are to be found in the exercise of judicial power of orders which alter the rights of the parties or are the source of new rights. Likewise, there are countless instances of judicial discretions with no specification of the criteria by reference to which they are to be exercised—nevertheless they have been accepted as involving the exercise of judicial power (see Cominos v. Cominos [15] ). It is no objection that the function entrusted to the Court is novel and that the Court cannot in exercising its discretion call in aid standards elaborated and refined in past decision; it is for the Court to develop and elaborate criteria regulating the discretion, having regard to the benefits which may be expected to flow from the making of an order under sub-s. (2)(a) and the impact which such an order will have on the interests of persons who may be affected.
1. (1972) 127 C.L.R. 588.
In the exercise of judicial power courts are called upon to decide whether particular transactions are invalid or unenforceable under the legislation relating to companies, money-lending and hire-purchase. Likewise they are frequently required to determine whether procedural steps taken in the course of legal proceedings have been validly or regularly taken. In each class of case the courts are empowered to relieve against invalidity, unenforceability or irregularity after having regard to any injustice, prejudice or hardship that may be caused by the making of such an order. This function, so it seems to us, is essentially an exercise of judicial power. Even if this were not so, the exercise of the power to grant relief must be regarded as incidental to the exercise of judicial power which is involved in the determination of the initial issue of invalidity, unenforceability or irregularity. For our part, we can perceive no real difference between these functions and the role thrust upon the Australian Industrial Court by s. 171C. The exercise of the power given by s. 171C(2), if not itself an exercise of judicial power (which in our opinion it is), is incidental to proceedings for a declaration of invalidity under sub-s. (1) which involves the exercise of such power.
It is a significant consideration, as the judgments in Reg. v. Davison [16] point out, that the function is entrusted to a court, at least in those cases in which the function cannot be clearly classified as administrative in character, and that it is the same as or essentially similar to functions which have hitherto been discharged by courts.
1. (1954) 90 C.L.R. 353.
To our mind the present case should be distinguished from Reg. v. Spicer; Ex parte Australian Builders' Labourers' Federation [17] in which s. 140 of the Conciliation and Arbitration Act 1904-1956 was held invalid. Here the Court has a jurisdiction vested in it, exercisable on the application of a party; there the Court was given a power to act of its own motion. Here the jurisdiction conferred enables the Court to relieve against invalidity and its consequences, a function frequently undertaken by courts and not essentially dissimilar to that entrusted to courts under the companies, money-lending and hire-purchase legislation; there the power to disallow rules was a power which has been regarded as a non-judicial function.
1. (1957) 100 C.L.R. 277.
True, it was said in that case that the discretion given by s. 140 was not a judicial discretion but was based "wholly on industrial or administrative considerations" (per Dixon C.J. [18] ) and involved "considerations of industrial policy" (per Taylor J. [19] ). We do not regard these observations as indicating that the mere requirement that a court take into account considerations of industrial policy in exercising a discretion is of itself enough to stamp that discretion with the character of a non-judicial function. The observations were made in a context in which there were other grounds supporting the conclusion reached by the Court.
1. (1957) 100 C.L.R., at p. 289.
2. (1957) 100 C.L.R., at p. 310.
In the result it may be said of s. 171C, as Barwick C.J. said of s. 143(2) of the Conciliation and Arbitration Act 1904-1973 in Reg. v. Joske; Ex parte Australian Building Construction Employees and Builders' Labourers' Federation [20] , that "The basis for the exercise of the discretion is specifically set out. It clearly partakes of judicial function: the weighing of the gravity of ascertained facts and decision upon the claims of justice."
1. (1974) 130 C.L.R. 87, at p. 94.
Section 171D(1) enables the Court, on an application made by an organization, a member or any person having a sufficient interest in respect of it, to declare
(a) a part of the organization has ceased to exist or to function effectively and there are no effective means under the rules of the organization or branch by which it can be reconstituted or enabled to function effectively; or
(b) an office or position in the organization or in a branch of the organization is vacant and there are no effective means under the rules of the organization or branch to fill the office or position,
Sub-section (2) empowers the Court, once a declaration has been made, to "approve a scheme for the taking of action for the reconstitution of the branch or part of the branch, or of the collective body, or to enable it to function effectively, or for the filling of the office or position". The Court, before making an order, must satisfy itself that the order would not do substantial injustice to the organization or to any member (sub-s. (3)). An order or direction and any action taken in accordance with an order or direction has effect notwithstanding anything in the rules (sub-s. (5)).
Much of what we have said in relation to s. 171C has equal application to s. 171D. There is to our mind nothing in the issues which s. 171D(1) poses for decision that is alien to the exercise of judicial power. Such issues of fact as the question whether part of an organization has ceased to exist or to function effectively, whether there are effective means under the rules by which it can be reconstituted or enabled to function effectively, are issues of fact well suited to judicial determination. So also are the issues posed by par. (b) of sub-s. (1).
The principal point of attack made by the prosecutors was on the power given to the Court by sub-s. (2) to approve a scheme. Yet this is a power which is associated with a jurisdiction to make a declaration under sub-s. (1), a function which we have held to involve the exercise of judicial power. Whether a scheme will or is likely to (a) reconstitute a branch, part of a branch or a collective body, (b) enable any one or more of these entities to function effectively, (c) result in the filling of an office or position or (d) cause substantial injustice to the organization or any member are all issues which are susceptible to judicial determination in the exercise of the judicial power, as indeed is the evaluation of the considerations which may be thought to be relevant to the making of an order granting or refusing approval. To the extent to which the argument is an attack on sub-s. (3) it is sufficient for us to reiterate the observations which we have already made in connexion with s. 171C(2) (b).
Section 171D(1) entrusts to the courts a function similar to that which courts have undertaken in confirming schemes of arrangement under the Companies Act. These schemes often reconstitute the capital structure of a company and readjust the rights of creditors and shareholders. The jurisdiction thereby exercised, it should be acknowledged, involves the exercise of judicial power. Consequently, it is our opinion that the jurisdiction conferred upon the court by s. 171D is itself an exercise of judicial power.
We turn now to the structure of the Association and the sequence of events which generated the proceedings in the Industrial Court. The Association is a federal body having a branch in each State with provision under its constitution for the establishment of two additional branches one of which is the Northern Newcastle Branch in New South Wales. The branches have autonomy in the management of their affairs. Membership of a branch constitutes membership of the Association. Under the Association's rules branches are required to pay affiliation fees on or before 1st April in each year, the fees being calculated on the basis of the membership as it exists on the preceding 1st January. The management of the affairs of the Association is vested in a National Council which consists of a president, vice-president, secretary-treasurer, assistant secretary and delegates from the branches, the representation by delegates from each branch being proportionate to the number of its members. The National Council meets biennially in October. Between meetings of the National Council the affairs of the Association are administered by the national executive which consists of the president, vice-president, secretary-treasurer and three other members elected by and from the national council, with the provision that a branch not represented on the executive may elect one of its council delegates to the executive. The Council has power to change the rules and to fix affiliation fees. Non-financial members and branches are not entitled to privileges of membership.
The critical events commenced when at a meeting of the council on 12th October 1974 the then national secretary, Egan, was removed from office under r. 12(d) and was replaced by Goldsworthy, formerly the assistant secretary. Proceedings (No. 161 of 1974) were then taken by the respondents Egan and Davis, members of the organization, under s. 141 for an order for Egan's reinstatement and for a series of orders establishing that the members of the National Council (other than the New South Wales delegates) and some members of the national executive were not validly elected or appointed. A final order for the reinstatement of Egan was ultimately made but during the course of the proceedings and before any final order was made, the Court made an interim order deeming the New South Wales branch to be for all purposes a financial member of the Association for 36,741 members.
The prosecutors challenged this order on a number of grounds. In discussing s. 141(2) and its relationship with s. 141(1) and Pt IXA we have already said enough to dispose of the submissions that s. 141(2) only authorizes an order for the performance or observance of the rules and that the existence of Pt IXA operates to deny jurisdiction to make an order in this case. Other submissions made by the prosecutors now need to be considered. The first is that there is no power to make an order against an organization and that this was such an order. The objection is without substance. The order was an order binding on the parties requiring them to act in the affairs of the organization on the footing that the New South Wales branch was a financial member to the extent stated; it was not an order against the organization itself.
The other submissions are that the order was not sought by the applicants but by those respondents who represented the New South Wales branch against other respondents and that it was not commenced in the manner required by r. 70, namely by rule nisi. Again this submission is in our opinion misconceived. Once it is accepted that the power to make interim orders is wide enough to enable the Court to protect on an interim basis the interests of the parties, there is no reason to think that the Court cannot make an order which differs from the relief sought by the applicants, provided that the occasion for its making arises in the course of the proceedings and it answers the description contained in s. 141(2). The question then is whether the interim order relates to a matter to which the proceedings relate. This question should be answered in the affirmative. The relief sought in the proceedings called in question the membership of the branches other than the New South Wales branch, but in order to obtain the final relief sought the applicants needed to establish that the New South Wales branch was a member; unless this was so, the applicants were not entitled to relief. What was in controversy between the parties was the membership of the branches because on this depended the conduct of the Association's affairs and in particular the composition of the Association's delegation to a meeting of the Australian Council of Trade Unions, the composition of the delegation hinging on the outcome of the proceedings. Accordingly, the matter to which the proceedings related was the membership of the branches and the composition of the delegation. The interim order related to this controversy by providing an interim basis for performance or observance of the rules so as to enable the Association's affairs to be conducted and an appropriate delegation to be selected.
Rule 70 required that the proceedings should be commenced by rule nisi. Instead of obtaining a rule nisi the respondent O'Neill filed a document described as an application. No objection was taken to the informal mode of commencement by application and the Court made an order after hearing argument without attention being drawn to the existence of the formal defect. In our opinion the defect falls within r. 155(2) and is one which may now be overlooked. In any event, as it is a defect procedural in character it does not in our opinion go to jurisdiction (see R. v. Commonwealth Court of Conciliation and Arbitration; Ex parte Grant [21] ).
1. (1950) 81 C.L.R. 27.
In the result we would discharge the order nisi relating to proceedings No. 161 of 1974.
In consequence of an election held by postal ballot for the National Council and other officers of the Association in 1974 questions arose as to the validity of the election. In proceedings No. 295 of 1975 the applicants sought in the Australian Industrial Court orders that certain national councillors of the Association cease to hold themselves out or recognize other respondents as national councillors of the Association. By way of interim relief under s. 141(2), orders were made against particular respondents requiring them to cease to hold themselves out or to recognize other respondents as national councillors. The validity of these orders was challenged by the prosecutors on the ground that by reason of the existence of the provisions of Pt IXA they were not authorized by s. 141(2) and also on the further ground that the order was not an order for the performance or observance of the rules. The prosecutors' submissions, therefore, do no more than raise questions already discussed and disposed of. The consequence is that the rule nisi in this Court (No. 109 of 1975) should be discharged.
The third proceeding in the Industrial Court (No. 300 of 1975) arose out of amendments to the rules of the Association made at a meeting of the National Council on 15th to 17th October 1975. In these proceedings the respondents in this Court alleged that the amendments were not validly made, in particular those amendments which related to the membership of the Newcastle and Northern branch, and they sought relief in connexion with these rules and in connexion with the enrolment of persons as members of the Newcastle and Northern branch pursuant to the amended rules. The proceedings were in fact adjourned but during the course of the proceedings an interim order was made requiring Tacon, the national secretary, to take no further steps to conduct, continue or complete the election for officers for the Newcastle and Northern branch pursuant to national r. 40. This order was challenged again on the ground that it exceeded the limited scope of s. 141(2), viewed in the light of Pt IXA, contended for by the prosecutors. This ground has already been discussed and disposed of. Consequently, the order nisi relating to this proceeding should also be discharged.
In the same proceedings, in response to a subpoena duces tecum, certain documents were lodged by the applicants in this Court with the Industrial Court. After argument an interim order was made on 28th November 1975 giving the respondents in the Industrial Court leave to inspect the documents "by Mr. Whalen or any other agent of the parties" and stating that the inspection would be under the supervision of an officer of the Court. Apart from grounds already discussed, that order was attacked on the ground that it fell outside the authority conferred by s. 187 which provides that "all books, papers, documents and things produced in evidence before the Court may be inspected by the Court or by such of the parties as the Court allows". This section deals with documents produced in evidence; it does not purport to deal with the inspection of documents produced under subpoena before their production in evidence. The section therefore provides no basis for relief by way of prerogative writ.
Finally, the applicants challenge the jurisdiction of the Industrial Court to entertain proceedings ( Nos. 301 and308 of 1975) in which the organization and some of the respondents sought declarations under s. 171C(2) of the invalidity of (a) certain rules and (b) validating orders. In addition orders under s. 171D approving a scheme were sought. The views which we have already expressed dispose of the contention put in support of the challenge that the sections operated to confer non-judicial functions on a federal court.
In the light of the conclusions which we have reached we do not find it necessary to consider the submission made at the subsequent hearing that the Boilermakers' Case [22] was incorrectly decided and we therefore refrain from expressing an opinion on it.
1. (1957) 95 C.L.R. 529.
In the result, therefore, we would discharge the five orders nisi made by Stephen J. |
high_court_of_australia:/showbyHandle/1/10250 | decision | commonwealth | high_court_of_australia | text/html | null | Insurance Commissioner v Associated Dominions Assurance Society Pty Ltd [1953] HCA 94 | https://eresources.hcourt.gov.au/showbyHandle/1/10250 | 2024-09-13T22:57:23.592939+10:00 | High Court of Australia
Fullagar J.
Insurance Commissioner v Associated Dominions Assurance Society Pty Ltd
[1953] HCA 94
ORDER
On commissioner's motion order that Associated Dominions Assurance Society Pty. Ltd. be wound up by this Court under the provisions of the Life Insurance Act 1945-1950 of the Commonwealth and of the Companies Act 1936 of the State of New South Wales and that Basil Oswald Smith of 115 Pitt Street, Sydney, and Charles Herbert Rutherford Jackson of 115 Pitt Street, Sydney, be appointed liquidators of the affairs of the said company. Order that company's motion be dismissed. Order that the costs of the commissioner and of the said company of both motions be taxed and paid out of the assets of the said company. Fullagar J. made the following further order:— Order that the powers and duties of the liquidators appointed by Order of 10th December 1953 include the following:—
(a) To take into their custody or under their control all the real and personal property and things in action to which the said company is or appears to be entitled;
(b) To carry on the business of the said company so far as is necessary for the beneficial winding up thereof;
(c) To bring in the name and on behalf of the said company actions to recover book debts of the said company;
(d) Where the amount involved does not exceed one hundred pounds, without the sanction of this Court
(i) to make any compromise or arrangement with creditors or persons claiming to be creditors, or having or alleging themselves to have any claim, present or future, certain or contingent, ascertained or sounding only in damages against the said company or whereby the said company may be rendered liable; and
(ii) to compromise all calls and liabilities to calls debts and liabilities capable of resulting in debts, and all claims, present or future, certain or contingent, ascertained or sounding only in damages, subsisting or supposed to subsist between the said company and a contributory or alleged contributory or other debtor or person apprehending liability to the said company, and all questions in any way relating to or affecting the assets or the winding up of the said company, on such terms as are agreed, and take any security for the discharge of any such call debt liability or claim and give a complete discharge in respect thereof;
(e) To sell the real and personal property and things in action of the said company by public auction tender or private contract, with power to transfer the whole thereof to any person or company, or to sell the same in parcels;
(f) To do all acts and to execute in the name and on behalf of the said company, all deeds receipts and other documents and for that purpose to use when necessary, the seal of the said company;
(g) To prove, rank and claim in the bankruptcy of any contributory, for any balance against his estate, and to receive dividends in bankruptcy in respect of that balance as a separate debt due from the bankrupt and ratably with the other separate creditors;
(h) To draw accept make and indorse any bill of exchange or promissory note in the name and on behalf of the said company with the same effect with respect to the liability of the said company as if the bill or note had been drawn accepted made or indorsed by or on behalf of the said company in the course of its business;
(i) To take out letters of administration to any deceased contributory and to do in his official name any other act necessary for obtaining payment of any money due from a contributory or his estate which cannot be conveniently done in the name of the said company and in all such cases the money due shall for the purpose of enabling the liquidator to take out the letters of administration or recover the money, be deemed to be due to the liquidator himself;
(j) To appoint agents to do any business which the liquidator is unable to do himself;
(k) To open an account or accounts in the name of the said company in any branch of the Commonwealth Bank of Australia for the purposes of the winding up and forthwith to pay all moneys received by him as such liquidator into such bank account or accounts;
(l) To appoint a solicitor to assist him in the performance of his duties; and
(m) To do all such other things as are necessary for winding up the affairs of the said company.
Order that the date of commencement of the winding-up for the purposes of the Companies Act 1936 of the State of New South Wales be 5th February 1953. Order that the costs of the commissioner and of the company of the commissioner's motion and of the company's motion, including the costs of the proceedings of this day be taxed and paid out of the assets of the company.
Cur. adv. vult.
The following written judgment was delivered:—
Dec. 10
Fullagar J.
I have before me two motions which I ordered to be heard together. The first is a motion by the Insurance Commissioner, notice of which was filed on 5th February 1953, asking that the Associated Dominions Assurance Society Pty. Ltd. (which I will call the company) be wound up under Div. 8 of Pt. III. of the Life Insurance Act 1945-1950 Cth.. The second is a motion by the company, notice of which was filed on 27th May 1953, asking that the company be placed under judicial management under the same Division of the same Part of the Act. The Insurance Commissioner, who is named as a respondent to the second motion, is the commissioner appointed under s. 9 of the Act. This is only the second occasion on which the jurisdiction given by the Act to this Court to order the winding up of a life insurance company has been invoked. The first was a case of a company in a very small way of business, the application was not opposed, and a winding-up order was made by Williams J. on 20th February 1947. This is the first occasion on which an application has been made under the Act for an order for judicial management. The whole position created by the Act being thus practically unexplored, I think that I ought to state fairly fully my reasons for the decision which I have reached. I may say that I considered at an early stage whether I ought not to take steps to have policy holders of the company separately represented before me, but I decided against any such course, thinking that the interests involved were sufficiently represented by counsel for the commissioner and counsel for the company and that it was not desirable to add to the expense of already costly proceedings.
I propose (1) to set out the substance of the material provisions of the Commonwealth Act; (2) to consider two general questions of law which were raised thereon; (3) to state shortly the sequence of events leading up to the present applications; (4) to examine the financial position and prospects of the company; and (5) to explain, as well as I can, the conclusion which I have reached.
(1) The Life Insurance Act 1945, was assented to on 16th August 1945, and by virtue of a proclamation under s. 2 came into force on 20th June 1946. Section 4 contains a number of definitions, only one or two of which need be noticed. There is a rather curious definition of "approved securities", but the sole or main importance of this appears to be in connection with the deposits which the Act requires a life insurance company to lodge with the Treasurer of the Commonwealth. "Industrial insurance business" is defined as meaning life insurance business consisting of the issuing of or the undertaking of liability under industrial policies, and "industrial policy" is defined as meaning a policy upon which the premiums are by the terms of the policy made payable at intervals of less than two months and are contracted to be received or are usually received by means of collectors. "Ordinary life insurance business" is defined as meaning life insurance business consisting of the issuing of or the undertaking of liability under ordinary policies, and "ordinary policy" is defined as meaning a policy other than an industrial policy. Section 8 provides, subject to a qualification which is not material for present purposes, that the provisions of the Act shall apply to the exclusion of the application of a number of specified State Acts, which may probably be assumed to include all State legislation on the subject of life insurance. Section 9 provides for the appointment of an Insurance Commissioner. Section 15 provides that a company carrying on life insurance business in Australia immediately prior to the commencement of the Act shall not, after the expiration of six months from the commencement of the Act, carry on any class of life insurance business in Australia unless it has been registered by the commissioner. Provisions relating to registration follow. Section 19 of the Act of 1945 has been amended by s. 2 of the Life Insurance Act 1950. Section 26 requires a company carrying on life insurance business in Australia to deposit with the Treasurer money or approved securities or both to the value of £50,000. Section 29 provides that money so deposited is to be invested by the Treasurer in such approved securities as the company selects or, in default of selection, as the Treasurer determines. All deposits are to be deemed to form part of the assets of the company, and interest accruing thereon is to be paid to the company.
Section 37 provides that every company shall establish and maintain a "statutory fund" under an approved name in respect of the life insurance business carried on by it, and that it may establish and maintain a separate statutory fund under an appropriate name in respect of any class or classes of life insurance business. Section 38 provides that all amounts received by a company in respect of any class of life insurance business shall be carried to and become assets of its statutory fund. It also provides that, subject to s. 50, the assets of a statutory fund shall not, so long as the company carries on the class or classes of life insurance business in respect of which the fund was established, be available to meet any liabilities or expenses of the company other than liabilities or expenses referable to that class or those classes of life insurance business and liabilities charged on those assets immediately prior to the commencement of the Act, and shall not otherwise be directly or indirectly applied for any purpose other than the purposes of that class or those classes of life insurance business. Section 39 provides that, subject to the Act, the assets of every statutory fund maintained by a company may be invested in such manner as the company thinks fit, but are not to be invested in any other life insurance undertaking. Sections 41 to 47 prescribe certain accounts and returns which are to be made by the company, which include revenue accounts in prescribed forms and a balance sheet in a prescribed form.
Section 48 provides that every company shall, as at the date of the expiration of the financial year expiring next after the commencement of the Act and thereafter at intervals of five years, cause an actuary to make an investigation into its financial condition, including a valuation of its liabilities in respect of its life insurance business, and to furnish it with a report of the results of the investigation. Section 49 provides for the basis of valuation which is to be adopted in the preparation of the valuation balance sheet. It is to be such as to place a proper value upon the liabilities, regard being had to mortality experience, to the average rate of interest from investments and to the expenses of management. The value placed on the aggregate liabilities of any statutory fund is not to be less than it would have been if it had been calculated on a basis set forth in the Fourth Schedule to the Act, which is referred to as the "Minimum Basis". Section 50 prescribes conditions on which a company may pay or apply any part of its statutory fund as dividends or otherwise as profits to shareholders or as bonuses to policy holders. Section 52 requires accounts, balance sheets, &c., prepared in pursuance of the requirements of the Act to be lodged with the commissioner.
Section 55 provides that if it appears to the commissioner that "(a) a company is, or is likely to become, unable to meet its obligations; (b) a valuation made in pursuance of Division 5 of this Part discloses that the amount of a statutory fund of a company is less than the amount of the liabilities of the company in respect of that statutory fund; (c) a company has failed to comply with any provisions of this Act; (d) a company has not, within a period of one month as from a date upon which the Commissioner demanded from it in writing any information which the Commissioner was entitled under this Act to demand from it, furnished that information fully and satisfactorily; (e) the rate of expense of procuring, maintaining and administering any life insurance business of a company in relation to the income derived from premiums is unduly high; (f) the method of apportionment of income or expenditure of a company among any classes of life insurance business or between life insurance business and any other business is inequitable; or (g) any information in the possession of the Commissioner calls for an investigation into the whole or any part of the life insurance business of the company", the commissioner may serve on the company a notice in writing requiring it to show cause within a specified period why he should not investigate the whole or any part of the business of the company. If the company fails within the period specified to show cause to the satisfaction of the commissioner, the commissioner may make the investigation. Section 56 provides that in making an investigation the commissioner may require the company to produce any securities, books, documents, &c., and allow him to make extracts from them and may examine on oath or affirmation any director or officer of the company.
Section 59 provides that if the commissioner, by reason of the conclusions arrived at by him as a result of an investigation so made, is of opinion that it is necessary or proper so to do, he may apply to the Court for (a) an order that the company or any part of the business of the company be placed under judicial management; or (b) an order that the company be wound up. The expression "the Court" is defined by s. 4 as meaning the High Court of Australia. Section 59 also provides that a company may, in respect of itself, after giving the commissioner one month's notice in writing, apply to the Court either for a winding-up order or for an order for judicial management. Both the company and the commissioner are entitled to be heard on any application made to the Court under this section. Section 59 also provides that a company or any part of the business of the company shall not be judicially managed or wound up except under the provisions of the Act. The word "company" is defined by s. 4 as meaning a body corporate which carries on life insurance business in Australia. Sections 60 to 66 inclusive are concerned with the conduct of the "judicial management" of a company in pursuance of an order made under s. 59 (1) (a). All that need be noted at this stage is that s. 62 requires the person appointed by the order as judicial manager to conduct the management with the greatest economy compatible with efficiency, and as soon as possible to file with the Court a report stating what course he thinks most advantageous to the general interests of policy holders. Under this section the judicial manager may recommend inter alia either that the company be permitted to carry on its business as before, or that the company be wound up. Sections 67 to 72 deal with the consequences of a winding-up order. All that need be noted at this stage is that the Court is to appoint a liquidator and to give him such directions as appear to be necessary. The liquidator is to be under the control of the Court and may apply to the Court from time to time for directions. Notice of any such application is to be given to the commissioner. Section 67 (7) provides that "Subject to this Act, and to any direction of the Court, the winding-up of a company incorporated within Australia shall be carried out in accordance with the law in force in the State or Territory in which the head office of the company is situated with respect to the winding-up of a company by a court and that law shall apply accordingly, with such modification and adaptations as are necessary".
The remaining provisions of the Act have no direct relevance to either of the present applications, but ss. 96 and 97 should, I think, be noted. Section 96 provides that a policy holder who desires to discontinue payment of premiums on a policy on which not less than three years' premiums have been paid shall on application be entitled to receive a paid-up policy for an amount not less than that determined in accordance with the provisions of Pt. I. of the Sixth Schedule. Section 97 provides that the owner of a policy which has been in force for at least six years shall on application be entitled to surrender the policy and to receive not less than its surrender value less the amount of any debt owing to the company. For the purposes of s. 97 the surrender value of a policy is to be the amount calculated in accordance with Pt. II. of the Sixth Schedule. It will be seen that these provisions, in cases to which they apply, give definite rights to a policy holder as against a company. Apart from such provisions, the position would depend entirely on the contract between the policy holder and the company, and, in the absence of any express provision on the subject, the policy holder would have no right at any time either to receive a paid-up policy or to surrender his policy and receive any sum by way of surrender value.
(2) Two general questions of law were argued before me, and these I must now consider.
In the first place Mr. Holmes challenged the validity of s. 59 of the Act, so far at least as it purported to authorize the making of a winding-up order. No general attack was made on the validity of the Act, regard being had doubtless to the recent decisions of this Court in Associated Dominions Assurance Society Pty. Ltd. v. Balmford [1] , and Hospital Provident Fund Ltd. v. State of Victoria [2] . It was said, however, that sub-s. (4) of s. 59 was invalid and inseverable from the rest of the section, so that the whole section fell to the ground. It was also said that the Commonwealth Parliament had no power under the Constitution to create or destroy legal personality, or to make laws affecting the status or capacity of corporations which owed their existence to, and derived their status and capacity from, State laws. The minor premise of the argument was not, I think, expressly stated, but it is presumably to be found in the proposition that a law providing for the winding up of companies incorporated under State laws is a law which directly affects the status and capacity, and ultimately the legal existence, of such companies. The very words "winding up" denote, it might be said, a process in the course of which the affairs of such a corporation are taken out of its hands and its property and rights disposed of, and at the end of which the corporation itself is annihilated. Mr. Holmes referred to Huddart, Parker & Co. Pty. Ltd. v. Moorehead [1] , and to a line of Canadian cases in the Privy Council of which John Deere Plow Co. Ltd. v. Wharton [2] is an important example. He referred also to Re Alberta Debt Adjustment Act [3] . The latter case went on appeal to the Privy Council, and is reported sub nom. Attorney-General for Alberta v. Attorney-General for Canada [4] , but their Lordships held the Alberta statute in question invalid on a broad ground which did not require them to consider that part of the majority judgment in the Supreme Court of Canada on which Mr. Holmes relied.
1. (1951) 84 C.L.R. 249.
2. (1953) 87 C.L.R. 1.
3. (1909) 8 C.L.R. 330.
4. (1915) A.C. 330.
5. (1942) S.C.R. (Can.) 31, esp. at p. 42.
6. (1943) A.C. 356.
There are provisions in the Life Insurance Act 1945, which may be found difficult to sustain under the Constitution at all, and others which it may be found difficult to sustain without an application of s. 15A of the Acts Interpretation Act 1901-1950. In the first place, take sub-ss. (4) and (5) of s. 40, sub-ss. (4) and (5) of s. 47, sub-ss. (4) and (5) of s. 52, and sub-ss. (3) and (4) of s. 58. In each of these cases the Act purports to confer on this Court a "jurisdiction" to entertain an "appeal" from an administrative decision of the commissioner. In the last of the four cases it purports to confer a similar "jurisdiction" on the Supreme Court of a State. I should have thought it difficult to say that the power so conferred is judicial power, and equally difficult to say that powers other than judicial powers, and powers strictly incidental thereto, could lawfully be conferred under Chapter III of the Constitution on this Court or on any Federal court or on any State court as a court to exercise Federal jurisdiction: cf. Queen Victoria Memorial Hospital v. Thornton [5] . Again, s. 8 of the Act, which purports to deprive a large number of State Acts of all effect, could conceivably be open to a challenge which would raise the whole question of what Evatt J. has called "manufactured inconsistency": see West v. Commissioner of Taxation (N.S.W.) [6] . There are other provisions too which may be thought dubious. For example, though I express no opinion on the matter, I can readily imagine its being argued that the character of a "law with respect to insurance" does not attach to the provisions of ss. 92, 93 and 94 of the Act, which are concerned with the protection of the rights of insured persons under life policies against creditors and with the creation of beneficial interests in life policies. And, to come nearer home, the argument presented in this case that sub-s. (4) of s. 59 is invalid is, to say the least, an argument which may some day demand serious consideration, for its effect would appear at first sight to be that no creditor or shareholder can present a petition for the winding up of any company which carries on a life insurance business, even though that business may constitute only a very small part of that company's activities.
1. (1953) 87 C.L.R. 144.
2. (1937) 56 C.L.R. 657.
However, I do not find it necessary to decide whether sub-s. (4) of s. 59 is a valid provision, because that sub-section has no direct application to the present case, and because I consider that I should be bound to hold it, if it were invalid, severable from those parts of s. 59 which are directly relevant. The position might have been different in the absence of s. 15A of the Acts Interpretation Act 1901-1950. But this appears to me to be just the very kind of case in which that section is decisive. The same considerations appear to me to apply with regard to those other provisions of the Act the validity of which is impugned on one ground or another. Even if the attack on them is soundly based, they are severable from those provisions which are material for present purposes. Even if the sub-sections, to which I have referred, of ss. 40, 47, 52 and 58 were invalid and inseverable, so that their invalidity brought down the whole of those respective sections (which is quite a possible view), I should still think that those sections were severable from the rest of the Act.
Nor do I think that I can accept Mr. Holmes's more general constitutional argument. It is quite true that the Parliament of the Commonwealth has no general power to make laws with respect to the creation of corporations, or the powers and capacities of corporations, or the liquidation and dissolution of corporations. The power given by s. 51 (xx.) of the Constitution with respect to "foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth", whatever may be its true scope, does not amount to any such general power (Huddart, Parker & Co. Pty. Ltd. v. Moorehead [1] ). In Bank of New South Wales v. The Commonwealth [2] , Latham C.J. said of s. 51 (xx.) that "the one thing that is clear about it is that" [it] "assumes the existence of corporations either under foreign law or under some law which is in force in the Commonwealth. If the corporation is already formed it derives its existence and its capacity from the law which provided for its formation" [3] . If there is no general power to provide for the creation of corporations, it may be taken that there is no general power to wind up or dissolve corporations. But I should think it quite clear that a law made by the Parliament with respect to any of the subjects mentioned in s. 51 may be made applicable to corporations and control their conduct within the field of the power, and I am disposed to think further that such a law may, if the special character of corporations requires special provision in order to make the law effectively applicable to corporations, make any such special provision. Although there are matters of detail (such as those I have mentioned) in which its provisions may be open to constitutional attack, I can feel no doubt that the Life Insurance Act of the Commonwealth is, regarded as a whole, a law with respect to "insurance", which is authorized by s. 51 (xiv.) of the Constitution. Life insurance is, and was in 1900, a well recognized kind or class of "insurance". It may be that the power includes a power to make special provision for the constitution or incorporation of bodies to carry on insurance businesses of various kinds (cf. M'Culloch v. Maryland [1] ; Jumbunna Coal Mine N.L. v. Victorian Coal Miners' Association [2] ), though it may be noted that s. 51 (xiii.), which confers legislative power with respect to banking, expressly refers to the incorporation of banks, and there is no corresponding reference in s. 51 (xiv.). But it is not necessary to consider this question, because the Act (apart from Pt. VI., with which I am not concerned) makes no attempt to do any such thing. It seems to me that the power to make laws with respect to insurance must include power to prescribe conditions upon which any person, natural or artificial, may carry on an insurance business of any kind. It must include power to require such persons to be registered and to provide security for the due performance of their obligations to insured persons, to maintain funds to answer those obligations, to keep appropriate accounts, to submit those accounts to a designated authority, to make and return to a designated authority periodical actuarial investigations disclosing their true financial condition, and so on. It must include power also to make such provisions practically effective, and s. 51 (xxxix.) is there to be called in aid, if need be. Further, the whole relation of insurer and insured is within the scope of the power, and the power must extend to providing for the enforcement of contractual obligations and for the creation and enforcement of further obligations. It must extend also, in my opinion, to dealing with a situation in which the interests of a body of insured persons are involved by reason of an actual or probable default on the part of their insurer. In such a situation it extends, in my opinion, to providing for the taking of such steps as may be thought necessary or desirable for the protection of such persons as a body and the equitable adjustment of their interests inter se. It cannot, as I think, be held to stop short of authorizing the taking of such steps as are authorized by s. 59. It seems to me that such provisions possess on their face the character of laws with respect to life insurance. It may be that the power does stop short of authorizing a direct provision for the actual dissolution of a corporation. But I regard this as a point of small importance in this case. Neither an order for judicial management nor an order for winding up affects the existence of a corporation.
1. (1909) 8 C.L.R., at pp. 349, 363, 371, 394, 412.
2. (1948) 76 C.L.R. 1.
3. (1948) 76 C.L.R., at p. 202.
4. (1819) 4 Wheat. 316 [4 Law. Ed. 579].
5. (1908) 6 C.L.R. 309.
I do not think that the position, as I have stated it, is affected by the Canadian authorities on which Mr. Holmes relied. The argument sought, of course, to apply e converso the case of John Deere Plow Co. Ltd. v. Wharton [1] , in which it was held that Provincial legislation restricting the operations of a company incorporated under a statute of the Dominion was unconstitutional. The decision in that case has been explained and applied notably in Great West Saddlery Co. v. The King [2] , and Attorney-General for Manitoba v. Attorney-General for Canada [3] . If those decisions could be so applied here, it might well lead to the conclusion that the whole of Div. 8 of Pt. III. of the Life Insurance Act of the Commonwealth was invalid, so that I should have to dismiss both the motion for winding up and the motion for judicial management. (The dismissal of its own motion, if the commissioner's motion were also dismissed, would probably cause no great sorrow to the company.) But the decisions in the Canadian cases cannot, in my opinion, be so applied. It appears to me that the position under our own Constitution is radically different in material respects.
1. (1915) A.C. 330.
2. (1921) 2 A.C. 91.
3. (1929) A.C. 260.
As is well known, ss. 91 and 92 of the British North America Act 1867 Imp. (30 & 31 Vict., c. 3) confer exclusive legislative powers over specified subjects upon the legislatures of the Dominion and of the Provinces respectively, and there is a provision at the end of s. 91 which may be stated sufficiently for present purposes by saying that (as it has been interpreted) a matter which falls within s. 91 is not to be deemed to be a matter falling within s. 92. Among the matters assigned to the Dominion by s. 91 is "(2) The Regulation of Trade and Commerce", and among the matters assigned to the Provinces by s. 92 is "(11) The Incorporation of Companies with Provincial Objects". In order to preclude what was regarded as a potential "hiatus" with respect to the incorporation of companies, it was held by the Privy Council at an early stage that the power to regulate trade and commerce included a power in the Dominion Parliament to provide for the constitution and incorporation of companies having "Dominion objects", i.e., objects not confined to the boundaries of any particular Province: Colonial Building & Investment Association v. Attorney-General for Quebec [1] . So to hold was, of course, equivalent to holding that an express and exclusive power with respect to the constitution and incorporation of companies with "Dominion objects", as distinct from companies with "Provincial objects", resided in the Dominion legislature. Nor could it be easy to confine such a power within narrow limits, although the doctrine actually developed has been criticized: see, e.g., the observation of Meredith C.J. quoted in Great West Saddlery Co. v. The King [2] . For a power to create, although exclusive, might be thought to be empty and nugatory unless it comprised a power to endow the thing created with powers and capacities to govern within a wide field its potentially Dominion-wide corporate activities, and to provide ultimately for its liquidation and dissolution. The result has been the rule exemplified in John Deere Plow Co. Ltd. v. Wharton [3] . It does not mean that Dominion companies are immune from Provincial legislation of a general character, but it does appear to mean that neither the existence of such a company nor the pursuit of its corporate objects can be controlled or affected by any law enacted in a Province.
1. (1883) 9 App. Cas. 157.
2. (1921) 2 A.C., at p. 115.
3. (1915) A.C. 330.
The position in Canada has no direct analogy under the Constitution of the Commonwealth. On the one hand, the enumerated powers of the Commonwealth Parliament do not include any general power to provide for the creation or destruction of corporate personality. On the other hand, corporations created under State laws enjoy no immunity from Commonwealth laws enacted under any of the powers given by the Constitution. If a Commonwealth law is in truth a law with respect to any of the matters enumerated in s. 51, it can—at any rate, since the Engineer's Case [4] —be no objection to it that it restricts, or even prohibits, the exercise of powers which belong to a corporation by virtue of its constitution under the law of a State. It may well be that a Canadian Province could not make applicable to a Dominion-created corporation such provisions as those of s. 15 (2) and s. 59 (1) of the Life Insurance Act of the Commonwealth. But there is no reason why in Australia the Commonwealth should not make such provisions applicable to a State-created corporation. I have already explained that, in my opinion, those provisions possess the character of laws with respect to insurance.
1. (1920) 28 C.L.R. 129.
The other question of law which was debated before me relates to the grounds on which this Court may or should exercise the power to make a winding-up order under s. 59. That section confers the power as a discretionary power, which is not controlled by any express condition, although the Court could not, of course, entertain an application by the commissioner unless it were satisfied that he had made an investigation under s. 55 and was genuinely of opinion, as a result thereof, that it was necessary or proper to make the application. Of those matters I am entirely satisfied. For the rest, s. 59, so far as its express terms go, leaves the discretion of the Court entirely at large. In this respect it presents a contrast to such familiar provisions as those of s. 208 of the Companies Act 1936-1940 N.S.W. and s. 166 of the Companies Act 1938 Vict., both of which are in the same terms as s. 168 of the Companies Act 1929 Imp. (19 & 20 Geo. 5 c. 23). It may be noted that s. 547 of the Victorian Act (which is now deprived of operation according to the tenor of s. 8 and s. 59 (4) of the Commonwealth Act) provides that the Court may order the winding up of a life assurance company on the petition of five or more policy holders or shareholders upon its being proved that the company is insolvent. This provision is taken from s. 21 of The Life Assurance Companies Acts 1870-1872 Imp. (33 & 34 Vict. c. 61—35 & 36 Vict. c. 41). So far as the general provisions of the Companies Acts are concerned, the most important grounds on which the Court is authorized to make a winding-up order are (e) that the company is unable to pay its debts and (f) that the Court is of opinion that it is just and equitable that the company should be wound up. With regard to the latter ground, the reports contain many and various examples of facts and circumstances which have been regarded as making it "just and equitable" that a company should be wound up.
I cannot say that I have felt any serious difficulty as to the general principles which should guide the Court in exercising its discretion under s. 59. With regard to the ultimate discretion, I think the general conception to be applied is that which is inherent in the words "just and equitable" in the Companies Acts. Those words are wide and vague, but they have become very familiar, and they have been judicially considered on many occasions. The Act, however, contemplates that certain matters are to be established before a question of discretion arises. When the application under s. 59 is made by the commissioner, it can only be after he has made an investigation under s. 55, and if he is of opinion that the results of the investigation warrant the making of the application. The grounds which justify the making of an investigation are stated in s. 55, and I have set them out above. They are seven in number. Six of them are specific, and the seventh is of a general nature. What might be included within the seventh need not now be considered. The six which are specific indicate, in my opinion, grounds which may justify the Court in making either a winding-up order or an order for judicial management. It does not follow from the establishment of any one or more of the grounds mentioned that either order should be made. The Court has still to exercise a discretion, and it should, in my opinion, make one or other order if, but not unless, it is satisfied that to do so is "just and equitable". It will be just and equitable if to do so appears likely to be in the best interests of all concerned. In saying this, I have it in mind that the prime intention of the Act is to protect policy holders—they, as Mr. Macfarlan said, borrowing from legislation on another subject, should be the "first and paramount consideration"—but I do not regard this as meaning that the interests of shareholders or others are always to be ignored. The grounds which may, under s. 55, support an investigation by the commissioner and an application under s. 59 are intrinsically of varying degrees of seriousness, and the facts of any particular case which falls within any one of them may be of varying degrees of seriousness. If any one of those grounds is established, the making of either of the orders authorized by s. 59 is still a matter of discretion. No rule should, or can, be laid down. The case must depend on all the circumstances. But, so far as grounds (a) and (b) in s. 55 are concerned—and these are the most important for the purposes of the present case—it may be said that, generally speaking, if there appears to be no reasonable prospect of the position being remedied and the company's business being placed in the near future on a sound basis, a winding-up order should be made. If it appears likely to be a case of mere temporary embarrassment, no order should be made. If the position is in doubt, and the Court thinks that, although a serious position is disclosed, further investigation and experiment would be desirable—perhaps that the company ought to be given a chance to see what it can do—then an order for judicial management of the company may well be thought appropriate.
I will only add at this stage that it seems clear to me, and I did not understand it to be disputed, that, for the purposes of s. 55 and s. 59 alike, it is necessary to have regard not only to present liabilities of a company but to future and contingent liabilities. Even in 1875 and under 33 & 34 Vict. c. 61, s. 21, I should have thought that the position was correctly stated by Mr. Kay Q.C. (as he then was) in argument in In re London & Manchester Industrial Association [1] , and that the observations of Bacon V.C. in that case [2] were quite mistaken. A different view was, I think, taken by James V.C. in Re European Life Assurance Society [3] . Sir William James in that case said:—"In my view of the law, it would be just and equitable to wind up a company like this assurance company if it were made out to my satisfaction that it is, not in any technical sense but plainly and commercially, insolvent—that is to say, that its assets are such, and its existing liabilities are such, as to make it reasonably certain—as to make the Court feel satisfied—that the existing and probable assets would be insufficient to meet the existing liabilities" [4] . His Lordship speaks of " existing liabilities". But he was dealing with a case in which the liabilities side of the company's balance sheet showed an item of some £300,000 as "Liabilities under assurances or balance of value of sums assured over present value of annual premiums", and the judgment shows very clearly that his Lordship regarded this actuarially calculated future liability as an "existing liability". When this is borne in mind, I think that the passage which I have quoted is not without value as a guide in the present case.
1. (1875) 1 Ch. D. 466, at p. 470.
2. (1875) 1 Ch. D., at p. 472.
3. (1869) L.R. 9 Eq. 122.
4. (1869) L.R. 9 Eq., at p. 128.
(3) I turn now to the facts leading up to the present applications. The company has been in existence for some twenty-five years, having been incorporated in New South Wales on 27th March 1928 as a company limited by shares. On 14th April 1937 it became a proprietary company under its present name. Its nominal capital is £250,000 divided into 250,000 ordinary shares of £1, of which 46,687 have been issued. Of these shares 20,007 were issued to one W. T. Page, now deceased, who was for many years managing director of the company. These were issued for a consideration other than cash. There was no evidence as to the nature of the consideration. The remaining 26,680 shares were issued for a cash consideration, and these are paid up to 3s. per share. The company thus has some £23,000 of uncalled capital. It was stated at the Bar that it was unlikely that a call would produce any substantial sum, but there is no evidence as to this. I regard the fact that there is uncalled capital as relevant, but, having regard to the figures to which I shall refer, as of small importance.
I have no evidence as to the activities of the company before the commencement of the Life Insurance Act 1945. The business carried on has comprised ordinary life insurance, industrial insurance and accident insurance. Shortly after the Act was proclaimed, the company applied for registration, and it was registered by the commissioner under s. 19 on 9th September 1946. The material, however, which, in pursuance of s. 17, accompanied the application for registration, disclosed certain features which the commissioner not unnaturally considered unsatisfactory. This material included a valuation report, with a valuation balance sheet, as at 30th June 1941, the latest date as at which the company had caused an actuarial investigation to be made. The valuation balance sheet showed "net liability under assurance and annuity transactions" at a figure of £331,564, and "assurance funds as per balance sheet" at a figure of £179,915. A deficiency of £151,649 was thus disclosed. The material also included accounts of the company as at 30th June 1945. The balance sheet as at that date showed, on the liabilities side, an item "Assurance Account—£307,262". It also showed other liabilities (apart from shareholders' capital and a reserve) amounting to some £12,000. The assets side showed "tangible" assets amounting to about £240,779 and "Establishment and Purchase Account—Cost of establishment of business and purchase price of other business acquired—£111,429". The company's next actuarial investigation was made as at 30th June 1946, and the documents in connection therewith, including a valuation balance sheet, were received by the commissioner in Canberra on 7th July 1947. It is necessary at this stage to say only that this valuation balance sheet showed net liabilities under policies at a figure of £549,783, and the life assurance statutory fund at £332,239. The deficiency thus disclosed was £217,544. It should be mentioned here also that the ordinary balance sheet as at 30th June 1946 showed, on the assets side, an increase in the figure for "Establishment Account" of some £8,000, that figure now standing at £119,911. Accounts for succeeding years, up to and including the year ended 30th June 1952 were transmitted by the company to the commissioner. Under s. 48 of the Act the company's next actuarial investigation should have been made as at 30th June 1951, the last having been made as at 30th June 1946. On 1st April 1952 the commissioner received a letter from the company, saying that a valuation as at 30th June 1950 had been made by Mr. A. T. Traversi, a Fellow of the Institute of Actuaries, and suggesting that, in order to save expense to the policy holders, this should be accepted in lieu of the valuation which was due as at 30th June 1951. Mr. Traversi's valuation balance sheet showed net liabilities under policies at a sum of £660,325, and the life insurance statutory fund at a sum of £475,173. The deficiency thus disclosed was £185,152. The commissioner raised various objections to accepting the material thus put before him, pointing out, among other things, that, if the material was intended to comply with the Act, it ought, in accordance with s. 52, to have been lodged with him twelve months earlier. In the meantime, however, several things had been happening.
The commissioner appears from the outset to have taken a serious view of the company's position. He began by requiring the company, under s. 40 (3) to rectify its accounts in various respects, which included a writing down of the value of certain shares held by the company in other companies. These requirements appear to have been carried out. However, after receiving the valuation balance sheet as at 30th June 1946, and the company's ordinary accounts for the year ended 30th June 1947, and after some correspondence with the company and an interview with its auditor, he wrote to the company on 2nd April 1948, informing it that he had instructed Mr. S. W. Caffin of his office to conduct an investigation into the affairs of the company. The company protested, and on 28th April 1948 issued a writ in an action in this Court claiming, inter alia, an injunction to restrain the commissioner from investigating its affairs. No further step was ever taken in this action. It was obvious that the commissioner had not complied with s. 55 of the Act, and (having doubtless been so advised) he issued on 30th April 1948 a formal notice to the company requiring it to show cause why its affairs should not be investigated. The company's immediate response was to commence another action, the writ in which was issued on 12th May 1948. For some reason more than two years elapsed before this action was practically determined in favour of the company when the Full Court, on 9th August 1950, on appeal from McTiernan J., held that the notice of 30th April 1948 did not comply with the requirements as to time of s. 55, and granted an injunction restraining the commissioner from acting on the notice: see Associated Dominions Assurance Society Pty. Ltd. v. Balmford [1] . On 8th February 1951 the commissioner issued a fresh notice to show cause under s. 55, but, because the company claimed that it had not a fair opportunity of showing cause, he decided not to proceed further under that notice, and on 28th March 1951 he issued a third notice.
1. (1950) 81 C.L.R. 161.
On 13th April 1951 the company delivered to the commissioner at Canberra a document in which it purported to show cause why an investigation under s. 55 should not be made. I will not attempt to summarize this document, which is Exhibit W.C.B. 21 to Mr. Balmford's main affidavit. Suffice it to say that, while it contained certain arguments which were put before me and which I shall have carefully to consider, a substantial part of it was taken up with complaints of unfair treatment by the commissioner in several respects including a failure to state any "particulars" of his reasons (if any) for thinking that the company was likely to become unable to meet its obligations. This professed desire for "particulars" bears all the indicia of insincerity. The company also objected strongly to the proposed appointment of Mr. Caffin as investigator, referring to an action for malicious conspiracy to injure it, which it had commenced on 14th December 1949 in the Supreme Court of New South Wales against the commissioner himself (Mr. Balmford), Mr. Caffin and others. It suggested that the nature of some of the acts of which the company complained would be found referred to in Associated Dominions Assurance Society v. Andrew [1] . In the proceedings there reported, which were against employees of the company, the company had failed, and special leave to appeal to this Court was refused: see [2] .
1. (1949) 49 S.R. (N.S.W.) 351; 66 W.N. 176.
2. (1949) 79 C.L.R., at p. 651.
Five days later—on 18th April 1951—the company commenced yet another action in this Court, action No. 8 of 1951. In this action it claimed, inter alia, a declaration that the Life Insurance Act, and in particular Div. 7 of Pt. III., was invalid, and an injunction to restrain the commissioner from acting on his notice. The statement of claim made allegations of malice and want of good faith against the commissioner. On 27th April 1951 the commissioner informed the company by letter that he had determined that it had not shown cause to his satisfaction, and that he had appointed Mr. Caffin to make an investigation of its affairs. On 26th April 1951 McTiernan J. refused an application by the company in action No. 8 of 1951 for an interlocutory injunction, and an appeal against this decision to the Full Court was dismissed on 1st June 1951: see Associated Dominions Assurance Society Pty. Ltd. v. Balmford [3] . On 4th October 1951, McTiernan J. made an order striking out the statement of claim in the action, and on 14th December 1951 an appeal against this decision to the Full Court was dismissed, leave being reserved to deliver an amended statement of claim.
1. (1951) 84 C.L.R. 249.
In the meantime Mr. Caffin had proceeded to enter upon the investigation entrusted to him by the commissioner. For the purposes of the task in hand he required the production of the securities of the company and certain books of account and desired to interview some of the senior officers of the company. The securities and books which he required were not produced to him, and he was able to interview none of the officers of the company. It was open to the commissioner to act under s. 56 of the Act, but—quite possibly because he did not regard that section as providing anything in the nature of a satisfactory sanction—he did not do so. Instead Mr. Caffin informed the company that he would conduct his investigations without the documents and information which he had required. Again the company commenced legal proceedings, but a motion for an injunction to restrain Mr. Caffin from adopting this course was dismissed by Roper C.J. in Eq., on 26th July 1951. Mr. Caffin then commenced and completed a detailed examination and analysis of the material contained in the documents, accounts and returns, furnished from time to time to the commissioner in pursuance of the Act. He presented his report to the commissioner on 10th September 1951, and on 6th February 1952 the commissioner notified to the company "a summary of the conclusions arrived at" by him as a result of Mr. Caffin's report. His notice of motion for a winding-up order was, as I have said, filed on 5th February 1953, and the company's notice of motion for an order for judicial management about four months later. The motions were heard by me on 7th September 1953 and succeeding days.
I have thought it desirable to set out the events which led up to the making of these applications to the Court. It is not that I think that anything that emerges from them should carry decisive weight with me in determining what course I should adopt. But they present some remarkable features, which ought not to be overlooked. Statements made in one of the letters from the company to the commissioner suggest that at one stage the company's managing director was willing to interview the commissioner and make certain books and records available. But it remains true to say that for a period of five years the company did everything in its power to delay the taking of decisive action by the commissioner, to prevent an examination of its books and records, and to withhold all information other than the returns which the Act required it to make. It did not even comply fully with the Act, for it did not make the actuarial investigation required as at 30th June 1951. Ultimately, indeed, it succeeded in its endeavours in all the directions mentioned. In the course of its endeavours it made most serious allegations against the commissioner and Mr. Caffin, which were—very properly, no doubt—not raised before me, but which have never been withdrawn. I think I ought to say that, so far as any material before me goes, these allegations are without any foundation. Then, when the commissioner finally moves for a winding-up order, the company, having done all the things which I have mentioned, agrees in effect that the intervention of the Court is necessary, but asks the Court to make an order which, while taking its affairs out of its own control, will not actually put it into liquidation. It may be that the death of Mr. W. T. Page in 1952 was a material event in the story, but the acts of the company are the acts of the company whoever is responsible for its management. Mr. Macfarlan, for the commissioner, did not strongly press these matters upon me, and the company's actual financial position and prospects must clearly be regarded as the main factors in the case. I think, however, that such matters as I have mentioned might legitimately be weighed in the balance in a doubtful case. And, in so far as there are any gaps in the relevant material, it is to be borne in mind that these exist because the company has not chosen to disclose books and records to the commissioner.
(4) I approach now an examination of the financial position and prospects of the company. Such a task is more difficult than in the case of an ordinary commercial concern, because of the peculiar features of a life insurance business. The general position, as I see it, may be set out substantially in Mr. Balmford's words with some modifications. There are passages in his second affidavit which appear to me to have the effect of qualifying (though they do not expressly do so) the exposition in his first affidavit. What follows, of course, does not pretend to be more than a summary of bare essentials.
An ordinary commercial institution measures its financial solvency by means of a balance sheet setting forth the actual liabilities and assets in hand. Regard may, of course, also be had to contingent assets or liabilities, if any. In the case of a life insurance company which has been doing a substantial business, while the immediate liabilities may be quite small, those which are payable in the future upon death, or in the case of endowment assurances upon survival, are likely to be very substantial. The consideration to the company for the undertaking of these future liabilities is the payment of premiums, and future premiums payable must be taken into account in order to arrive at an estimation of the company's true future liabilities. To arrive at the true position of a company's life insurance business, it is, therefore, necessary to begin by estimating the cost of future claims and future receipts from premiums. This involves, in the first place, an estimate of the number of present policy holders of each age—(a) who will die or attain the maturity age of their policies in each future year, from which numbers can be obtained the cost of the claims arising in each future year; and (b) who will not have died or will not have attained the maturity age of their policies in each future year, from which numbers can be obtained the premiums to be received in each future year. Having obtained an estimate of the claims and premium receipts in each future year the actuary has then to discount these amounts at an appropriate rate of interest in order to obtain their value at the present time. The difference between these two discounted values represents the "net liabilities under policies", which are referred to in Form J in the Second Schedule to the Act. A major consideration in the valuation is the determination of the rate of interest to be used in discounting future claims and premium receipts. The valuation rate of interest should be related to the rate of interest which it is anticipated that the company will earn on its investments, though it is to be noted that maximum rates of interest to be used in the calculation of future liabilities are now fixed by the Fourth Schedule to the Commonwealth Act. The effect of assuming in the valuation a higher rate of interest than that which can be actually earned is to under-estimate, or at least to run a grave risk of under-estimating, the value of the company's liabilities. The higher the rate of interest adopted, the lower will be the apparent net liability. The accepted method of arriving at the financial position of a life office is by comparing the net liabilities, actuarially calculated in the manner described above, with the assets available to meet those liabilities.
I have already mentioned that s. 49 of the Life Insurance Act 1945-1950 and the Fourth Schedule prescribe a "minimum basis" for the calculation of the liabilities of a life office. While the importance of this for present purposes must not be exaggerated, it does mean, I think, that the Court is not left entirely at large with regard to a standard of solvency. One of the matters which justify an investigation by the commissioner, and which may justify a winding-up order, is that a valuation discloses that the amount of the statutory fund is less than the liabilities in respect of that fund. The amount of the statutory fund is, to all intents and purposes, a matter of ascertainable fact, whereas the amount of the liabilities is a matter of actuarial estimation and probability, and the propriety of a particular "valuation" might be matter of difference of opinion. When, however, we find the Act itself prescribing a "minimum basis" of valuation, the possible field of controversy while not, of course, eliminated, is at least reduced. No basis of calculation more favourable to the company than that prescribed by the Fourth Schedule is permitted for the purposes of the Act. All this, of course, in no way affects the significance to be attached to a deficiency in a particular case. Still less does it compel the exercise of discretion in any particular way.
It will clear the ground somewhat if I put one matter aside at the outset. There were several references during the hearing to the "expense rate" of the company. What is called the "expense rate" or "expense ratio" of a life office is the ratio of the expenses of conducting the life business to the premium income thereof. What can be regarded as a reasonable expense rate depends on a variety of circumstances. The commissioner, I think, regards the expense rate of the company in the present as having been, in all the circumstances, unduly high. This may or may not be so, but the figures are not startling, and I have attached no importance to the expense rate as such in this case.
The matters on which the commissioner mainly relied are matters of much greater moment. They were analyzed and discussed before me with care and in detail, but I think it will suffice if I set out the substance of what I regard as important.
(a) We have, to begin with, from the company itself actuarial statements of the company's position as at three dates—30th June 1941, 1946 and 1950. The last, it will be remembered, was made by Mr. Traversi: the quinquennial investigation which the Act required to be made as at 30th June 1951, appears not to have been made. It does not seem to me to be important at this stage to distinguish between the ordinary branch and the industrial branch of the company's business. The relevant figures disclosed as at the three respective dates are as follows:—
1941 1946 1950 Net value of liabilities £331,564 £549,783 £660,325 Statutory or Insurance Fund 179,915 332,239 475,173 Deficiency £151,649 £217,544 £185,152
The amount of the deficiency disclosed by these figures in each year is very substantial. If we regard them comparatively, they show an increase in the amount of the deficiency as between 1941 and 1946 of some £66,000, and a decrease in the amount of the deficiency as between 1946 and 1950 of some £32,000. It would appear, however, that, for purposes of comparison, the figures for 1941 and 1950 require adjustment. In the first place it seems that the valuation of 1946, being made after the Act of 1945 came into force, was on a "more stringent" basis than that of 1941. This means, as I understand it, that, if the same basis were taken for 1941 as for 1946, the amount of the 1941 deficiency would be greater than the above figure, with the result that the difference between the figures for the two years would be reduced. Mr. Traversi says, and Mr. Balmford accepts this position, that an adjustment for this change in the valuation basis would reduce the apparent increase in amount of deficiency between these two years to approximately £30,000. In the second place, in the year ended 30th June 1950 the company sold a property which it had acquired and thereby realized a capital profit of some £37,000. Since this is a non-recurring profit, it would seem right to exclude it in comparing the positions as at 30th June 1946 and as at 30th June 1950, though it could not, of course, be excluded in considering the company's actual position as at 30th June 1950. If this be excluded, the company's deficiency increased between 1946 and 1950 to the extent of some £5,000. So far as amount of deficiency is concerned, it may perhaps be said that no very startling change took place over the nine years. On the other hand, if the above figures are taken at their face value, it may be said that there has been a substantial improvement in the company's position, since they would appear to indicate that the percentage of statutory fund to net liabilities increased between 1946 and 1950 from about sixty per cent to about seventy-two per cent, about half of this increase being accounted for by the non-recurring profit on the sale of the land. If the 1941 liabilities are calculated on the 1946 basis, a somewhat similar percentage improvement is indicated as between 1946 and 1941.
(b) In spite of the apparently improving ratio, the above figures show a serious deficiency existing as at 30th June 1950. But the above figures are far from disclosing the full seriousness of the position. The figure taken above as representing the statutory fund at each date is taken from the company's ordinary balance sheets, in which it appears, of course, on the liabilities side. We have not a copy of the balance sheet as at 30th June 1941, though the relevant figures can be obtained from material before the Court. It will suffice to look at the balance sheets for the years ended 30th June 1946 and 1950. In 1946 the item "Statutory Fund—£332,239" appears on the liabilities side. There are also certain current liabilities, though these are, comparatively speaking, not of large amount. They do, of course, affect the actual position, but for present purposes I am prepared to ignore them. When we turn to the assets side of the balance sheet, in order to ascertain what there is to answer the "statutory fund", we find the total assets of the company stated at a figure of £371,737, of which, however, no less a sum than £119,911 is the value attributed to an "intangible" asset described as "establishment account". Of this sum of £119,911 (which, by the way, has increased by about £8,500 since 1941) a sum of £95,902 is attributed to the life insurance business, the balance of £24,009 (which is the amount of shareholders' paid-up capital) being attributed to "Other classes of business". The position disclosed by the ordinary balance sheet as at 30th June 1950 is substantially the same in the respect under consideration. The statutory fund is shown on the liabilities side at the figure of £475,173. Total assets of the life insurance business are shown at a figure of £480,005, but the "establishment account" still stands at £119,911, though the amount of this which is attributed to life insurance business is reduced to £91,111. There is an additional item on the assets side—"Sundry Debtors (Including Insurance Act Suspense Account)—£10,284". I am not clear as to what this item is supposed to represent, but I did not understand it to be suggested that it should be regarded otherwise than as an "intangible". We thus get a total figure for intangibles of £101,395. In the absence of any evidence as to these intangibles, or as to the existence of anything in the nature of a "hidden reserve", I would be disposed to express the result of this examination of the balance sheets at 30th June 1946 and 1950 by saying that, at least to the extent of the intangibles, the statutory fund mentioned in those balance sheets was not represented by assets. It is, I think, only saying the same thing in another way if we say, as the commissioner says, that we should add to the amount of the deficiency shown in the table at the beginning of par. (a) above the amount of the value attributable to intangibles. If we do that, we get the following result:—
1946 1950 Deficiency shown above £217,544 £185,152 Intangibles 95,902 101,395 Real deficiency £313,446 £286,547
My figures for 1946 differ slightly from those of the commissioner, and it may well be that the commissioner is more likely than I to be right, but in any case I would, having regard to the figures involved, regard the difference between us as negligible. The figures given immediately above do still show some improvement in the company's position as between 1946 and 1950. They show a decrease in the amount of the deficiency. They also show for 1946 what I would regard as the true statutory fund as amounting to about forty-three per cent of the actuarial liability, and for 1950 as amounting to about fifty-seven per cent of the actuarial liability. Those figures give to the company, so to speak, the benefit of the casual profit on the sale of land. If that profit were excluded, the amount of the deficiency would show a slight increase, and the difference in percentages would work out, I think, as an increase from about forty-three per cent to about fifty-one per cent. This accords substantially with Exhibit R2, which was prepared by Mr. Traversi, and which shows the ratio as being 5s. 10d. in the £ in 1941, 8s. 11d. in the £ in 1946, and 11s. 5d. in the £ in 1950.
The salient fact which seems to me to emerge from all this is that at 30th June 1950, the latest date as at which we have what I would regard as reliable information as to the company's actuarially calculated liability on its policies, the statutory fund amounted, on the most favourable view possible to the company, to only about fifty-seven per cent of the amount of those liabilities, the actual amount of the deficiency being in the vicinity of £300,000. This salient fact, viewed in the light of the company's history over the preceding nine years, appears to me to provide the crux of the commissioner's case. There are, however, certain other matters to be mentioned, which have a bearing on the position and prospects of the company. Having regard to the apparent improvement in 1950, it becomes important, I think, to attempt to assess its prospects.
(c) Although certain figures for 1950-1951 suggest considerable activity on the part of the company, I can find nothing in the evidence to establish that any material improvement in its position took place between 30th June 1950 and 30th June 1952, which is the latest date as at which we have any figures. Indeed, I think the contrary is suggested. The balance sheet at the latter date shows an increase in the statutory fund to £511,588. It also shows an increase in the figures for the main tangible assets, loans on mortgages and on policies, and government securities, to £420,644, but the establishment account stands at the same figure as in 1950, the proportion attributed to the life insurance business being £91,111, and there is a further "intangible" asset—"Litigation Suspense Account—£22,256", while on the liabilities side there is a substantial bank overdraft (secured) of £25,817. One other feature should be mentioned. The proportion of loans on mortgage to government securities has very greatly increased, the former now standing at £236,935, and the latter at £157,600. This suggests a change in investment policy, made perhaps with the object of obtaining a slightly higher rate of interest. It would appear from the evidence that a realization of all these assets would be likely to involve a loss. The commissioner has expressed the opinion that the point as at which the apparent ratio of real assets to net liabilities was about 11s. 5d. in the £ has represented the peak of the company's fortunes, and I am disposed to agree with him.
(d) Rates of interest are a matter to which the commissioner has attached some importance. Theoretically the rate of interest used in the actuarial calculation of net liabilities should be the rate which is being earned or may be expected to be earned on the company's funds. In the present case the figures given above for the company's net liabilities have been calculated by taking an interest rate of four per cent, whereas the actual rate earned, calculated over the whole of the assets, including intangibles, has in only three years since 1937 exceeded three per cent, and in many years has been considerably under three per cent. The adoption of a lower rate of interest than four per cent would, of course, have disclosed an apparent deficiency greater than that shown above. The rates earned in 1950-1951 and 1951-1952 respectively were £3 11s. 2d. per cent and £3 8s. 10d. per cent. One might guess that the increase in these last two years was due to the increase in the ratio of mortgages to government securities held. The importance of the interest figures I take to be mainly as showing that net liabilities in 1946 and 1950 were calculated on a basis favourable to the company.
(e) The position disclosed by the revenue accounts of the company is, I think, of considerable importance. The commissioner has extracted from these accounts the figures showing the excess of gross income over outgoings, i.e., over expenses of all kinds and surrender, death and maturity claims. The excess for the six years ended 30th June 1947 to 30th June 1952 inclusive is disclosed as being respectively £37,289, £35,047, £19,191, £15,605, £25,927 and £10,488. The substantial rise in 1950-1951 is attributed by the commissioner (and I did not understand his view to be challenged) to (i) a considerable increase in the amount of new business written in the ordinary branch (a large proportion of which was written off as "forfeitures" in the following year), and (ii) an abnormally low figure for claims in the industrial branch. Apart from 1951 the figures show a very marked decline. The decline is in fact very much more marked in the industrial branch than in the ordinary branch, and actually the figure for 1952 is arrived at by subtracting a deficiency of £3,333 in the industrial branch from a credit balance of £13,821 in the ordinary branch.
(f) It seems to me to be an extremely important fact that the company is now entering on a period in which heavy increases in maturity claims can be anticipated. The commissioner has examined the maturity dates of a large number of endowment assurance policies in force in the ordinary branch and in the industrial branch respectively as at 30th June 1946 and 30th June 1950. I will refer only to policies in force at the later date. The total sums insured in the ordinary branch at that date amounted to £885,556. The commissioner excluded from his calculations whole life policies for a total amount of £267,172, and he had to exclude from his calculations endowment assurances for a total amount of £311,925, the years of maturity of which were not disclosed by the company's returns. Taking the four quinquennial periods, 1951-1955, 1956-1960, 1961-1965, and 1966-1970, they show maturities under the policies taken into account at the respective figures of £19,077, £33,829, £53,688 and £109,067. The corresponding figures for the industrial branch are much more striking. The total sums insured in this branch at 30th June 1950 amounted to £942,014. Here again a large number of policies were excluded from the commissioner's calculations. The whole life policies in this branch were, as one would expect, for the comparatively small total amount of £21,404. The endowment assurances, the maturity dates of which were not disclosed by the returns, amounted to £307,808. Taking the endowment assurances of which he knew the maturity year and taking the five quinquennial periods, 1946-1950, 1951-1955, 1956-1960, 1961-1965, and 1965-1970, the commissioner found the maturities respectively as amounting to £8,409, £151,154, £240,638, £137,327, and £15,395. These figures for the industrial branch have to be viewed alongside Exhibit R4, which purports to take the whole of the endowment assurances in this branch, and which suggests that (through surrenders and lapses and perhaps other causes) the actual figures for the maturities are likely to be considerably lower than the commissioner anticipates. I am not able, however, to regard Exhibit R4 as substantially qualifying the general picture which the commissioner's calculations present.
(g) I think that, in order to complete the picture, the figures for new sums insured, and for annual premiums on new sums insured, should be referred to. It will suffice to state these for three years. In respect of the ordinary branch they are as follows:—
Year New Sums Insured Annual Premiums on New Sums Insured 1946-1947 £205,126 £9,920 1950-1951 £265,762 £7,100 1951-1952 £70,414 £2,572
Between 1946-1947 and 1950-1951, the amount of new sums insured fluctuated, but there was a very marked drop in the amount of annual premiums on new sums insured. The rise in 1950-1951 has already been referred to. In respect of the industrial branch the figures for the same years are as follows:— Year New Sums Insured Annual Premiums on New Sums Insured 1946-1947 £101,092 £7,339 1950-1951 £44,000 £2,698 1951-1952 £41,181 £2,546
In the case of the industrial branch, the decline from year to year, both in new sums insured and in annual premiums on new sums insured, has been continuous. The company would appear to have endeavoured in very recent years to develop ordinary business in preference to the comparatively more expensive industrial business.
(h) Only one other substantive matter need, I think, be mentioned, and that is the "forfeiture rate" of the company. I am not sure that the term "forfeiture rate" is a technical term with a strictly defined meaning, but it seems clear enough that it has reference to the ratio of business lost through non-payment of premiums to business gained. It may be taken, I think, that the great bulk of forfeitures occur in the year in which the relevant policy is written or in the following year. From one point of view, a forfeiture, while it represents clear loss to the policy holder, who has simply paid something for nothing, may represent in a sense a gain to a profit-seeking company, because, although the amount received will have cost a good deal to obtain, all future liability of the company is cancelled. But, in the long run and from any ultimate point of view, it would seem clear enough that a high forfeiture rate is an unhealthy sign. I am not prepared to disagree with the commissioner, when he says that a satisfactory method of calculating a forfeiture rate is to express the sums insured which are forfeited in a year as a proportion of the average of the new sums insured for that year and the preceding year. The forfeiture rates of the company, calculated on this basis have been as follows:—
Year Ordinary Branch Industrial Branch 1946-1947 23.4 per cent 71.3 per cent 1947-1948 47.7 per cent 67.9 per cent 1948-1949 80.4 per cent 75.3 per cent 1949-1950 55.1 per cent 126.2 per cent 1950-1951 27.5 per cent 66.3 per cent 1951-1952 44.2 per cent 121.5 per cent
These figures are curious in some respects. For example, while it is, of course, to be expected that the forfeiture rate in the industrial branch will be higher than in the ordinary branch, we find one year in which it is lower. Again we find a very definite improvement in 1950-1951. But the overall picture seems clearly to reveal a forfeiture rate which is abnormally high. This by itself would, of course, be of little importance on a motion to wind up, and I mention it only as one other factor in the general situation.
I do not think it necessary to refer to the figures of the accident insurance business of the company. That business is a comparatively small business, and it seems sufficient to say that any profits and assets attributable to it cannot be used to alter materially the general picture presented by the company's life business. No attempt to do this was made on behalf of the company.
It could hardly, I think, be denied that the material summarized above makes a prima-facie case for an order for a winding up under the Act. The commissioner's evidence is open, I think, to the comment (which was made) that he has set out to make the best case he could for a winding up, and there may be instances in which he has been tempted to exaggerate the position. In this particular case, however, I do not think that anything can be made of any such general comments. Even if we should discount it or qualify it here and there for this or that reason, I can feel no doubt that the position is reliably disclosed by the commissioner's evidence and is a very serious position indeed. I take this indeed to be more or less conceded by the company, which seeks judicial management as an alternative which it says is preferable to a winding up. The company's case rested fundamentally on the evidence and opinions of Mr. A. T. Traversi, an actuary of wide experience, to which I have given careful attention. In the following paragraphs I refer to the main points which I understand to be made.
(a) Mr. Traversi began by saying that, in considering the solvency of a company which it was proposed should be wound up, it was altogether wrong to apply the stringent "minimum basis" prescribed by the Fourth Schedule for the valuation of liabilities. He said that the Fourth Schedule was concerned only with the distribution of bonuses and dividends. So far as this view depends on the construction of the Act, I do not agree with it. I do not think that the Fourth Schedule is concerned only with the distribution of bonuses and dividends. Such a view appears to me to be decisively negatived by s. 55 (1) (b), which states one of the grounds justifying an "investigation" by the commissioner, and which expressly refers to a valuation which has to be made subject to s. 49 and the Fourth Schedule. I do, however, agree—at any rate, up to a point—with what I understand to be the broad general contention underlying what Mr. Traversi said. While I think that the Act has prescribed its own standard of solvency, I do not think for a moment that a company ought to be wound up merely because a Fourth Schedule valuation discloses that net liabilities exceed the statutory fund even to a considerable degree. I agree that it is a very serious matter indeed to order a life insurance company to be wound up. All sorts of circumstances may have to be taken into consideration. The most obvious is the degree of the deficiency revealed. Not less obvious are the period during which the deficiency has existed and the prospect for the future. Another—perhaps less obvious—is the age of the company. I would fully accept the statement in the Report of the Hood Commission, which was cited to me, that "the business of life insurance at the present day is so complex and the changes taking place during its development are so considerable that the application of a "hard and fast" standard of solvency to all companies irrespective of their age or the nature of their business would undoubtedly result in serious injury to the company and through it to its policy-holders". I see no reason to suppose that this is less true in 1953 than it was in 1910.
(b) Of the two main points—or what I regard as the two main points—made by Mr. Traversi, the first is a development of his view that a "net premium or modified net premium valuation", such as is prescribed by the Fourth Schedule, "is not a proper measure of solvency". He says:—"The proper measure of solvency is a gross premium valuation, that is, a valuation which, instead of taking credit for the value of the "net" or "modified net" premiums, takes credit for the value of the actual (or gross) premiums payable in future under the policy contracts, throwing off a reasonable proportion of the premium for renewal expenses and eliminating negative values". Mr. Traversi has not, I think, attempted to translate this view into figures, but in Exhibit C1 the commissioner has worked out the position on a four per cent basis assuming an expense rate of ten per cent in the ordinary branch and twenty-six per cent in the industrial branch. This shows smaller, but still very substantial, deficiencies in 1946 and 1950. In par. 10 of his affidavit Mr. Traversi takes what are substantially the same figures as those which are taken by the commissioner in his original calculations—these figures are taken from the returns in Form I in the Second Schedule and from the ordinary balance sheets—and works out the deficiency as at 30th June 1941, 1946 and 1950, so as to show a different result. I will only set out, by way of example, his figures for 1946. They are as follows:—
Present value of Tangible assets £251,827 sums assured £1,200,995 Present value of future Other liabilities 15,489 premiums 651,212 Deficiency 313,445 £1,216,484 £1,216,484
This calculation gives very nearly the same figure for the amount of the deficiency as the commissioner's calculations for the same year. The same is true of Mr. Traversi's calculations for the years ending 30th June 1941 and 30th June 1950. But, because Mr. Traversi treats the value of future premiums as an asset instead of a factor in the calculation of future policy liabilities, a ratio of assets to liabilities is shown which is very different, and which has the appearance of being considerably more favourable to the company. Mr. Traversi's method shows this ratio for 1946 to be a little under seventy-five per cent and for 1950 to be a little over seventy-five per cent, whereas the commissioner's method, as I have said, shows the ratio for 1946 to be about forty-three per cent and for 1950 to be about fifty-seven per cent. In a subject matter of such complexity I hesitate to express an opinion on a point on which two well qualified experts differ, but I feel bound to say that I am disposed to think that the commissioner is really right. I have difficulty in thinking that it is right, for present purposes, to regard as an actual asset sums which nobody is under any obligation to pay. Moreover, I have a strong impression that the commissioner's view is more in accord with sound theory as to the relation between a life policy and its premiums. I have felt that Mr. Traversi is really inviting me to ignore s. 49 and the Fourth Schedule, and I have felt also that the commissioner's calculations really represent the realities of the situation.
(c) It is quite clear that Mr. Traversi does not regard the position of the company as satisfactory, whatever may be the proper method of analysing its financial position, but he says that in February 1953 he "advised the company that a rough approximate valuation at six per cent with a reduction of expenses to twenty per cent of the premium income encouraged the idea that a valuation at eight per cent might suffice to put the company on a satisfactory basis". He also advised the company "that there was a lucrative field of investment in instalment and hire purchase finance". His statement as to the existence of this "lucrative field" is supported by certain other affidavits, to which I do not think it necessary to refer specifically. Then, from statistical data supplied by the company and exhibited to his affidavit, Mr. Traversi has prepared, and sets out in par. 28 of his affidavit, an approximate valuation balance sheet as at 30th June 1952 on an eight per cent basis. This valuation balance sheet is as follows:—
Value of liabilities (sums assured and bonuses) £825,753 Value future premiums £403,114 Other liabilities 53,654 Tangible assets 447,084 Loss on sale of bonds 15,000 Deficiency 44,209 £894,407 £894,407
Is it to be noted that the method followed is the same as that followed in par. 10 of Mr. Traversi's affidavit, as to which I need not repeat what I have said. The sum of £15,000 represents the probable difference between sale price and balance sheet value of government securities held. The mortgage securities, which in 1952 largely exceeded government securities in amount, are apparently treated as of full face value, although, as Mr. Balmford pointed out, it would be quite impossible to convert them immediately into eight per cent securities of anything like the same value. Three comments which (apart from the general method adopted) seem to me to be justly made on par. 28 of Mr. Traversi's affidavit are these. It is open to very serious question whether "instalment and hire purchase finance" is a satisfactory investment for a very precariously situated life insurance company. Both Mr. Balmford and Mr. Innes (a former actuary of the Australian Mutual Provident Society) were strongly of opinion that it was not. (The case of a strong company with large reserves is, of course, quite different.) In any case there is not the slightest hope of obtaining eight per cent in the immediate future on the present face value of the company's tangible assets. And finally even the extremely optimistic valuation balance sheet put forward still shows a deficiency.
(d) There is one other matter to be mentioned. During the pendency of this matter two letters were written to the commissioner by the managing director of another company carrying on a business of life insurance in New South Wales, suggesting the outlines of two alternative schemes by which that company would "take over the control" of the Associated Dominions company. The commissioner declined to discuss either proposition: it is far from clear to me that he had any power to take any action in the matter. At a much later stage—after I had concluded the hearing of the motions and reserved judgment—Mr. Holmes sought to put before me an agreement (expressed to be subject to the approval of this Court) between the same life insurance company, the Associated Dominions company, and another company carrying on a business of financing hire-purchase agreements. It seemed to me to be a somewhat remarkable document. I understood it to be put that such an agreement could be carried into effect in the course of judicial management, and that the possibility of some such agreement being carried into effect afforded an argument in favour of ordering judicial management in preference to a winding up. I expressed the opinion, which I still hold, that such proposals as those of this other life insurance company ought not to carry any weight with me in deciding whether there ought or ought not to be a winding-up order in this case. I will refer briefly further to these proposals a little later.
(5) I have now, I think, summarized all the factual considerations which can be regarded as having any importance in this case. The making of a decision is a matter which must inevitably be attended with some anxiety. The primary question of solvency is not such a clear-cut question as it normally is in the case of an ordinary commercial undertaking. The standard accepted by actuaries is in some degree artificial, and in some degree elastic. I cannot overlook the necessity for caution, which Mr. Holmes so strongly pressed upon me, and which was illustrated by the examples of one or two companies which have appeared to be in a more or less hopeless position, and which have made spectacular recoveries. But, looking at the facts and adjudging the probabilities as best I can, I am of opinion that this company ought to be wound up.
The central and outstanding fact in the whole case appears to me to be that the company is insolvent. I regard this as quite clearly established. The company is insolvent not merely in a technical sense but in a practical and commercial sense, not merely in slight degree but in very serious and substantial degree. This does not mean that it is unable at the moment to pay its debts as they fall due. It could, so far as the evidence goes, discharge its current liabilities tomorrow, and it will for some time to come be able to pay its policy holders in full as and when their claims mature. But it is highly probable—practically certain, I think, as matters stand—that it will in the not very distant future be unable to discharge in full claims under maturing policies. When that event will occur cannot in the nature of things, be precisely stated. I did not understand it to be suggested that it was likely to occur before 1960.
That being the position of the company, there is, in my opinion, a high degree of probability that, if it is not placed in liquidation, policy holders whose claims mature in the near future will be paid in full at the expense of those whose claims mature in the more distant future. Many, of course, will already have been paid in full, and nothing can be done about that. But such a state of affairs ought not, in my opinion, to be allowed to continue. In a winding up all policy holders will stand on an equal footing, whether their claims are due to mature soon or late. It seems to me to be prima facie just and equitable—just and equitable from the point of view of the policy holders generally—that a company which finds itself in the position of this company should be wound up.
I would, of course, agree that an assessment of future prospects is a vital element in the case which the commissioner makes. To a motion based merely on present insolvency—even a substantial degree of insolvency—it might be possible for a company to make a number of answers. For example, it might be said that it was a young company which had not had time to recover from heavy initial expenditure and which, though at the moment insolvent, was rapidly building up reserves. No such answer, however, could be made in this case, because this company has been carrying on business for twenty-five years. Again, some satisfactory explanation of a company's present insolvency might be forthcoming: it might be shown to be due to misfortunes which were not likely to recur, or to errors in management or policy which had been remedied. Again, however, no such answer is really put forward in this case. There is a vague suggestion that the blame should be laid at the door of Mr. Page, and Mr. Page is dead. But such vague suggestions carry us nowhere. It is suggested too that the company has suffered from "adverse publicity", and I would think that there is some foundation for this suggestion. But such publicity was very largely the inevitable result of the company's own actions, and such effect as it has had on the company's fortunes is probably irremediable.
The essence of any such answer that might be made to a motion for winding up on the ground of insolvency is, of course, that it establishes some prospect of recovery. On the evidence in this case I am unable to see anything in the nature of a reasonable prospect of recovery. Theoretically it might be possible for the company to carry on business vigorously and, by writing a large amount of new business at a low expense rate, build up its funds. But, even if this were a practical possibility—and I do not think it is—to embark on such a course would be, in effect, to invite new policy holders to come to the rescue at considerable risk to themselves. A realization of the impracticability and undesirability of such an attempt in existing circumstances has probably provided one reason for the course which the company has taken in asking that, in lieu of a winding-up order, an order for judicial management should be made. I do not imagine that it is the only reason. It is not contemplated that the company shall, at any rate in the immediate future, seek or write new business under judicial management, nor could it, by reason of s. 60 (4) of the Act, do so except with the leave of the Court. It is contemplated that, for the present at any rate, a judicial manager shall administer a "closed fund".
I have already, in an earlier part of this judgment, expressed very generally my view as to considerations which may properly guide the Court when it is faced, as I am faced here, with the choice between winding up and judicial management. It all comes back again, in my opinion, to an assessment of future prospects. This is not a case in which the Court is left in any real doubt as to the true financial condition of the company. Nor is it, to my mind, in the least degree likely that further investigation of the company's affairs by a judicial manager would reveal that the prospects of the company are more favourable than on the material before me they appear to be. In such circumstances I do not think that judicial management should be preferred to an immediate liquidation unless there is seen to be some prospect of a real benefit to policy holders generally as a result of judicial management. I am not able to see any such prospect.
From one point of view it may perhaps be said that there is little practical difference in ultimate effect between the two orders which may be made. On the one hand, a judicial manager may after a period, if he is satisfied that nothing is to be gained by a continuance of judicial management, recommend to the Court under s. 62 that the company be wound up. On the other hand, if a liquidator, appointed under a winding-up order, were to find the outlook materially brighter than had been thought, I have no doubt that the Court would have power to stay the winding up. From another point of view, it might even be said that something may be gained, and nothing can be lost, by a period of judicial management. But any such approach overlooks, in my opinion, the point of fundamental importance to which I have already referred. A period of judicial management preceding a liquidation will, apart from the additional expense involved, have had the inequitable effect of prolonging, probably for a substantial time, the period during which maturing claims are paid in full at the expense of claims maturing later. It is primarily for this reason that I am of opinion that, in such a case as the present, judicial management ought not to be preferred to immediate liquidation unless there is seen to be some definite prospect of recovery under judicial management. One hesitates to make general statements which experience may prove to be too wide, but I am disposed to think that cases are likely to be rare in which judicial management will be appropriate where a company which has been carrying on business for many years is clearly and seriously insolvent.
The only avenue by which I understood it to be suggested that the company might advance to a recovery was the conversion of all or most of its tangible assets and a transfer of the proceeds to the "lucrative field" of the financing of hire purchase and instalment payments. I have already indicated my view of this proposal. I do not wish to be thought to be saying that such a proposal is inherently of such a nature that it ought not to be taken seriously. It is a fact that certain trading companies are engaged in the "field" in question and are finding it "lucrative", and Mr. Traversi cited the case of a life insurance company which had by resorting to it succeeded in redressing a dangerous position. To say that a policy of investment is "unorthodox" is not necessarily a final condemnation of it. But I regard the proposal as quite impracticable in the present case. I agree broadly with the comments made on it in Mr. Balmford's second affidavit. The loans on mortgage could not be immediately realized without loss. Loans on policies could not be called in. At least £50,000 must remain as a deposit with the Treasurer of the Commonwealth, who is very unlikely to approve the proposed new form of investment (see s. 29). And on 30th June 1952 the company's bank had a charge over assets presumably sufficient to secure with an adequate margin an overdraft of some £26,000. But the whole idea seems to me to be open to the objection which I have noted above. It might very well be wrong to describe the suggested investment as speculative, but the whole plan would be in the nature of an experiment, and again I do not think that experiments should be undertaken which may very well benefit policies which will mature early at the expense of those which will mature later.
It remains only to say a word as to the latest proposal put forward by the other insurance company to which I have referred. I do not wish to say very much about it. I think that Mr. Manning was entirely right when he said that what was proposed was, to all intents and purposes, a liquidation with the other insurance company as liquidator. It involves handing over to that other company control of the business and funds of the Associated Dominions Co. Whether it was actually contemplated that that other company, or some person representing it, should be appointed judicial manager, I do not know. I am quite sure that I should not have made any such appointment. The fact that such an agreement might be put before a judicial manager affords, to my mind, no reason whatever for preferring judicial management to immediate liquidation. If any scheme which appears to him to be safe and practicable and likely to benefit the whole body of policy holders is put before the liquidator, whom I propose to appoint, whether by this other life insurance company or by any other person or corporation, I have no doubt that he will bring it before the Court on notice to the commissioner.
I will make a winding-up order. I will hear counsel as to its form and content.
1. (1951) 84 C.L.R. 249.
2. (1953) 87 C.L.R. 1.
3. (1909) 8 C.L.R. 330.
4. (1915) A.C. 330.
5. (1942) S.C.R. (Can.) 31, esp. at p. 42.
6. (1943) A.C. 356.
7. (1953) 87 C.L.R. 144.
8. (1937) 56 C.L.R. 657.
9. (1909) 8 C.L.R., at pp. 349, 363, 371, 394, 412.
10. (1948) 76 C.L.R. 1.
11. (1948) 76 C.L.R., at p. 202.
12. (1819) 4 Wheat. 316 [4 Law. Ed. 579].
13. (1908) 6 C.L.R. 309.
14. (1915) A.C. 330.
15. (1921) 2 A.C. 91.
16. (1929) A.C. 260.
17. (1883) 9 App. Cas. 157.
18. (1921) 2 A.C., at p. 115.
19. (1915) A.C. 330.
20. (1920) 28 C.L.R. 129.
21. (1875) 1 Ch. D. 466, at p. 470.
22. (1875) 1 Ch. D., at p. 472.
23. (1869) L.R. 9 Eq. 122.
24. (1869) L.R. 9 Eq., at p. 128.
25. (1950) 81 C.L.R. 161.
26. (1949) 49 S.R. (N.S.W.) 351; 66 W.N. 176.
27. (1949) 79 C.L.R., at p. 651.
28. (1951) 84 C.L.R. 249. |
high_court_of_australia:/showbyHandle/1/11271 | decision | commonwealth | high_court_of_australia | text/html | null | Laybutt v Amoco Australia Pty Ltd [1974] HCA 49 | https://eresources.hcourt.gov.au/showbyHandle/1/11271 | 2024-09-13T22:57:24.473796+10:00 | High Court of Australia
Menzies, Gibbs and Mason JJ.
Laybutt v Amoco Australia Pty Ltd
[1974] HCA 49
ORDER
Appeal allowed with costs. Order of the Supreme Court of New South Wales set aside and in lieu thereof order that the suit be dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
Nov. 15
Menzies and Mason JJ.
On 24th July 1972 Harold Laybutt granted an option to purchase certain land at Blacktown to the respondent Amoco Australia Pty. Limited for the sum of $42,000. The consideration for the grant of the option was expressed to be $10.
Clause 1 of the option provided:
1. This option may be exercised by you or your nominee by notice in writing handed to
*me
————
one of us
on or before 24th Oct 1972(Insert actual date) date or within that time posted to
*me
————
one of us
by registered mail to the address shown below and by payment to the said Agent within the said time of the deposit mentioned below.
*Delete words that do not apply and initial.
Clause 2 of the option provided that upon exercise of the option there was to be created a contract for the sale of the property on the terms and conditions of the contract for the sale of land last issued under the approval of the Law Society of New South Wales and the Real Estate Institute of New South Wales. Although the option contained two spaces in which provision was made for the insertion of the name of the vendor's agent, the spaces were not filled in; indeed, a line was drawn through one space. Clause 2 (a) prescribed a deposit in an amount equal to ten per cent of the purchase price.
There was an apparent inconsistency between cl. 1 of the option and cl. 1 of the form of contract incorporated by reference. The former stipulated payment of a deposit within three months as an element in the exercise of the option, whereas the latter provided for payment of a deposit to an agent as stakeholder only upon the signing of the contract for the sale of the land.
Four days after the grant of the option Harold Laybutt died. Probate of his will was not granted to his executrix and sole surviving beneficiary, the appellant Lily May Laybutt, until June 1973. Having ascertained that the appellant was appointed executrix by the will, the respondent served notice of exercise of the option on Mrs. Laybutt on 23rd October 1972.
In an attempt to overcome the difficulty constituted by the omission to name an agent in the option the respondent delivered a cheque for $4,200 to Messrs. Maurice Isaacs & Glass, the solicitors acting for the deceased's estate on the instructions of the appellant. The cheque was delivered on 24th October 1972; it was accompanied by a letter stating that the cheque was for the deposit to be held by the solicitors as stakeholder pending completion of the purchase under the option.
The cheque was returned in January 1973 with an accompanying letter from the solicitors which stated that all negotiations in connexion with the sale of the land were terminated. The respondent commenced proceedings in the Equity Division of the Supreme Court of New South Wales in which declarations were made that the option had been properly exercised and that there was an enforceable contract, and an order was made for specific performance. It is from these declarations and the order that the appellant has appealed to this Court.
Although the appellant argued that the option was void for uncertainty before the primary judge, the argument was not reiterated in this Court. The appellant submitted here, first, that the option had not been validly exercised because payment of the deposit was made to her solicitors, not to her, and, secondly, that the option was not capable of being exercised after the death of the grantor. Accordingly, the issue which arises on the arguments which have been put to this Court is not one of uncertainty but one of construction. However, it is evident from the terms of the option and the standard form of contract that the construction of the documents is closely associated with the underlying possibility that the option may be void for uncertainty.
We begin with the inference drawn by the primary judge "that the parties deliberately omitted to name an agent", an inference which was correctly based on the failure to fill in the two spaces in the option in which appropriate provision was made for naming the agent and on the line which had been drawn through one of the spaces. His Honour went on to say, and this finding was not challenged, that it would be wrong to hold that "their agreement should fail for lack of an agent's name". There is nothing to suggest that the name of the agent was omitted so that it would become the subject of some later agreement between the parties. Apart from the provision that the deposit be paid to the agent, it was not a matter on which it was necessary for them to reach a consensus. In ordinary circumstances a vendor would have an agent of his choice acting for him but in this case the grantor had no reason to have appointed an agent or to appoint one in the future — that no doubt was the reason why the name was omitted, the parties overlooking the agent's role as a recipient of their deposit under cl. 1.
For the respondent it was submitted that the option conferred on the grantor a right to name an agent in which event, but not otherwise, the provisions in the option and in the standard form of contract relating to the payment of a deposit came into operation. As neither the grantor nor the appellant had nominated an agent, no deposit became payable, although the amount of the deposit was properly to be regarded as forming part of the balance of the purchase price payable on completion. The reasons for rejecting this construction are manifold. The option provided for payment of a deposit, not to an agent to be nominated by the grantor, but to "the said Agent", that is, the agent named in the option. Apart from this consideration the provisions of the option and the contract emphasize that the payment of the deposit was an essential element in the bargain. The option stipulated that the payment was an element in the exercise of the option. The contract provided for payment of the deposit "on the signing of the agreement" — an obligation which would be satisfied on the option being exercised — and for its forfeiture in the event of default by the purchaser (cl. 16). Finally on this point it is not easy to read the contract as conforming to the view that the amount of the deposit was payable on completion. What was payable on completion was "the balance of the purchase price", an expression which means the purchase price less the deposit.
An alternative submission was that, even if the omission to name an agent did not affect the operation of the provisions contained in the standard form of contract respecting the deposit, it had the consequence that payment of the deposit was not a necessary element in the exercise of the option. This view was based on the proposition that the stipulation for the payment of the deposit was tied to payment to the vendor's agent and that to dispense with the naming of the agent was to dispense with payment of the deposit as a means of exercising the option. However, it is one thing to say that the failure to name an agent shows that it was not intended that payment should be made to an agent and quite another thing to say that the parties did not intend the payment of the deposit to be an essential element in the exercise of the option. Clauses 1 and 2(a) of the option made explicit provision in this regard. The omission of the agent's name enables one to conclude that references in the option and the contract to the agent should be disregarded and that payment was not to be made to the agent, but it does not justify a total disregard of the provision for payment of the deposit. There is here insufficient foundation for an inference that the parties intended that the option could be exercised by notice only, without payment of the deposit (cf. Fitzgerald v. Masters [13] ).
1. (1956) 95 C.L.R. 420.
What then is the effect of cl. 1 of the option and cl. 1 of the contract? Is the option void for uncertainty? Should the two clauses be read as requiring payment to the grantor, his successors and assigns, or to a person nominated as the appellant's agent by the respondent as his Honour held? We have already indicated that this is not a case in which the parties intended to agree on the identity of an agent in the future; nor was it a matter on which it was essential for the parties to agree, putting to one side the effect of cl. 1 of the option and cl. 1 of the contract. If the option is void for uncertainty it is because the provisions for payment of the deposit in the option and the contract are meaningless. The references to "the said Agent" in cl. 1 of the option and to "the Vendor's Agent herein named as stakeholder" in cl. 1 of the contract are meaningless, but this does not mean, as Denning L.J. pointed out in Nicolene Ltd. v. Simmonds [14] , that the whole option is a nullity. There the meaningless clause was rejected and the contract shorn of the clause was held to stand. The clause in question was an exempting condition but the principle then applied is not limited to conditions of that kind. It may be applied to words in a contract, at least when as here it appears that the parties intended to exclude them and they are severable.
1. [1953] 1 Q.B. 543, at p. 551.
The question remains whether the meaning of the provisions contained in the two clauses can be determined with a reasonable degree of certainty. The primary judge, influenced by the presence of the words "as stakeholder" in cl. 1 of the contract, thought that the parties intended that payment should be made to a third person who nevertheless was intended to have the character of the vendor's agent. He held that the respondent could nominate a person to act as agent of the vendor, subject to a right (which in the event was not exercised) in the appellant to object to that nomination.
There are to our minds various reasons why this approach cannot be supported. First, it rests on the view that the option and the contract contemplated, in the absence of an existing nomination of an agent, a subsequent nomination of such a person. However, the two documents must be read together. So read they refer to the payment of one deposit. Once this is accepted there is no basis for giving the expression "the Vendor's Agent herein named" in cl. 1 of the contract an effect different from that accorded to "the said Agent" in cl. 1 of the option. The deliberate omission to name an agent in the option relates to the contract as well as the option; in each case it indicates an intention to dispense with the notion of payment to an agent rather than an intention to reserve a right to nominate such a person at a later date. Secondly, we can find no support for the view that, in the absence of authority conferred in that behalf, it is permissible for a purchaser to appoint an agent for the vendor. The observations of Griffith C.J. in Christie v. Robinson [1] , and Fenton v. Browne [2] go, not to the appointment of an agent, but to the responsibility of one party in the event that a stakeholder, objected to by the other party, afterwards defaults. Thirdly, the qualification that the other party has a right to object to the nomination is productive of difficulties too numerous to be mentioned.
1. (1907) 4 C.L.R. 1338, at p. 1347.
2. (1807) 14 Ves. Jun. 144 [33 E.R. 476].
For our part we would read the two clauses as making provision for the payment of the deposit to the grantor, his successors and assigns. The case, so it seems to us, is one in which there is a stipulation that a deposit shall be paid, but there is no identification of the person to whom it is to be paid. In such a case it is to be implied that payment will be made to the other contracting party, his successors and assigns, assuming that the option is not personal to the grantor. The words "as stakeholder" in cl. 1 of the contract are not an obstacle to this conclusion. They were intended to govern the character in which a vendor's agent would receive the money; they must be disregarded along with the words to which they relate.
A payment made to A's solicitor for A may be said to constitute a payment made to A if the solicitor is authorized by A to receive the payment. In this case, by reason of the provisions of ss. 44 and 61 of the Wills, Probate and Administration Act, 1898 N.S.W., as amended, there is a question as to whether the option could be exercised by giving notice and paying the deposit to the Public Trustee in whom the grantor's estate was deemed to be vested pending a grant of probate or to the appellant on the footing that she was an executor de son tort and that her title by virtue of the subsequent grant related back to the date of death of the grantor. We shall assume, without answering this question, that the appellant was the person to whom in the circumstances notice was correctly given and payment should have been made, no suggestion having been made that the payment to the solicitors was made to them on behalf of the Public Trustee or that he had ever authorized them to receive such a payment.
There is no evidence that Messrs. Maurice Isaacs & Glass, the solicitors appointed by the appellant to act for the estate in connexion with the grant of probate, were expressly authorized by her to receive the deposit on behalf of the estate. The retention for three months by the solicitors of the deposit might, however, be sufficient to found an inference that they had been so authorized. It is an issue to which the primary judge did not direct his attention as he took a different view of the case. Even so, a finding for the respondent on this issue would not be enough to carry the day in its favour for it is apparent on the evidence that the deposit was paid to the solicitors, not on terms that they were to account to the appellant or the estate, but that they were to hold it "as stakeholder, pending completion of the purchase under the said Option", to quote from the respondent's letter of 24th October 1972 to the solicitors. The payment, accordingly, was not a payment to the grantor, his successors and assigns, which in the view we take was what the option required.
On this footing the respondent failed to exercise the option in accordance with cl. 1 of the option.
On this ground, without expressing any opinion on the other questions which were argued, we would allow the appeal.
Gibbs J.
This is an appeal from a judgment of the Supreme Court of New South Wales in its Equity Division by which it was declared that an option granted by Harold Ernest Laybutt (since deceased) to the respondent company to purchase property described as 143 Newton Road, Blacktown, was duly and properly exercised, that by reason of the exercise of the option there was created between the respondent and the estate of the late Harold Ernest Laybutt an agreement for the sale of that property by the estate to the respondent on the terms set out in the option and that the said agreement is valid and enforceable and ought to be specifically performed, and by which it was decreed accordingly and consequential orders were made.
On 24th July 1972 Harold Ernest Laybutt, who was then the owner of the property at 143 Newton Road, Blacktown, signed a document headed " Option to Purchase " which was addressed to the respondent Amoco Australia Pty. Ltd. This document was a printed form which had been completed, with some additions in handwriting; however, not every space in the form had been filled in and not all inappropriate words had been crossed out. Its provisions, so far as they are presently material, are as follows:
In Consideration of the sum of Ten dollars paid to me/us by you (the receipt whereof is hereby acknowledged) I/We Harold Ernest Laybutt Grant to you or your nominee an option to purchase from me/us the below described property for the sum of Forty Two Thousand dollars ($42,000) which sum shall include commission (payable to the above-named agent as at the Scale approved by the Real Estate Institute of New South Wales) upon the following terms and conditions:
1. This option may be exercised by you or your nominee by notice in writing handed to
*me
————
one of us
on or before 24th Oct. 1972(Insert actual date) date or within that time posted to
*me
————
one of us
by registered mail to the address shown below and by payment to the said Agent within the said time of the deposit mentioned below.
2. The exercise of the option shall create a contract between me/us and you or your nominee for the sale of the said property on the terms and conditions of the Contract for the Sale of Land last issued under the approval of the Law Society of New South Wales and the Real Estate Institute of New South Wales completed with the following details:
(a) The deposit shall be ten dollars per centum of the purchase price, the sum now paid as consideration for this option
*to be
————
not to be
credited as part of such deposit.
(e) The Second Schedule of the said contract is to be deemed to have inserted therein the correct information as at the date hereof. The Fourth Schedule to have annexed thereto *the attached Sec. 342AS Certificate, or *Paragraph 17 of the Contract for Sale and Fourth Schedule thereto shall be deemed deleted and the Purchaser shall be deemed to have satisfied himself as to all matters relating to Town Planning and zoning of the subject land.
Such information as to the correct matter in relation to either or both schedules (as the case may be) to be obtained or deemed obtained by you prior to the exercise of this option.
5. Special conditions
The following special conditions will be included in the Contract for Sale referred to in paragraph 2 hereof:—
(a) The balance of purchase price shall be paid in cash on completion in exchange for a duly executed conveyance or registerable transfer to the purchaser of the fee simple title of the said property free from all encumbrances, mortgages, charges, easements covenants, restrictions and conditions whatsoever together with all documents of title related to the said property.
In the margin, opposite to cl. 2, appeared the following: " *Delete words that do not apply and initial", but no deletions were made in par. (e) of cl. 2.
Although the opening words of the option refer to "the above-named agent", and cl. 1 speaks of "the said Agent", no agent was named in the document; the form, in two places, had the words "Vendor's Agent" with spaces after those words in which it was intended that the name of the agent should be written but nothing was written there; on the contrary, a line was drawn through each space. In fact no agent had been employed by Mr. Laybutt in connexion with the transaction.
It was common ground that "the terms and conditions of the Contract for the Sale of Land" mentioned in cl. 2 of the option were those set out in the 1972 edition of the form of Contract for Sale of Land issued under the approval of the Law Society of New South Wales and the Real Estate Institute of New South Wales which was in circulation before the date on which the option was signed. The only provisions of that form which it is necessary to mention are the following:
1. The Purchaser shall upon the signing of this agreement pay as a deposit to the Vendor's Agent herein named as stakeholder the sum of
($____________)
which shall vest in the Vendor upon and by virtue of completion and which shall be accounted for to the Vendor upon receipt of an order from the Purchaser or his Solicitor authorising such payment. The deposit may be paid by cheque but if the cheque is not honoured on presentation the Purchaser shall immediately and without notice be in default under this agreement.
The balance of the purchase price shall be paid as stipulated in the First Schedule hereto. Any moneys payable to the Vendor hereunder by the Purchaser or the Agent shall be paid to the Vendor's Solicitor or as he may direct in writing.
2. If the Purchaser defaults in the observance of performance of any obligation imposed on him under or by virtue of this agreement the deposit paid by him hereunder, except so much of it as exceeds 10% of the purchase price, shall be forfeited to the Vendor who shall be entitled to terminate this agreement and thereafter either to sue the Purchaser for breach of contract or to resell the property as owner and the deficiency (if any) arising on such resale and all expenses of and incidental to such resale or attempted resale and the Purchaser's default shall be recoverable by the Vendor from the Purchaser as liquidated damages provided that proceedings for the recovery thereof be commenced within 12 months of the termination of this agreement. The Vendor may retain any money paid by the Purchaser on account of the purchase other than the deposit money forfeited under this clause as security for any deficiency arising on a resale or for any damages or compensation (including any allowance by way of occupation fee or for rents or profits from a Purchaser who has been in possession of the property or in receipt of the rents or profits thereof) awarded to him for the Purchaser's default provided that proceedings for the recovery of such damages or compensation be commenced within 12 months of the termination of this agreement.
3. Should it be established that at the date of this agreement the property was affected by any one or more of the following:
(a) any provision of any planning scheme, whether prepared or prescribed, or any interim development order made under the provision of the Local Government Act, 1919;
(b) any Residential District Proclamation under Section 309 of the Local Government Act, 1919;
(c) any proposal for realignment widening siting or alteration of the level of a road or railway by any competent authority;
(d) any mains or pipes of any water sewerage or drainage authority passing through the property;
(e) any provisions of or under the Mines Subsidence Compensation Act, 1961;
(f) †
*
in any manner other than as disclosed in the Fourth Schedule hereto, then the Purchaser shall be entitled to rescind this agreement but shall not be entitled to make any other objection requisition or claim for compensation in respect of any such matter. Any right of the Purchaser to rescind under this clause shall be exercised by notice in writing given to the Vendor prior to completion. In relation to paragraph (c) hereof, the property shall be deemed to be affected by a proposal if the Purchaser produces a written statement of the authority concerned, the substance of which is other than that the property is not affected by any proposal of the authority.
There was a sidenote to par. (f) as follows:
†Any other matters.
*desired to be disclosed in the Fourth Schedule.
The 4th Sch. (to which there was a sidenote "Delete if not applicable.") read as follows: "The property is affected as shown in the copy certificate under Section 342AS of the Local Government Act, 1919, annexed hereto." Of course, no such certificate was annexed to the form of contract issued by the Law Society and the Real Estate Institute and no certificate had been annexed to the option.
Mr. Laybutt died on 28th July 1972, leaving a will by which he appointed the appellant, his widow, to be his sole executrix and beneficiary. Probate of this will was not granted until sometime in June 1973.
The respondent had not exercised the option before Mr. Laybutt's death. After his death the respondent, on 30th August 1972, lodged a caveat against the title to the land but did nothing in an attempt to exercise the option until 20th October 1972. On that day a director of the respondent signed two notices, each addressed to "The Executors, Estate late H. E. Laybutt"; the notices, which were identical in substance, stated that the respondent thereby exercised the option. One of these notices was on 20th October 1972 posted to the executors, c/- Messrs. Maurice Isaacs & Glass, the solicitors for the appellant; the other was on 23rd October 1972 handed to the appellant herself at 143 Newton Road, Blacktown. On 24th October an employee of the respondent delivered to Messrs. Maurice Isaacs & Glass a letter addressed to that firm which referred to the purported exercise of the option and said: "We have pleasure in enclosing our cheque for $4,200 deposit to be held by you as Stakeholder, pending completion of the purchase under the said Option."
With the letter was enclosed a cheque for $4,200 payable to the order of "Maurice Isaacs & Glass Trust Acc.". There is no evidence or suggestion that any member of that firm of solicitors had been authorized by the deceased or by the appellant or, if it matters, by the Public Trustee, to receive payment of the deposit. The cheque was held for some time without acknowledgment but finally on 19th January 1973 Messrs. Maurice Isaacs & Glass returned the cheque to the respondent with a letter stating that the option had not been properly exercised and asking for the withdrawal of the caveat.
In these circumstances the respondent's claim to be entitled to specific performance of a contract to sell the land depended upon the following questions all of which were answered by the learned primary judge favourably to the respondent:
1. Could the option still be exercised notwithstanding the death of the grantor?
2. If so, was the notice in writing which was necessary to exercise the option properly given to the appellant as executrix of the deceased although probate had not been granted to her when the notice was given?
3. Did the option provide with sufficient certainty for payment of the deposit, and if so, was payment to the solicitors sufficient to satisfy its requirements?
4. If the option was validly exercised, were the terms of the agreement so uncertain that there was no binding contract?
The question whether an option to purchase land may be exercised after the death of the grantor does not appear to be the subject of much authority. When I use the expression "option to purchase" throughout the present judgment I intend to refer to such an option granted inter vivos and for valuable consideration. The only decision to which we were referred which is directly on the point is Kennewell v. Dye [3] . In that case a lease contained a provision in the following terms: "It is further hereby agreed and declared that the said [landlord] will sell to the said [tenant] the property for the sum of £350; subject to the said [tenant] giving to the said [landlord] three months' notice of his intention for so doing". After the death of the landlord the tenant gave to the landlord's personal representative notice in writing of his intention to exercise the option. It was held that the tenant was entitled to specific performance. Roxburgh J. relied [4] upon the following statement of the law contained in Williams on Executors, 12th ed. (1930), at p. 1126:
The executors or administrators so completely represent their testator or intestate, with respect to the liabilities above mentioned, that every bond, or covenant, or contract of the deceased (not being a contract personal to the deceased) includes them, though they are not named in the terms of it; for the executors or administrators of every person are implied in himself.
He went on to say that only two things would prevent the burden of the option from devolving on the grantor's personal representative, first, if upon its true construction it was not intended to do so and secondly, if the contract was personal to the grantor. He further held [5] that where the burden of a covenant devolves on a personal representative notice which the covenant requires to be given to the deceased "can and ought to be given to his personal representatives". It would appear that Roxburgh J. regarded the provision granting the option as a contract to sell the property subject to the necessary notice being given, and if this view was correct the conclusion reached was, with respect, plainly right. Authority is not needed for the proposition that, as a general rule, upon the death of a party to a contract his liabilities thereunder pass to his personal representatives. This rule will not apply if the performance of the contract depended upon the personal skill or judgment of the deceased party or if the contract otherwise revealed an intention that it should be enforceable only against that party personally. If it is correct to regard an option to purchase as a conditional contract of sale there is no reason why the ordinary principle as to the effect of death on contractual liabilities should not apply.
1. [1949] Ch. 517.
2. [1949] Ch., at pp. 521-522.
3. [1949] Ch., at p. 523.
However, there is what Dixon C.J. in Braham v. Walker [6] called a "standing controversy" as to the true nature of an option to purchase. One view is that an option to purchase is "a contract for valuable consideration, viz., to sell the property (or whatever the subject matter may be) upon condition that the other party shall within the stipulated time bind himself to perform the terms of the offer embodied in the contract": per Griffith C.J. in Goldsbrough, Mort & Co. Ltd. v. Quinn [7] . The other view is that "an option given for value is an offer, together with a contract that the offer will not be revoked during the time, if any, specified in the option": per Latham C.J. in Commissioner of Taxes (Q.) v. Camphin [8] . This difference of opinion is reflected in the judgments in Carter v. Hyde [9] , where it was held that the personal representatives of the grantee of an option to purchase a lease were, upon giving notice in writing as required by the option, entitled to specific performance of a contract of sale. In that case the option took the form of an offer coupled with a promise not to revoke it [10] . The majority of the Court treated the option as being, in effect, a conditional contract of sale: Knox C.J. said [11] : "In effect it amounts to an agreement by the appellant to sell the lease, &c., for £1,500 to Hyde if within three months the latter signifies his assent to purchase." Higgins J. [12] expressed the same view. Their judgments are consistent with and support the decision in Kennewell v. Dye [13] . The third member of the Court, Isaacs J., took a different view; he said [14] that the words of the document in question placed it "within the category of an offer created by a contract and irrevocable, and not in the category of an instant sale of the property as it then stood, subject to a subsequently performed condition". However, he held that the option created a proprietary right which passed on the death of the grantee to his personal representatives. Higgins J. agreed with this reasoning also; he said [15] : "The position may be regarded in either of two aspects — contract and property; and in either aspect the result is the same, that the executors may sue." However, where it is the grantor, not the grantee, who has died the result may not be the same in either aspect. If there is a conditional contract for sale, the personal representatives of the grantor are bound by it, subject to the qualifications mentioned. If there is no such contract, but the grantee has a proprietary right, it does not necessarily follow that the right is enforceable against the personal representatives of the grantor. If the grant of an option amounts to an offer to sell coupled with a contract not to revoke the offer, the question will arise whether in spite of that contract the offer will lapse on the death of the offeror. In considering this matter, it would be necessary to decide whether an offer lapses upon the death of the offeror, at least if the offeree has notice of the death — a proposition which, as Blackburn J. pointed out in Fong v. Cilli [16] , "has been repeatedly stated in a dogmatic form (for example, by Mellish L.J. in Dickinson v. Dodds [17] ), and is accepted in the textbooks, though it is hard to find a decision on the point" — and if that is true as a general rule whether, as Denning L.J. suggested in Errington v. Errington [18] the position will be different if the offer was one which could not have been revoked during the lifetime of the offeror.
1. (1961) 104 C.L.R. 366, at p. 376.
2. (1910) 10 C.L.R. 674, at p. 678.
3. (1937) 57 C.L.R. 127, at p. 132.
4. (1923) 33 C.L.R. 115.
5. (1923) 33 C.L.R., at p. 119.
6. (1923) 33 C.L.R., at p. 120.
7. (1923) 33 C.L.R., at p. 128.
8. [1949] Ch. 517.
9. (1923) 33 C.L.R., at p. 123.
10. (1923) 33 C.L.R., at p. 132.
11. (1968) 11 F.L.R. 495, at p. 498.
12. (1876) 2 Ch. D. 463, at p. 475.
13. [1952] 1 K.B. 290, at p. 295.
Dicta abound in favour of both of the contending views as to the nature of an option to purchase, but it has usually proved immaterial which view was adopted. An option to purchase may assume various forms — it may be expressed as an agreement to sell upon condition (as in Kennewell v. Dye [19] ), or as an offer together with an agreement not to revoke it (as in Carter v. Hyde [20] ) or as the grant of an option so called (as in the present case). Although it may be undesirable that these differences in form should lead to different consequences, when the result intended to be effectuated is the same, it is unnecessary, in the present case, to consider whether one form of option is different in nature from another; we are concerned only with an option of the third kind. The Australian cases in which the nature of options to purchase have been discussed were reviewed in Ballas v. Theophilos [21] , by Smith J. who advanced cogent reasons in favour of the view that an option similar in form to that in the present case is a conditional contract of sale. His judgment was affirmed on appeal to this Court, but it was not thought necessary to resolve this question: Ballas v. Theophilos [No. 2] [22] . More recently, in two cases in the Equity Division of the Supreme Court of New South Wales, it has been held that an option of that kind constitutes an irrevocable offer rather than a conditional contract: Johnson v. Bones [23] ; Westminster Estates Pty. Ltd. v. Calleja [24] . In England there is a similar conflict of opinion. In Griffith v. Pelton [25] , Jenkins L.J., delivering the judgment of the Court of Appeal, described an option to purchase land as "a conditional contract for such purchase by the grantee of the option from the grantor, which the grantee is entitled to convert into a concluded contract of purchase, and to have carried to completion by the grantor, upon giving the prescribed notice and otherwise complying with the conditions upon which the option is made exercisable in any particular case". In Beesly v. Hallwood Estates Ltd. [26] , Buckley J. declined to follow those dicta, which he regarded as at variance with what had been said in Helby v. Matthews [27] , and held that an option to renew a lease did not constitute a contract, but constituted an offer to grant a further term which the lessor was contractually precluded from withdrawing so long as the option remained exerciseable. His decision was affirmed in the Court of Appeal but on grounds that did not involve a decision on this point — Beesly v. Hallwood Estates Ltd. [28] — and his view of the nature of an option was accepted as correct by Plowman J. in In re Button's Lease [29] . In Helby v. Matthews [30] it was decided that a hirer who had an option to buy the goods hired was not "a person having agreed to buy goods" within s. 9 of the Factors Act 1889 U.K.. It is easy to see that the hirer, who was free to buy or not as he pleased, could not be said to have agreed to buy the goods within the meaning of the statute. However, Lord Herschell L.C., in rejecting the view expressed in the Court of Appeal that the owner of the goods had agreed to sell them, and that this connoted an agreement by the hirer to buy them, said [31] :
This is undoubtedly true if the words "agreement to sell" be used in their strict legal sense; but when a person has, for valuable consideration, bound himself to sell to another on certain terms, if the other chooses to avail himself of the binding offer, he may, in popular language, be said to have agreed to sell, though an agreement to sell in this sense, which is in truth merely an offer which cannot be withdrawn, certainly does not connote an agreement to buy, and it is only in this sense that there can be said to have been an agreement to sell in the present case.
1. [1949] Ch. 517.
2. (1923) 33 C.L.R. 115.
3. [1958] V.R. 576, at pp. 578-581.
4. (1957) 98 C.L.R. 193, esp. at pp. 207-209.
5. [1970] 1 N.S.W.R. 28, at pp. 36-37.
6. [1970] 1 N.S.W.R. 526, at pp. 530-531.
7. [1958] Ch. 205, at p. 225.
8. [1960] 1 W.L.R. 549, at pp. 555-556.
9. [1895] A.C. 471, at pp. 477, 479-480.
10. [1961] Ch. 105.
11. [1964] Ch. 263, at pp. 270-271.
12. [1895] A.C. 471.
13. [1895] A.C., at p. 477.
Lord Watson [32] , also said that the owner of the goods "was in exactly the same position as if he had made an offer to sell on certain terms, and had undertaken to keep it open for a definite period"; he added that the owner's obligation was "nothing more than a binding offer to sell". These remarks do of course support the view later taken by Buckley J. and by Plowman J., but they did not receive the concurrence of all of the members of the House of Lords, and cannot be regarded as expressing the ratio decidendi of that case. Lord Macnaghten, although agreeing with the conclusion that the hirer had not agreed to buy, said that "the contract on the part of the dealer was a contract of hiring coupled with a conditional contract or undertaking to sell" [33] . Lord Shand may have been of the same opinion; he said that "although there was an obligation to sell if the hirer should avail himself of the right of option to purchase, there was no obligation or agreement to purchase" [34] . Lord Morris expressed no opinion on the matter. Helby v. Matthews [35] contains weighty dicta on both sides of the controversy, but does not settle the question what is the nature of an option to purchase.
1. [1895] A.C., at p. 480.
2. [1895] A.C., at p. 482.
3. [1895] A.C., at p. 484.
4. [1895] A.C. 471.
There are two other cases in which it was held that an option to purchase is a conditional contract, and which may be mentioned because a different result might have been reached if the option had been treated as an irrevocable offer. The earlier of these decisions is Weeding v. Weeding [36] . In that case the testator made a will devising his real estate on certain trusts and bequeathing the residuary personal estate on different trusts. Thereafter he entered into a contract giving an option of purchase over part of the real estate, which option was exercised after his death. It was held that the property was converted from the date of the exercise of the option and went to the residuary legatees. Page Wood V-C. said [37] : "I cannot agree with the argument that there is no contract. It is as much a conditional contract as if it depended on any other contingency than the exercise of an option by a third person, such as, for example, the failure of issue of a particular person." In Re Mulholland's Will Trusts [38] , the testator had demised property to a bank for a term and by the lease had given the bank an option to purchase. By his will the testator appointed the bank to be one of his executors and trustees. After the deceased's death the bank exercised the option. It was objected that the bank, as trustee, could not purchase the property and in support of this argument it was said that "the option here amounted to no more than an offer by the testator which, as consideration had passed, could not be withdrawn; that, if the option should be exercised, the offer would be accepted and a contract to purchase would spring into existence; but that at the date of that contract the fiduciary relationship had come into existence and, therefore, the bank was not entitled effectively to exercise the option", [39] . This argument was rejected by Wynn-Parry J. who held that the notice exercising the option did not lead to the creation of any fresh contractual relationship between the parties; since the only contractual right had been created before the fiduciary duty arose, the bank, notwithstanding its acceptance of the executorship and trusteeship of the testator's will, was entitled to exercise the option.
1. (1861) 1 J. & H. 424 [70 E.R. 812].
2. (1861) 1 J. & H., at pp. 430-431 [70 E.R., at p. 815].
3. [1949] 1 All E.R. 460.
4. [1949] 1 All E.R., at p. 464.
If this question were to be decided upon authority, it might be thought that in Australia the decision in Carter v. Hyde [40] established that even an option which has the form of an irrevocable offer is in substance a conditional contract. If the question is approached from the point of view of principle, there are several reasons which in my opinion lead to the same conclusion, although as I have already said I need not consider whether the position will be different if the option takes the form of an offer coupled with a contract not to revoke it. In the first place, it is clear that the option itself creates an equitable interest in the land to which it relates: see London & South Western Railway Co. v. Gomm [41] ; Carter v. Hyde [42] ; Commissioner of Taxes (Q.) v. Camphin [43] ; In re Button's Lease [44] , to cite only some of the authorities. An equitable interest cannot be created by a mere offer; it is necessary to find a contract which gives the grantee a right to call for a conveyance of the land. Of course, on either view of the nature of an option, there is a contract, but it seems very artificial to treat a contract which does no more than provide that an offer shall not be revoked as giving the party to whom the offer is made a right to call for a conveyance of the land and an equitable interest in it. On the other hand, a conditional contract to sell the land would clearly create a contingent equitable interest in the land.
1. (1923) 33 C.L.R. 115.
2. (1882) 20 Ch. D. 562, at pp. 580-581.
3. (1923) 33 C.L.R., at pp. 125, 132.
4. (1937) 57 C.L.R., at pp. 132-134.
5. [1964] Ch., at p. 271.
Moreover, it is established by Goldsbrough, Mort & Co. Ltd. v. Quinn [45] that the grantee of an option may effectually exercise it notwithstanding that the grantor has purported to revoke it. If the only contract were not to revoke the offer, a wrongful revocation would entitle the grantee to damages for breach of contract but it might well be thought that once revoked, whether wrongfully or not, it could not thereafter be accepted. It is also difficult to see how it would be possible to grant specific performance of a contract not to revoke an offer, after the offer had already been revoked. In Goldsbrough, Mort & Co. Ltd. v. Quinn, Isaacs J. [46] , and, as an alternative to the primary reason for his decision, O'Connor J. [47] held that the law will treat the wrongful revocation as ineffectual. Since there is certainly no general principle that an act may be disregarded simply because it was done in breach of contract this explanation of the legal result is less satisfactory than holding an offer to be a contract subject to a condition whose fulfilment cannot be prevented by any act of the grantor.
1. (1910) 10 C.L.R. 674.
2. (1910) 10 C.L.R., at p. 691.
3. (1910) 10 C.L.R., at p. 686.
For these reasons I consider that an option to purchase (at least one in a form similar to that in the present case) is a contract to sell the land upon condition that the grantee gives the notice and does the other things stipulated in the option. An option to purchase, regarded in that way, is not an agreement which gives one of the parties the right to perform it or not as he chooses; it gives the grantee the right, if he performs the stipulated conditions, to become the purchaser. With respect, therefore, I regard the reasoning in Kennewell v. Dye [48] , and that of the majority of the Court in Carter v. Hyde [49] , as correct. The burden of the option in the present case was a contractual obligation which devolved upon the appellant as personal representative of the deceased, since it does not appear from the provisions of the option that it was intended not to do so, or that the contract was personal to the deceased. I hold, therefore, that notwithstanding the death of Mr. Laybutt the appellant still had the right to exercise the option, assuming it to be otherwise valid.
1. [1949] Ch. 517.
2. (1923) 33 C.L.R. 115.
The question that then arises is whether the notice handed to the appellant on 23rd October 1972 satisfied the requirements of the option. Once it has been decided that the option was binding on the personal representatives of the grantor, it is clear that apart from any statutory requirement to the contrary, notice to the appellant as executrix would have been sufficient to satisfy the requirements of the option although she had not then been granted probate: Kennewell v. Dye [50] , and see Kelsey v. Kelsey [51] , and Ballas v. Theophilos [No. 2] [52] . However, on behalf of the appellant it was submitted that the provisions of s. 61 of the Wills, Probate and Administration Act, 1898 N.S.W., as amended, had the effect that the option could not be exercised by notice given to the appellant as executrix but had to be given to the Public Trustee. Section 61 provides as follows:
From and after the decease of any person dying testate or intestate, and until probate, or administration, or an order to collect is granted in respect of his estate, the real and personal estate of such deceased person shall be deemed to be vested in the Public Trustee in the same manner and to the same extent as aforetime the personal estate and effects vested in the Ordinary in England.
Section 44 of the same statute provides:
Upon the grant of probate of the will or administration of the estate of any person dying after the passing of this Act, all real and personal estate which any such person dies seised or possessed of or entitled to in New South Wales, shall as from the death of such person pass to and become vested in the executor to whom probate has been granted or administrator for all his estate and interest therein
There is no doubt that at the time when the notice was given the estate of the deceased had by virtue of the operation of s. 61 become formally vested in the Public Trustee, although it is not altogether clear what capacity and powers the Public Trustee had as a result: cf. Holloway v. Public Trustee [53] . At the date of the hearing, however, probate had been granted and s. 44 had taken effect; the estate of the deceased was then vested in the appellant whose title had related back to the time of death. Moreover, although s. 61 provides for the vesting of the deceased's property pending probate, it does not alter the rule that an executor derives his title from the will and that the probate merely authenticates his title and is not the source of it. At the time when the notice was given the appellant was therefore the executrix of the deceased's estate and in that capacity was competent to receive the notice exercising the option; the fact that the property of the deceased was not then vested in her provides no reason why she could not do so. In support of the argument that the notice was not properly given to the appellant reliance was placed on Holland v. King [54] . In that case a partnership deed provided that the executor or administrator of a deceased partner should have the option of succeeding to that partner's share upon giving notice to the surviving partners within three months of the death. A partner died intestate and his widow gave notice to the surviving partners within the three months but did not obtain letters of administration until after that period had expired. It was held that there was no effectual notice under the deed. No reasons were given for the decision but it may be explained on the ground that when the notice was given it was of no validity, since the widow was not then the administratrix of the deceased partner, and that it could not be ratified by the administratrix after the time allowed for the exercise of the option had expired: see Dibbins v. Dibbins [55] . In the present case, however, no ratification was necessary. The appellant was the executrix at the time when she received the notice and was therefore the appropriate person to receive it. In any case, she did not perform any act which required ratification; she was merely the recipient of the notice. Reliance was also placed on Andrews v. Hogan [56] , where a notice to quit was held validly served on the Public Trustee as successor in title to the estate of a deceased tenant, but that case is distinguishable, first, because the question there was in whom the premises had vested and secondly, because in that case no probate was ever granted. The conclusion that the notice was properly given to the appellant in the present case is supported by the actual decision in Carter v. Hyde [57] , although this question does not seem to have been discussed; the notice exercising the option was there given by the executors of the deceased grantee although, as the learned trial judge in the present case has pointed out, it appears from the report of the proceedings in the Supreme Court of New South Wales (Hyde v. Carter [58] ) that probate was not granted until after the notice had been given. For these reasons, in my opinion the notice given to the appellant will have been effectual for the purpose of exercising the option if the option was valid and its other requirements were satisfied.
1. [1949] Ch. 517.
2. (1922) 91 L.J. (Ch.) 382, at p. 384.
3. (1957) 98 C.L.R., at p. 204.
4. [1959] S.R. (N.S.W.) 308, at p. 311.
5. (1848) 6 C.B. 727 [136 E.R. 1433].
6. [1896] 2 Ch. 348.
7. (1952) 86 C.L.R. 223.
8. (1923) 33 C.L.R. 115.
9. (1922) 23 S.R. (N.S.W.) 125, at pp. 128, 140.
It next becomes necessary to consider the provisions of the option, and of the contract relating to payment of the deposit. Clause 1 of the option provided that "This option may be exercised by notice in writing and by payment to the said Agent within the said time of the deposit mentioned below". Clearly these words purported to make payment, as well as notice, a condition of the valid exercise of the option. However, the payment is required by the clause to be made to "the said Agent" and the option neither names any agent nor provides any machinery by which it may be ascertained what person was intended to receive the payment. The omitted detail (the name of the agent) was not of a kind that can be supplied by implication of law. Moreover, there is no extrinsic evidence — for example, as to a course of dealing between the parties — that would enable the agent to be identified. If it is not possible so to interpret the option as to determine the name of the person to whom payment of the deposit is to be made the clause requiring such payment to be made will be meaningless and void of contractual force. In Adamastos Shipping Co. Ltd. v. Anglo-Saxon Petroleum Co. Ltd. [59] , Lord Reid said:
In G. Scammell & Nephew Ltd. v. Ouston [60] , Lord Wright said: "The object of the court is to do justice between the parties, and the court will do its best, if satisfied that there was an ascertainable and determinate intention to contract, to give effect to that intention, looking at substance and not mere form. It will not be deterred by mere difficulties of interpretation. Difficulty is not synonymous with ambiguity so long as any definite meaning can be extracted. But the test of intention is to be found in the words used. If these words, considered however broadly and untechnically and with due regard to all the just implications, fail to evince any definite meaning on which the court can safely act, the court has no choice but to say that there is no contract." In Nicolene Ltd. v. Simmonds [61] , that principle was applied so as to strike out of a contract a term so vague or ambiguous that no ascertainable meaning could be given to it, and to leave the rest of the contract valid.
1. [1959] A.C. 133, at pp. 175-176.
2. [1941] A.C. 251, at p. 268.
3. [1953] 1 Q.B. 543.
There is no provision of the option, or of the incorporated form of contract, that gives the least hint as to what person was intended by the parties to be the vendor's agent for the purposes of the agreement. The fact that the agent is to be paid as "stakeholder" (cl. 1 of the form) suggests that it was not intended that the deceased himself should be paid the deposit. If this view is incorrect, and if, on the proper construction of the option agreement payment of the deposit to the deceased or his personal representatives was a sufficient compliance, the fact is that no such payment was made. On behalf of the respondent it was submitted that is should be inferred that the intention of the parties was that either party was entitled to nominate an agent for the purpose of receiving the deposit, but in my opinion the words of the documents do not support such an inference. The personal qualities of the agent to whom payment was to be made was a matter of importance to the deceased. As cl. 16 showed, the deposit was intended to be, as a deposit usually is, "a security for the completion of the purchase": Howe v. Smith [62] . It is not likely that the deceased would have agreed that the deposit should be paid to anyone upon whom he could not rely to account to him for the money if he became entitled to it. For example, the deceased might have been expected to have been unwilling to appoint as his agent someone under the influence or domination of the respondent or someone who for other reasons might be inclined to display partiality towards the respondent if a dispute arose. It cannot be said with any confidence that if at the time the option agreement was made it had been suggested to the parties that they should include a provision allowing the respondent to nominate the person to whom the deposit should be paid the deceased would have agreed to the suggestion. It is not possible to imply in the contract a term that the respondent should be entitled to select the person to whom payment should be made.
1. (1884) 27 Ch. D. 89, at p. 98.
The learned trial judge held that the respondent had the right to nominate the person to whom the deposit should be paid for the purposes of the option and of the resulting contract. He said:
In my opinion, it was open to the plaintiff to nominate the stakeholder himself and then it would have been open to the vendor to object to the plaintiff's choice and propose a change of stakeholder which, if the plaintiff refused, would place the plaintiff at risk if the stakeholder defaulted or made off with the money: Christie v. Robinson [63] , per Griffith C.J. citing Fenton v. Browne [64] .
In my opinion the authorities to which his Honour referred provide no assistance in determining the present question. In Christie v. Robinson [65] it was held that upon the rescission, by mutual consent, of a contract of sale, the purchaser was entitled to recover from the vendor a deposit which he had paid under the contract to the vendor's agent, although the vendor himself had never received the deposit from the agent. Griffith C.J. said that "the fact that an auctioneer may be sued for a return of the deposit in no way concludes the question so as to show that the vendor cannot be sued" [66] , and it was in the course of discussing that question that he cited from Smith v. Jackson [67] the following passage in which Fenton v. Browne [68] is mentioned:
If then the auctioneer cannot pay over the deposit to the vendor, is he to be considered as his agent? The vendor is responsible for the loss, if any, occasioned by the auctioneer; that was determined in Fenton v. Browne [69] , in which case, the Master of the Rolls says: "Upon a sale by auction the vendor determines who is to receive the deposit. The auctioneer is not a stakeholder of the purchaser; at least not of his choice. If he were a stakeholder for both parties, either would have a right to propose to change such stakeholder; and the party refusing takes upon himself the risk."
This passage means no more than that if one party proposes that a stakeholder be changed and the other refuses, the latter takes the risk of loss caused by the default of the stakeholder. The matter which was decided in Fenton v. Browne was that a vendor who had resisted an application by the purchaser for payment into court of the deposit which was in the hands of the vendor's agent had to bear the loss caused by the agent's failure. Grant M.R. said [69] that the refusal to concur in the proposition that the money be paid into court threw "the risk of his [the agent's] credit on the party refusing". It does not follow from this that where a contract fails to name the person intended to act as stakeholder it must be implied that either party has a right of nomination.
1. (1907) 4 C.L.R. 1338, at p. 1347.
2. (1807) 14 Ves. Jun., at p. 150 [33 E.R., at p. 478].
3. (1907) 4 C.L.R. 1338.
4. (1907) 4 C.L.R., at p. 1347.
5. (1816) 1 Madd. 618, at p. 620 [56 E.R. 227, at p. 228].
6. (1807) 14 Ves. Jun. 144 [33 E.R. 476].
7. (1807) 14 Ves. Jun., at p. 150 [33 E.R., at p. 478].
8. (1807) 14 Ves. Jun., at p. 150 [33 E.R., at p. 478].
A further submission on behalf of the respondent was that upon the proper construction of the documents the vendor had reserved to himself the right to nominate an agent if he wished the deposit to be paid, and that if no agent were nominated the provision for payment of the deposit did not come into operation. Alternatively it was put that although there was an obligation to pay the deposit the vendor was given the right to elect whether it should be paid by naming an agent. Both of these suggested constructions are opposed to the words of the documents which plainly require payment of a deposit to an agent but fail to indicate the identity of the person to whom payment is to be made.
For these reasons, in my opinion it must be held that those provisions of cl. 1 of the option that relate to the payment of the deposit are meaningless. The clause cannot be construed to permit payment to any person whom the respondent might select. The payment made to the solicitors was not a compliance with the provisions of cl. 1.
It is then necessary to decide whether it is possible to strike out of the option that part of cl. 1 which is meaningless, leaving the remainder valid, or whether the whole option fails. It is clear that an agreement is not nullified by the inclusion of a meaningless clause, provided that the latter is severable: Nicolene Ltd. v. Simmonds [70] ; Fitzgerald v. Masters [71] ; Adamastos Shipping Co. Ltd. v. Anglo-Saxon Petroleum Co. Ltd. [72] . The question whether a meaningless clause is severable depends on the intention of the parties to be gathered from the agreement as a whole: Whitlock v. Brew [73] . The question in the present case is whether the parties intended that the option should be binding notwithstanding the failure of the provision requiring payment of a deposit. The Court will of course attempt to give efficacy to an agreement which the parties no doubt believed would be binding, and will be most reluctant to hold meaningless and void an agreement which the parties apparently intended to have legal effect. However, it seems to me impossible to say that the deceased intended that the option, which was expressed to be exerciseable on payment of the specified deposit, can be exercised without any payment being made. The receipt of a deposit, as I have already indicated, is generally regarded by a vendor as a matter of some importance and the provisions of cl. 16 of the form of contract indicate that this was so in the present case. Moreover, the payment and receipt of a deposit was basic to the relationship that would result from the exercise of the option. Clause 1 of the form of contract requires the payment of the deposit (which is obviously the same deposit as that mentioned in the option) upon the signing of the agreement and requires "the balance of the purchase price" to be paid in cash on completion. Other provisions of the form of contract speak of the deposit and of the balance of the purchase price. The rejection of that part of cl. 1 of the option that deals with the payment of a deposit would affect the balance of the contractual relationship between the parties, since the payment of a deposit is an integral part of the working out of the contract. The provision for the payment of a deposit appears to be essential to the exercise of the option. I conclude, therefore, that the meaningless words of cl. 1 of the option agreement cannot be severed from the rest of that agreement but have the effect of invalidating it.
1. [1953] 1 Q.B., at p. 552.
2. (1956) 95 C.L.R. 420, at p. 427.
3. [1959] A.C., at p. 176.
4. (1968) 118 C.L.R. 445, at p. 461.
For this reason, there is, in my opinion, no binding contract between the appellant and the respondent. It is accordingly unnecessary to consider the other grounds on which it was suggested that the agreement was void for uncertainty — particularly the failure to cross out unnecessary words, or fill in the gaps, as the case may be, in cll. 2(a) and (e) of the option and cl. 17 and the 4th Sch. of the form of contract — although I may say that I incline to the view that the difficulties raised by those provisions might have been overcome by a process of construction.
I would allow the appeal. |
high_court_of_australia:/showbyHandle/1/10913 | decision | commonwealth | high_court_of_australia | text/html | null | Mills v Stokman [1967] HCA 15 | https://eresources.hcourt.gov.au/showbyHandle/1/10913 | 2024-09-13T22:57:27.204731+10:00 | High Court of Australia
Barwick C.J. McTiernan, Kitto, Taylor and Menzies JJ.
Mills v Stokman
[1967] HCA 15
ORDER
Order of the Supreme Court varied by deleting therefrom the declaration that Martin Cornelis Stokman is the owner of the slate at grass situated on part Portion 195 and on part Portion 122 of the land of Daphne May Mills and adding thereto a declaration that Martin Cornelis Stokman is entitled to use and enjoy the rights over Portion 195 of the land owned by Daphne May Mills which were granted by the agreement of 14th November 1955 to Robert George Warren and an injunction in terms of the prayer numbered one of the statement of claim limited to the lands comprised in the said Portion 195. Otherwise appeal dismissed with costs.
Cur. adv. vult.
Cur. adv. vult.
The following written judgments were delivered:—
1967, May 19
Barwick C.J.
Prior to 1931, a company had quarried slate for the purpose of forming and selling roofing slates on portion of seventy-six acres of land near Goulburn in the State of New South Wales. The title to portion of that land at all relevant times was under the provisions of the Real Property Act, 1900 and the remainder under the old system. The quarry and the greater part though not the whole of the dross from its working were situate upon portion of the land held under old system title and access to them was obtained directly from a road called the Middle Arm Road.
The dross from the quarrying operations consisted of dust, chippings and slabs of slate of varying shape and dimension. It resulted from the formation of slate tiles for roofing out of slate extracted from the land and thus represented unwanted material excavated in the course of obtaining slate suitable for making roofing tiles. As matters stood at the time of the quarrying operations, this dross would appear to have had no commercial value. Apparently it was cast on one side and in the course of time came to cover more than two acres of land to an average height of thirty feet, reaching at least fifty feet at its peak, even after some of it had been used to fill depressions, including portion of a creek bed, in parts of the land.
The quarrying operation was abandoned in 1931 since when, except for the events giving rise to this suit, the dross remained untouched except by the forces of nature, which no doubt progressively consolidated it into a mound or heap.
By 14th November 1955 the seventy-six acres had come into the ownership of Donald Albert Mills and his wife Winifred Katherine. By that time, apparently, slabs of slate for domestic paving, garden walls and other purposes of domestic decoration, were in considerable demand in the Australian Capital Territory. Some of the slate in the heap of dross was eminently suitable for these purposes and had thus acquired some commercial value. On that day Mr. Mills and his wife entered into an agreement with the respondent Warren which, after reciting their ownership of the land and the presence on the land of a considerable quantity of slate, provided as follows: "(1) The vendors will sell and the purchaser will buy all that the slate on the land hereinbefore referred to at or for the price or sum of four hundred pounds (£400) which shall be paid on the execution hereof. (2) The purchaser shall have full and free power and authority for himself his servants agents and workmen to go to and return from the lands upon which the said slate is situated from the Middle Arm Road for the purpose of cutting or sawing up or carrying away the said slate at all times and also for any of the purposes aforesaid to employ horses wagons motor traction and other mechanical contrivances which may be necessary or convenient for the said purposes but any road used for this purpose shall be maintained by the purchaser at his expense and he will ensure that all gates are closed at all times. (3) The purchaser shall have the right to build a causeway or bridge over the Tarlo River but such causeway or bridge shall be constructed in such a manner so as not to divert the stream of the said river. (4) The vendors will not sell the land hereinbefore referred to without having inserted in the contract of sale for such lands a condition that such sale is subject to this agreement."
The purchaser Warren was an architect. For some time between 14th November 1955 and 19th February 1960 he made slate available to Martin Cornelis Stokman, a stonemason of Canberra, who apparently took slate from the heap of dross, and fashioned it for use in connexion with dwellings in the Australian Capital Territory. On the last-mentioned date, Warren and Stokman entered into an agreement which, after reciting the agreement between Mills and his wife and Warren, provided: "(1) The vendor will sell and the purchaser will buy all the slate now on the land of the said Donald Albert Mills and Winifred Katherine Mills hereinbefore referred to at and for the price of five hundred and fifty pounds (£550). (2) The said sum of five hundred and fifty pounds (£550) shall be paid by the purchaser to the vendor as follows: A deposit of one hundred pounds (£100) has already been paid by the purchaser to the vendor and the balance of four hundred and fifty pounds (£450) will be paid by the purchaser to the vendor on the twenty second day of February one thousand nine hundred and sixty. (3) The vendor hereby appoints the purchaser his agent with full and free power and authority to go to and return from the lands upon which the said slate is situated from the Middle Arm Road for the purpose of cutting or sawing up or carrying away the said slate at all times and also for any of the purposes aforesaid to employ horses wagons motor traction and other mechanical contrivances which may be necessary or convenient for the said purposes but any road used for this purpose shall be maintained by the purchaser at his expense and he will ensure that all gates are closed at all times."
Thereafter for some time Stokman entered the subject lands and removed from the heap of dross such slate as he desired to use in the construction of pavements, fireplaces, garden walls or the like in connexion with houses in Canberra.
However, some time before the execution of the last-mentioned agreement, D. A. Mills and his wife left the seventy-six acres and went to live in Brisbane. Also, early in 1960 they entered into some arrangement with the appellant Daphne May Mills, the mother of D. A. Mills, for the sale of the seventy-six acres to her, the price to be paid over some period of time. Evidence of this transaction was given in the present suit in the most sketchy and unsatisfactory terms. Neither the documents by which the sale was effected nor the transfer or conveyance by which it was completed were before the primary judge. All we know is that the Commercial Bank of Australia Ltd. on 6th August 1960 gave to the appellant notice of the assignment to it of the estate and interest sold to the appellant by D. A. and W. K. Mills in terms of a contract of sale dated 1st August 1960: and that the portion of the seventy-six acres held under the provisions of the Real Property Act were not transferred to the appellant till some time in 1963. It was assumed at the hearing of the suit that the purchase price was not wholly paid till 1963 and that the land held under old system title was not conveyed till then.
Between some date in 1960, as to which there is conflicting evidence, when according to the appellant she first saw a person removing slate from the land, and 23rd January 1961 the respondent Stokman from time to time entered the land and removed slate from the heap. However, shortly before 23rd January 1961 the appellant, through her husband, Victor Albert Mills, disputed the respondent's right to remove slate. According to the evidence, the appellant, again through her husband, complained that she was "not getting any money out of the slate". After conversations, the details of which are in dispute, an agreement dated 23rd January 1961 was signed between the appellant and the respondent Stokman which, after reciting that that respondent was the owner by purchase of all the slate on and in (sic) the said land, provided that that respondent would employ Victor Albert Mills, or a person nominated by the appellant, to assist in the selection and loading of slate to be removed from the land and would pay to the appellant £1 per load in respect of which such assistance was given. Clause 3 of this agreement is in the following terms: "(3) That Mrs. Mills on behalf of herself her heirs executors and assigns acknowledges and agrees that Mr. Stokman is the owner of all the slate situated on or in the land hereinbefore referred to and further acknowledges and agrees that she will not by herself her servants agents or workmen give bargain sell exchange bequeath or otherwise dispose of any part of the said slate without the prior written consent of Mr. Stokman. Mrs. Mills further acknowledges and agrees that Mr. Stokman has full and free power and authority for himself his servants agents and workmen to go to and return from the said lands upon which the said slate is situated from the Middle Arm Road for the purpose of cutting or sawing up or carrying away the said slate at all times and also for any of the purposes aforesaid to employ horses wagons motor traction and other mechanical contrivances which may be necessary or convenient for the said purposes but any road used for this purpose shall be maintained by Mr. Stokman at his expense."
Thereafter the respondent Stokman removed slate from the said lands, being assisted in that connexion from time to time by the appellant's husband. But in April or May 1964 the appellant refused to allow the respondent Stokman to enter the land and remove any further slate. A dispute had then arisen as to payment of the agreed sum in respect of a load of slate removed by Stokman, the appellant apparently insisting either on prepayment as a condition of entry upon the land or upon payment in cash at the time of loading the slate. A dispute also arose as to whether or not the appellant was at that time selling slate to other persons. This suit brought by the respondents followed these events.
The statement of claim treated the heap of dross as slate at grass and a chattel, the ownership of which passed to the respondent Stokman by the agreement of February 1960. The respondents grounded their claim upon the two agreements, that of 1955 and that of 1960, and claimed as their principal relief injunctions to restrain the appellant from preventing them or either of them from entering upon and returning from the appellant's land for the purpose of cutting, sawing up or carrying away the slate situate upon that land, and to restrain the appellant from selling or permitting the removal of the said slate from the land without the permission of the respondents or of one of them. By amendment made during the course of the hearing, the prayers of the statement of claim were amended to claim declarations that the respondent Stokman was the owner of the slate at grass and entitled to use and enjoy the rights over the appellant's land granted by the agreement of 1955 to the respondent Warren.
The agreement of 1961 was tendered at the hearing by the respondents, without objection, presumably to establish notice in the appellant of the respondents' rights. The appellant sought to establish by cross-examination and by evidence given chiefly by her husband that the execution of that agreement was obtained by misrepresentation.
The learned primary judge was of opinion that none of the slate in the heap of dross was a chattel but that on the contrary the whole heap formed part of the land. He felt fortified in this conclusion by Boileau v. Heath [1] . But he held that the right given by the agreement of 1955 to the respondent Warren to enter the land and remove the slate from the heap was not, nor was it intended to be, assigned to the respondent Stokman. As that respondent claimed to be entitled in his own, as distinct from the respondent Warren's, right to enter the land and sought an injunction to protect that right, the primary judge because that respondent was not an assignee of the right of entry, was prepared to dismiss the suit. As a further ground of decision, his Honour held that, even if the agreement of 1955 amounted to the grant of a profit à prendre the respondent was a purchaser for value of the land without notice and thus not bound by that agreement. He did dismiss the suit.
1. [1898] 2 Ch. 301.
From that dismissal, the respondents appealed. The Supreme Court (Court of Appeal Division) allowed the appeal. It made a declaration that the respondent Stokman was the owner of the slate at grass and granted an injunction restraining the appellant from selling or permitting the removal from the land of the said slate without the written permission of the respondents or of either of them. The Supreme Court held that the pieces of slate in the heap were chattels, upon the footing that, having been severed from the land by the process of quarrying, no more appeared than that they rested upon the land by their own weight. As a further reason for concluding that the respondent Stokman was the owner of the slate in the heap, by virtue of the two agreements of 1955 and 1960, the Supreme Court on the footing that the heap formed part of the land held that the slate was agreed to be severed from the land under the agreement of 1955 and that, therefore, it came within the definition of goods in s. 5 (1) of the Sale of Goods Act, 1923. Consequently, by dint of the agreement of 1955 and ss. 22 and 23, r. 1 of the Sale of Goods Act, the property in that slate passed to the respondent Warren under the agreement of 1955 and thereafter to the respondent Stokman under the agreement of 1960.
In my respectful opinion, the primary judge was right in concluding on the material before him that the heap of slate as at 14th November 1955 formed part of the realty. Whilst there is a paucity of evidence as to the circumstances in which and the purpose for which the quarrying company placed the pieces of slate in or on the heap, it is clear that they were then unwanted for the purposes of the persons who quarried them and that they had no commercial value, neither then nor in prospect. According to the evidence, the heap had been upon the land in 1931, being then of substantially the same size as it was during the events leading to this suit. Nothing was proved as to the estate or interest of the quarrying company in the land nor as to the devolution of the title to the land up to the time it came into the possession of D. A. and W. K. Mills. We do not know by what transaction or transactions the quarrying company terminated its interest in the land, or in the heap of dross. But there is nothing to suggest nor reason to suppose that the heap had at any time been dealt with separately from the title to the land.
I have come to think that the proper inference from what is known by evidence in the suit is that the heap represented unwanted dross cast on one side with the intention that it should remain on the land indefinitely, and, by implication, that it should form part of it. In my opinion, the proper inference from its continuous association with the land in the meantime is that it had been dealt with as realty by succeeding owners. Those inferences are enough within the authorities to warrant the conclusion that the heap of dross was on 14th November 1955 part of the realty. Reference to Holland v. Hodgson [1] is sufficient to indicate the relevant principles in this connexion; for my part, I find no need to rely on or to discuss particular instances such as Boileau v. Heath [2] , whose differentiating circumstances may need to be regarded. In my respectful opinion, it is not correct to regard this heap of dross as comparable to some separate substance attached to the land by no more than its own weight. In the course of time, like a heap of earth, it had no doubt become integrated at its base with the subjacent soil. Nor, in my opinion, is it correct to ignore the intention which the quarrying company must have had of abandoning to the land the unwanted and worthless dross of its operations.
1. (1872) L.R. 7 C.P. 328.
2. [1898] 2 Ch. 301.
So far as the reasons of the Supreme Court founded on the Sale of Goods Act are concerned, it is sufficient, in my respectful opinion, to point out that there was in truth no agreement on the part of either D. A. or W. K. Mills or of the respondent Warren to sever the slate from the land. The agreement of 1955 went no further than to purport to sell the slate to that respondent and to give him a right to enter and remove it. He did not agree to do so. No doubt it is implicit in the terms of the agreement that both parties thought that the slate was already severed: they did purport to deal with it as if it were a chattel interest. But an agreement to sever cannot be constructed out of that assumption on the part of the parties. In my respectful opinion, the Supreme Court was in error in regarding s. 5 (1) and ss. 22 and 23, r. 1 of the Sale of Goods Act as applicable to the slate or the agreement of 1955.
It follows that the declaration as to the ownership of the heap of dross made by the Supreme Court cannot be sustained. However, so to decide does not dispose of the case. As in my opinion the heap formed part of the land, the agreement of 1955, supported by consideration, is capable of creating an equitable profit à prendre. It contains an express grant of the right to enter and to remove the slate in the heap. In my opinion, that agreement did amount, in equity, to the grant of a profit à prendre and thus created an interest in the land which in the case of land held under common law title would be binding upon a purchaser with notice.
However, with respect, I find myself unable to agree with the primary judge that the appellant was a purchaser for value without notice of the equitable interest created by the agreement of 1955. The time at which to test the question whether or no she was such a purchaser was not, in my opinion, the date of the agreement to buy, whatever date that may have been. The appellant did not take title to the land till 1963, by which time not only had she seen the respondent Stokman removing slate from the land and learnt of his claim to do so as of right, but she had entered into the agreement in 1961. At that time she quite clearly knew the basis of the respondent Stokman's claim to enter the land. It seems to me nothing to the point that neither party regarded the heap of dross as realty but rather regarded the slate in it as personalty. The appellant knew that the respondent Stokman claimed to deduce the rights he claimed through the respondent Warren and the agreement of 14th November 1955. Indeed, the terms of that agreement had been specifically drawn to the appellant's attention by a solicitor's letter of 19th October 1960. There was no evidence at the hearing that in October 1960 or in 1961 she had paid the purchase price, or if it matters, any part of it. She was not therefore a purchaser for value without notice.
The heap of dross being part of the land and the agreement of 1955 having created in the respondent Warren an equitable interest in the land, namely, a profit à prendre the slate, of which the appellant had notice, what significance has the agreement of 1960? It affected to sell the slate on the footing that it was a chattel. It did not sell or transfer the equitable interest in the land which, in my view, the respondent Warren then had. But it did appoint the respondent Stokman for value the agent of the respondent Warren to go upon the land and remove the slate. That authority was irrevocable, being for value and intended to secure to the respondent Stokman the means of obtaining the slate in the heap of dross. The property in the slate when removed would, in my opinion, pass to the respondent Stokman by virtue of the sale of it which the agreement sought to effect. It would not matter, in my opinion, in this connexion, that the parties thought that the property in the slate could and would pass before removal or that the sale in terms was of the slate in the heap. It seems to me, therefore, that the appellant, being bound by the interest in the land which the agreement of 1955 had created in Warren, was not entitled to prevent the respondent Stokman from exercising as agent of the respondent Warren the rights which such interest in the land held on common law title gave that respondent. There is no allegation nor any evidence that the appellant by fraud obtained the registration as proprietor of the land, held under the Real Property Act. Therefore, she holds that land according to the certificate of title free of such an interest as a profit à prendre not created by herself and not endorsed thereon.
There remain several matters. First, the case was argued by the respondents according to the terms of the judgment of the primary judge upon the footing that the slate in the heap was a chattel and that the licence to enter given to Warren by the agreement of 1955 was by the agreement of 1960 assigned to the respondent Stokman. These positions of the respondents were taken deliberately, their counsel at the hearing declining to treat the case as in the alternative, that is, either as a claim by the respondent Stokman that he was the assignee of the right to enter, or as a claim by the respondent Warren that the right to enter remained effective against the appellant and that the respondent Stokman was his agent to exercise that right.
But the statement of claim relied upon the agreements themselves and the original prayers of the statement of claim sought an injunction to restrain the appellant from preventing the respondents or either of them, their servants or agents from entering upon and returning from the land for the purpose of cutting up and carrying away the slate situated on the land. The interpretation of those agreements which the statement of claim asserted was that the slate was a chattel and the respondent Stokman the owner and the assignee of a right to enter the land and remove the slate. But, notwithstanding this interpretation, and whatever argumentative basis for establishing the respondents' claim to relief may have been put forward by counsel, neither the basis of the statement of claim in the agreements themselves nor the prayers for the injunction to which I have referred were abandoned. It therefore seems to me that the course taken by counsel did not relieve the primary judge of the obligation to make a decision according to the pleadings and the evidence. In my respectful opinion, he ought to have granted injunctions as asked in the first and second prayers of the statement of claim, and ordered an inquiry as to damages as sought in the third prayer.
The second matter touches the agreement of 1961. I have not found it necessary to refer to that agreement as a source of the rights of the parties or of either of them. But the appellant, in case the Court should be of opinion that that agreement was a significant source of right in the respondent Stokman, sought a rehearing to enable her to set up defences to claims based upon that agreement which his counsel claimed would have been inappropriate to the respondents' claims as pleaded and argued at the hearing. The appellant seeks to assert that the agreement of 1961 terminated any rights which the respondent Stokman theretofore may have had and became after its execution the sole source of his rights. The appellant upon the basis of this assertion desired to set up that that agreement was induced by misrepresentation and that in any case it was discharged by breach before the commencement of the suit, or if not so discharged, would not in the circumstances be enforced in equity.
In my opinion, the agreement of 1961 cannot be regarded as intended to bring to an end existing rights. Nothing in its language supports such a view and much of that language is against it. Rather it appears to settle a dispute as to those rights by recognizing them and creating a collateral promise for the employment and payment of a person to assist in the loading of slate to be selected and carried away in pursuance of those rights. It was not set up by the respondents as itself a source of new rights—a matter which would have been particularly relevant in the case of the land held under the Real Property Act. In any case, in my opinion, that agreement did not itself create a profit à prendre. There is therefore no basis for the appellant's request for a rehearing of the suit. But, in any case, it would have been open to the appellant to have set up in the suit as the case was pleaded and conducted, that the agreement of 1961 terminated the rights which the suit was brought to enforce. Further, there seems to me to be no substance in the appellant's claim that that agreement was discharged by breach and no relevant consequence in her claim that its execution was induced by misrepresentation.
In the result, although I cannot agree with the declaration made by the Supreme Court on appeal, nor with the reasons of that Court for granting the injunction and ordering the inquiry as to damages, I am of opinion that this appeal should be dismissed.
Whilst it would seem that a good deal of confusion was unnecessarily introduced into the case by the submission made by counsel for the respondents before the primary judge, I do not think that that submission affords a reason for depriving the respondents of any costs either of the hearing or of either of the appeals.
McTiernan J.
I am of the opinion that the transaction between the first appellant's predecessors in title and the second respondent was not a contract for the sale of goods. The slate the subject matter of the transaction was, on the evidence, part of the land where it was deposited. The effect of the evidence is that by the transaction the second respondent bought a mass of pieces of the earth's crust, mined from the quarry in the vicinity, which the quarrying company returned to the earth. As the vendors entered into the transaction for value, it created a valid equitable profit à prendre. The next transaction between the second respondent and the first respondent was not an assignment of the whole of his interest by the former to the latter. This transaction purported to be a sale of what then remained of the mass of pieces of slate but the second respondent did not assign to the first respondent the licence to go on the land to win the slate and take it away. It would seem that an object of the agreement which the first respondent made with the first appellant, who then owned the land where the slate was deposited, was that the first respondent should obtain from the first appellant an authority to go on the land for the above-mentioned purpose. This agreement, if enforceable in a court of equity, is effective to give such authority. However, counsel for the respondents declined in argument to rely upon the agreement except as evidence that the first appellant knew before she paid for the land that the first respondent had purchased the heap of slate from the second respondent. Counsel also relied for this purpose on evidence showing that the second appellant in the course of his authority as the first appellant's agent obtained knowledge of the first respondent's interest in the heap of slate. The reason why counsel for the respondents declines to rely upon the agreement to support the first respondent's claim that he has authority to go on to the land and take away slate from the heap is that the appellants' counsel desires to contest the issue whether the agreement is specifically enforceable and that he had no opportunity of doing so at the trial because the respondents did not plead the agreement, nor was the issue contested whether the agreement supported the first respondent's claim that he had lawful authority to go on the land to win and carry away any slate from the heap. I think that it would be right to allow the application of the appellants' counsel for a direction that a trial of the issue be had and to make an order allowing this appeal. Consequently I would make an order setting aside the order of the learned trial judge and that both the appellants and the respondents should have leave to raise the relevant issues in relation to the agreement of 23rd January 1961. Further, that the respondents should pay the appellants' costs of the appeal to the Court of Appeal and to this Court and the costs of the suit should abide the order of the judge who disposes of the suit.
Kitto J.
The respondents' claim for a declaration that the slate in the mound is the property of Stokman and for relief upon that basis was, in my opinion, rightly dismissed by Myers J. upon the ground that the whole mound is part of the land and therefore the property of the appellant Daphne Mills. It may be right to conclude that the materials forming the mound became personalty upon being dug up and were later re-incorporated into the soil by being dumped on the land with the intention (to be inferred from the evidence, exiguous though it is) of being abandoned so as to become a permanent accretion to the surface. On the other hand the right conclusion may be that the materials were never so severed from the soil as to be converted into personalty. I should myself be inclined to favour the latter view on the ground that there is an element of intention in severance, just as there is in the kind of attachment which makes a chattel part of the realty, and that the proper inference from the known facts is that the company that worked the quarry and built the dump did not have the requisite intention of permanent severance with respect to anything but so much of the slate as it carried away.
As regards the portion of the mound which is upon land under common law title—and that is the greater part of it—I agree with the Chief Justice in thinking that upon the evidence it should be held that Daphne Mills acquired the legal estate with notice of an equitable interest, created in favour of the respondent Warren by the agreement of 14th November 1955 and enuring for the benefit of the respondent Stokman by virtue of the agreement of 19th February 1960. The intendment appearing from the first agreement is that Warren should have a right to enter upon the land and remove the slate so as to acquire the beneficial ownership of it, and that the right should not be defeasible by any action on the part of the vendors: cf. Fitzgerald v. Firbank [1] . This was plainly an intention to create a right not only as against the vendors but as against all the world, for it was conferred without any specified limit of time (though perhaps impliedly limited to a reasonable time: cf. Reid v. Moreland Timber Co. Pty. Ltd. [2] ), and was in aid of what the parties joined in describing as an absolute sale of the slate. The agreed price having been paid, the result, on the footing that the slate was part of the soil, was that, although for want of a deed the only rights which resulted at law were rights enforceable against the vendors personally, the agreement was specifically enforceable and Warren therefore acquired in the contemplation of equity the rights and the interest in the land which a grant by deed in conformity with the agreement would have given him: Mason v. Clarke [1] . That is to say he acquired an interest in the nature of a profit à prendre, an irrevocable licence coupled with an interest and therefore binding not only upon the vendors but upon anyone taking the land from them with notice: In re Refund of Dues under Timber Regulations [2] ; Reid v. Moreland Timber Co. Pty. Ltd. [3] . The opposite view, which was accepted in the Court of Appeal, namely that by reference to the provisions of the Sale of Goods Act it should be held that the effect was to make the slate goods for relevant purposes, is, I think, not sustainable. I content myself with referring on this point to the reasons of the Chief Justice and to the case of Stratford (H. M. Inspector of Taxes) v. Mole and Lea [4] .
1. [1897] 2 Ch. 96.
2. (1946) 73 C.L.R. 1, at p. 13.
3. [1955] A.C. 778.
4. [1935] A.C. 184, at p. 193.
5. (1946) 73 C.L.R., at p. 16.
6. (1941) 24 Tax Cas. 20.
The rights of entry and removal thus conferred upon Warren were expressly made exercisable by his agents, and by the agreement of 1960 he appointed Stokman his agent to exercise those rights and agreed that the slate should belong to Stokman. It seems that at the hearing before Myers J., counsel for the respondents, being invited to elect whether the statement of claim should be read as alleging an assignment to Stokman of the rights of entry or as an appointment of Stokman as Warren's agent, elected in favour of assignment. This arose out of a suggestion that Stokman was either an assignee from Warren or an agent for him, so that either he or Warren was the only proper plaintiff and the other should not have been joined. In truth, however, there was no election to be made. The assignment was equitable, so that Warren became a trustee for Stokman of such rights as the agreement of 1955 gave him at law, and as such was a necessary co-plaintiff with Stokman if Stokman be regarded as suing as equitable assignee: Performing Right Society Ltd. v. London Theatre of Varieties Ltd. [5] ; and there is nothing inconsistent with this in saying that as Warren's rights at law were exercisable by his agent and Stokman claims to exercise them as agent but nevertheless for his own benefit, Stokman is a proper plaintiff even in respect of what he claims to be entitled to do as agent.
1. [1924] A.C. 1.
As regards so much of the mound as stands upon land under the provisions of the Real Property Act, I think the position is different, because the appellant Daphne Mills, having become the registered proprietor, is unaffected by any interest not on the register, even though she took with notice of it. If the case were one of fraud it would be otherwise; but merely to take a transfer with notice or even actual knowledge that its registration will defeat an existing unregistered interest is not fraud: Real Property Act, 1900 N.S.W., s. 43; and see the cases collected by Gibbs J. in Friedman v. Barrett; Ex p. Friedman [1] .
1. [1962] Qd. R. 498, at p. 512.
In the result I would vary the order appealed from by omitting the declaration as to the ownership of the slate, and by limiting the injunction so as to apply to so much only of the land as is not under the provisions of the Real Property Act. With a similar limitation I would add a declaration as asked in par. (B1) of the prayer of the statement of claim. Otherwise I would dismiss the appeal with costs.
Taylor J.
I agree that for the reasons given by the Chief Justice this appeal should be dismissed.
Menzies J.
Having regard to the course taken by the parties at the hearing of this appeal and, in particular, to the concession made on behalf of the respondents that they have no rights except in relation to slate at grass upon the land of the appellant Daphne May Mills, it has, I think, become possible for this Court to dispose of the substantial dispute which is now between them.
The facts are set out in the judgments of the other members of the Court and I do no more than state my conclusions upon what appear to me as the real issues, whether or not they were raised by the pleadings.
(1) The rubble slate in the dump upon the land near Goulburn owned by the appellant Daphne May Mills is, and was at all times material, part of the land either because the rubble was not severed from the land or, upon being dumped, it became part of the land again. As to this, I prefer the view of the learned judge of first instance to that of the learned judges of the Court of Appeal.
(2) The plaintiffs' case that on 14th November 1955 the slate was a chattel which was then sold by Donald Albert Mills and Winifred Katherine Mills (the owners of the land) to the plaintiff Warren therefore fails. In any event, if the slate had become a chattel by severance and had not again become part of the land, the probability is that it would have continued to belong to the company which owned the land when the slate was quarried for its own purposes and which dumped such slate as it did not require to form the heap now in question. The presumption that the owner for the time being of the fee is entitled to chattels upon his land, vide South Staffordshire Water Co. v. Sharman [1] , has no application when there is a known owner. There was no evidence of the transfer of the heap of slate, as such, to Donald Albert Mills and Winifred Katherine Mills and, the ownership being elsewhere, the agreement of 14th November 1955, which they made, could have conferred no title on the plaintiffs to the slate if it had become and remained a chattel. Furthermore, the definition of goods in the Sale of Goods Act, 1923-1953 N.S.W. was of no assistance to the plaintiffs. There was no contract by the owners of the land under which it was agreed that the slate would be "severed before sale or under the contract of sale".
(3) The slate being part of the land on 14th November 1955, the true effect of the agreement of that date was to create a profit à prendre in equity or some similar property right, such as a right of entry, in the plaintiff Warren.
(4) Accordingly, the transfer or conveyance of the land by Donald Albert Mills and Winifred Katherine Mills to the defendant Daphne May Mills in 1963 was subject to the equitable interest of the plaintiff Warren and any successor in title unless the defendant Daphne May Mills was then a bona fide purchaser for value without notice of that interest.
(5) The defendant Daphne May Mills did by 1961 at the latest have notice of the equitable interest created by the agreement of 14th November 1955 and was therefore affected by it.
(6) Were there nothing more, the plaintiff Warren would have been entitled to relief.
(7) There was, however, something more, viz. the agreement between the plaintiff Stokman and the defendant Daphne May Mills of 23rd January 1961. This agreement became an exhibit but it seems that no rights flowing from it were asserted and no importance was attached to it at the hearing. Nevertheless, unless it were vitiated by misrepresentation or determined before action by, or after, breach, it would entitle the plaintiff Stokman to relief based upon its provisions.
(8) When the appeal was returned to the list for further argument, the case which counsel for the appellants indicated that they would attempt to make if the earlier judgments in the proceedings were to be set aside and the cause were to be remitted for further hearing upon amended pleadings does not justify the adoption of that extreme course. The case indicated was a flimsy one.
(9) It is not necessary to define the rights inter se of the respondent Stokman and the respondent Warren under the agreement between them of 19th February 1960.
(10) In my opinion, the foregoing conclusions warrant the making of declarations to the following effect:—(a) That the agreement of 14th November 1955 made between Donald Albert Mills and Winifred Katherine Mills of the one part, and Robert George Warren of the other part, entitled the respondent Warren to enter upon the land described in pars. 1, 4 and 5 of the statement of claim to cut and carry away the slate at grass thereon in accordance with the terms of the said agreement. (b) That the aforesaid right of the respondent Warren bound Daphne May Mills upon her becoming the owner of the said land, and continues to bind her as such owner. (c) That the agreement of 23rd January 1961 made between the respondent Stokman of the one part, and the appellant Daphne May Mills of the other part, entitles the said respondent to enter upon the said land for the purpose of cutting and carrying away the slate at grass thereon upon the terms of the said agreement.
1. [1896] 2 Q.B. 44.
I would therefore agree with the Court of Appeal that the appeal from the learned trial judge should be allowed. I consider, however, that in lieu of the declaration made by the Court of Appeal, declarations as already stated should be made. Otherwise, I would affirm the order of the Full Court. |
high_court_of_australia:/showbyHandle/1/10101 | decision | commonwealth | high_court_of_australia | text/html | null | Rural Bank of New South Wales v Hayes [1951] HCA 58 | https://eresources.hcourt.gov.au/showbyHandle/1/10101 | 2024-09-13T22:57:33.119137+10:00 | High Court of Australia
Dixon, McTiernan, Williams, Fullagar and Kitto JJ.
Rural Bank of New South Wales v Hayes
[1951] HCA 58
ORDER
Appeals dismissed with costs.
Cur. adv. vult.
The following written judgments were delivered:—
Oct. 16
Dixon, McTiernan, Williams and Kitto JJ.
In each of these cases, the appellant sued the respondent in an action of ejectment in the Supreme Court of New South Wales, claiming to be entitled to the possession of premises which were "prescribed premises" within the meaning of the Landlord and Tenant (Amendment) Act, 1948-1949 N.S.W.. The particulars of claim in each action alleged, in effect, that the defendant had held the premises as a tenant of the claimant, and that the tenancy had been duly determined by notice to quit. Each defendant entered an appearance and filed particulars of defence denying the due determination of the tenancy, and relying upon the fact that no notice to quit complying with s. 62 of the Landlord and Tenant (Amendment) Act had been served. One defendant (Hayes) also alleged specifically that, by reason of s. 69 of that Act, the Supreme Court had no jurisdiction to entertain the action.
Upon summonses to strike out the appearances and for liberty to enter judgment for the claimant, proof was given in each case that the claimant was the registered proprietor of the land under the provisions of the Real Property Act, 1900 N.S.W., that a weekly tenancy of the premises had been created between the claimant and the defendant, and that there had been served on the defendant a notice to quit which would have sufficed to determine the tenancy at common law. The notices to quit, however, did not comply with s. 62. The only question disputed on the hearing of the summonses was whether the Act is binding on the claimant. Owen J., who decided the matter in the first instance, answered this question adversely to the claimant and ruled that, by reason of s. 69, the Supreme Court had no jurisdiction to entertain the actions. Appeals to the Full Court were dismissed, and from the orders of the Full Court the claimant appeals to this Court by special leave.
Sections 62 and 69 are contained in Part III of the Act. Section 62 provides that, except as provided by Part III, the lessor of any prescribed premises shall not give any notice to terminate the tenancy or take or continue any proceedings to recover possession of the premises from the lessee or for the ejectment of the lessee therefrom. The section further provides that, subject to the Part, a lessor may take proceedings in any court of competent jurisdiction for an order for the recovery by him of any prescribed premises if the lessor, before taking the proceedings, has given to the lessee, upon one or more of certain prescribed grounds but upon no other ground, notice to quit in writing for a period determined in accordance with s. 63, and that period of notice has expired. Section 69 provides that for the purposes of s. 62 courts of petty sessions, and those courts only, shall be courts of competent jurisdiction. Section 8 (1) of the Act defines "lessor" and "lessee" to mean the parties to a lease or their respective successors in title, and to include certain other persons; and s. 8 (2) provides that "lessee" includes a person who remains in possession of premises after the termination of his lease of the premises, and that "lessor" has a corresponding meaning.
The only other provision which it is necessary to mention is contained in s. 5. That section provides that the Act shall not bind (a) the Crown in right of the Commonwealth or of the State; or (b) the Housing Commission of New South Wales.
The appellant contends that, by reason of the rule of construction which concedes to the Crown an immunity from the operation of a statute not disclosing by express words or necessary implication an intention to bind the Crown, and by reason also of the express provision of s. 5 (a), nothing in Part III of the Landlord and Tenant (Amendment) Act should be held to affect the right of the appellant to determine the respondents' tenancies in accordance with the rules of the common law or to recover possession of the premises by action of ejectment in the Supreme Court.
The appellant is a body corporate which was constituted by the Government Savings Bank Act, 1906 N.S.W., by the name of the "Commissioners of the Government Savings Bank of New South Wales". The name was altered by s. 3 of the Rural Bank of New South Wales Act, 1932 N.S.W.. That section also provided that the alteration of name should not affect, inter alia, any property of the body corporate (sub-s. (2)), and that a reference in any other Act to the commissioners of the Government Savings Bank of New South Wales shall be read and construed as a reference to the Rural Bank of New South Wales (sub-s. (5)).
The appellant is an independent body with powers and discretions of its own, empowered by s. 48A of the Government Savings Bank Act, 1906-1947 (a section introduced by the Rural Bank of New South Wales (General Banking) Act, 1947 N.S.W.) to carry on general banking business in the State and elsewhere. Its functions are not those of a department of the executive Government of New South Wales. Consequently it is not entitled to claim for itself, as being within the concept of the Crown, an immunity belonging to the Crown either under the common law or under statutory provision: see Bland Shire Council v. Rural Bank of New South Wales [1] . This proposition the appellant did not contest. The argument advanced on its behalf was that, although the appellant is not the Crown, all premises vested in it are the property of the Crown, and that the immunity of the Crown exempts from the operation of the Landlord and Tenant (Amendment) Act all property of the Crown, in whomsoever it may be vested.
1. (1946) 47 S.R. (N.S.W.), at p. 248; 64 W.N., at p. 19; (1947) 74 C.L.R., at p. 417.
The contention that premises vested in the appellant are the property of the Crown was founded upon s. 19 of the Government Savings Bank Amendment Act, 1913-1945 N.S.W.. This section must now be read with the substitution of name required by the Act of 1932, but in its original form it provided as follows:—"The commissioners shall hold all real and personal property whatsoever vested in them under the Principal or this Act for and on behalf of the Government of New South Wales, and all moneys so vested in or held by them whether the same be accrued due or not, are hereby declared to be public moneys belonging to His Majesty, and the property of the Crown, and, in addition to all other remedies, shall be recoverable accordingly as from debtors to the Crown."
The case of Commissioners of the Government Savings Bank v. Temora Municipal Council [1] supports the argument, if it was correctly decided under the provisions of the law as it then stood relating to the exemption of the Crown from rating. The Full Court of the Supreme Court decided in that case that, by virtue of s. 19, all land held by the bank was "the property of the Crown" for the purposes of the Local Government Act, 1906 N.S.W.. There was not at that time a definition in the Local Government Act of the expression "the Crown" extending its meaning to include any statutory body representing the Crown and a definition of "statutory body representing the Crown" embracing a variety of named public bodies and such others as might be proclaimed. See s. 4 of the Local Government Act 1919-1948 N.S.W., a provision under which the Government Savings Bank of New South Wales was proclaimed to be a statutory body representing the Crown (14th May 1920). See further The Shire of Bland Case [2] , where Rich and Williams JJ. refer to the admission made in that case that the Rural Bank is such a body.
1. (1919) 19 S.R. (N.S.W.) 111; 36 W.N. 56; 5 L.G.R. 1.
2. (1947) 74 C.L.R., at p. 415; 16 L.G.R., at p. 135.
The property to which the section applies is all real and personal property whatsoever vested in the commissioners "under the Principal or this Act", and all moneys "so vested in or held by them". Neither in the judgments in the Temora Case [1] nor in the argument presented for the appellant in this case is any limiting effect conceded to the words "under the Principal or this Act", or to the word "so". Counsel for the appellant submitted that property could not be acquired by the appellant save by the direct operation of the principal or the amending Act or by an exercise of some power conferred thereby; and he argued that property acquired by either of those means was aptly described as vested in the appellant "under" the one Act or the other. He therefore denied that the words "under the Principal or this Act" or the word "so" produced any effect upon the meaning of the section.
1. (1919) 19 S.R. (N.S.W.) 111; 36 W.N. 56; 5 L.G.R. 1.
It must be conceded that there is ambiguity in the language of the section: cf. Corporation of Hyde v. Bank of England [1] ; Ex parte Zietsch; Re Craig [2] ; and, that being so, it is permissible to consider the history of the legislation in order to ascertain its meaning.
1. (1882) 21 Ch. D. 176, at pp. 180, 181.
2. (1944) 44 S.R. (N.S.W.) 360, at p. 364; 61 W.N. 211, at pp. 213, 214.
The Act of 1906, which constituted the Commissioners of the Government Savings Bank of New South Wales as a body corporate, provided by s. 23 that the business of the bank should be carried on in two distinct and separate departments, namely (A.) the Savings Bank Department, and (B.) the Advance Department. The Act provided that to each department were to be carried certain pre-existing moneys, the character of which it is important to notice.
(A.) To the Savings Bank Department were to be carried moneys of two classes, namely (i) all moneys in the Treasury at credit of the Government Savings Bank Trust Fund, and (ii) all moneys held or deposited in a bank under the Government Savings Bank Act, 1902 N.S.W., or advanced to the Federal Government for the purposes of that Act: (s. 14). The moneys in the Treasury at the credit of the Government Savings Bank Trust Fund consisted of deposits which had been received into the Treasury under the Government Savings Bank Act, 1902. This Act had repealed earlier Acts under which a Government Savings Bank had operated, and it provided machinery whereby certain officers were empowered to receive deposits for remittance to the Treasury and to repay the same under such regulations as the Governor might prescribe: s. 4. Moneys deposited were made a charge upon the Consolidated Revenue Fund (s. 11 (1)). The Colonial Treasurer was also authorized to receive as a deposit under the Act moneys remaining in the hands of the trustees of any bank, commonly known as the Penny Savings Bank, who had determined to close such bank for the receipt of deposits; and the depositors were to be considered as depositors under the provisions of the Act (s. 17). Thus the first class of moneys which under the 1906 Act were to be carried to the Savings Bank Department were moneys deposited by and repayable to creditors of the Crown. The second class of such moneys were moneys owing to the Crown. The 1902 Act had provided, as to moneys deposited under the Act, that the Colonial Treasurer might deposit the same with such incorporated bank as the Governor might from time to time appoint: (s. 11 (2)); and it had also provided, as had an earlier Act (No. 79 of 1900), that the Governor might, by agreement with the Governor-General, make arrangements for the execution and performance by officers of the Postal Department of the Commonwealth of certain duties in respect of the administration of the Act: (s. 3), which included the repayment of deposits: (s. 4).
(B.) To the Advance Department were to be carried all moneys and securities for money, and all other property held by or on behalf of the Advances to Settlers Board or by the Treasurer or any person on his behalf under the Advances to Settlers Acts: (s. 16); and the commissioners were to collect and carry to the Advance Department all repayments made under the Advances to Settlers Acts and all interest on such advances: (s. 17). The Advances to Settlers Acts, which were the Acts No. 1 of 1899, No. 1 of 1902 and No. 106 of 1902, were repealed by the 1906 Act, subject to a proviso that subject to that Act they should continue in force in respect of advances made thereunder before the commencement of the 1906 Act until all such advances with interest thereon should be repaid or written off as bad debts: (s. 4). These Acts had provided for advances of Crown moneys to holders of freehold land or of certain holdings under the Crown Lands Acts: (Act No. 1 of 1899, s. 9 (1)). Every such advance with interest thereon was made a debt due by the person to whom the advance was made, recoverable by the Secretary for Lands and charged on the land in respect of which the advance was made: (s. 9 (2) (h)); and if any amount of principal or interest was unpaid for a period of three months the Secretary for Lands was given, in respect of freehold lands a power of sale, and in respect of Crown lands holdings a power of forfeiture: (s. 9 (2) (i)). The Government Savings Bank Act, 1906, provided that, notwithstanding the repeal of the Advances to Settlers Acts, advances made under those Acts should be repaid with interest to the Advance Department of the Bank, that the commissioners might take any proceeding which under those Acts might have been taken by the Secretary for Lands, except forfeiture of lands held under the Crown Lands Acts not being freehold lands, and in respect of the last-mentioned lands that any sums received by or on behalf of the Crown on account of improvements, to the extent of the amount owing to the Advance Department, should be payable to that department after deducting any moneys overdue at the date of forfeiture for rent or instalments: (s. 19).
These provisions having been made as to the vesting in the commissioners of (a) moneys held by the Crown to answer the claims of depositors under the Act of 1902, and (b) moneys to be recovered on account of the Crown in respect of deposits made by the Crown in an incorporated bank, advances made to the Federal Government for the purposes of the 1902 Act, or advances made by the Crown under the Advances to Settlers Acts, the 1906 Act proceeded to make provision for the carrying on of business by the bank. It provided that the bank should be administered, governed and managed by the commissioners: (s. 22); and that the business of the bank should be carried on in two distinct and separate departments, all transactions and accounts relating to each department being kept separate from those relating to the other department, no money belonging to one department being used for the purpose of the other department and no liability incurred in respect of one department affecting the other department or the funds thereof: (s. 23). The Act provided that the commissioners might, on behalf of the bank, purchase or lease lands and buildings to be used in the business of the bank, hold property as security, and sell, lease, convey, assign and assure "such lands, buildings, and property, or any property vested in them by this Act": (s. 24). The Act further empowered the commissioners to establish branches and agencies of the bank for the receipt of deposits and the payment of deposits and interest thereon and for receiving applications for advances under the Act: (ss. 27, 28). The repayment of all deposits in the bank and the payment of interest thereon were made payable out of the funds of the commissioners held under Part V. of the Act (which dealt with the Savings Bank Department), and was guaranteed by the Crown, any liability arising from the guarantee being made payable out of the Consolidated Revenue Fund: (s. 44). Provision was made by Part VI. for the lending of moneys by the commissioners from the Advance Department for purposes wider than those to which the Advances to Settlers Acts had been directed.
The Act of 1906 was amended in a number of respects by the Government Savings Bank Amendment Act, 1913, s. 18 and Schedule. Only one of the amendments which it made need be mentioned. Section 19 (c) of the Act of 1906 was amended by omitting the provision for deduction of any moneys overdue at the date of forfeiture for rent or instalments. The effect of this amendment was to enable the Advance Department to receive, to the extent of the amount owing to that department, the whole of the sums received by or on behalf of the Crown on account of improvements on a forfeiture of a Crown lands holding for non-payment of advances made under the Advances to Settlers Acts and interest thereon and expenses incurred in connection with the advance. Thus the moneys recoverable on account of the Crown were made recoverable wholly by the bank, instead of partly by the bank and partly by the Lands Department.
In consequence of all these provisions, the commissioners might at any time hold property, or be entitled to moneys, of two kinds: (i) property or moneys formerly belonging to the Crown but vested in them under the 1906 Act or the 1913 Act, and (ii) property or moneys acquired by them in the course or for the purposes of their banking business. It is in the light of this situation that s. 19 of the 1913 Act must be read. It will be seen at once that the expression "all real and personal property whatsoever vested in them under the Principal or this Act" is not equivalent to "all real and personal property whatsoever vested in them", and the expression "all moneys so vested in or held by them" is not equivalent to "all moneys vested in or held by them". The words "under the Principal or this Act", and the word "so", far from being meaningless or otiose, restrict the application of the section to the first of the two classes of property and money above mentioned. The reason for the enactment of the section in this restricted form is clear. The vesting provisions to which reference has been made had no other purpose than to utilize the machinery of the bank for the enforcement of the Crown's rights and the performance of its obligations with respect to the moneys and other property to which those provisions applied; and s. 19 accordingly preserved the character of such moneys and property as belonging to the Crown notwithstanding the vesting for which the Acts provided.
Section 19 should therefore not be construed as applying to property or moneys acquired by the bank otherwise than under the vesting provisions of the Acts. The wide construction placed upon the section in Commissioners of the Government Savings Bank v. Temora Municipal Council [1] cannot be accepted.
1. (1919) 19 S.R. (N.S.W.) 111; 36 W.N. 56; 5 L.G.R. 1.
In each of the present cases the evidence disclosed that the land of which possession was claimed had been acquired by the appellant by registration of a memorandum of transfer under the Real Property Act, 1900. It is not land to which s. 19 of the 1913 Act on its true construction has any application, and there is therefore no foundation for the argument upon which the appellant relied.
But, even if the land were held by the appellant for and on behalf of the Government of New South Wales by virtue of s. 19, it would not follow that the appellant as lessor of the land would be exempt from the operation of the Landlord and Tenant (Amendment) Act, 1948-1949. It has already been pointed out that the appellant is not the Crown; indeed s. 19 acknowledges as much by its express provision in favour of the Government vis-à-vis the appellant. The operation of the relevant provisions of the Landlord and Tenant (Amendment) Act is to diminish the rights of lessors; and the effect of s. 5 (a) in relation to those provisions is to preserve the rights of the Crown as a lessor. A corporate lessor which is not the Crown is bound by the Act; and it is nothing to the point that land of which the corporation is the lessor is held on behalf of the Government. It is a necessary consequence of the vesting of land in the corporation that the immunity of the Crown from the operation of the Act has no relevance in proceedings by the corporation to recover possession of the land. This is clearly the position in the present case, because the appellant is given by s. 48A (3) (k) of the Government Savings Bank Act, 1906 (as amended by Act No. 38 of 1947) a power of leasing exercisable for the purpose of carrying on its general banking business, so that the appellant sues in this case as a lessor in its own right and not in any sense on behalf of the Crown.
The appeals should be dismissed with costs.
Fullagar J.
I agree with the judgment of Dixon, McTiernan, Williams and Kitto JJ., and I agree with the whole of what is said in that judgment. I would, however, as I gather that they would, have taken the same view of this case if an examination of the statutory history of the plaintiff corporation had disclosed an entirely different result. The whole question seems to me to be whether the plaintiff is "the Crown" within the meaning of s. 5 of the Landlord and Tenant (Amendment) Act, 1948-1949 N.S.W., which provides that that Act shall not bind the Crown in right of the State. That Act is concerned throughout with "leases", a defined, and with the rights of parties to "leases", as defined. The "lessor", for the purposes of these cases, is not the Crown but a statutory corporation formerly known by a different name but now known as the Rural Bank of New South Wales. It cannot, to my mind, matter whether the statutory corporation "holds" the "real property", which it has "leased" to the defendants, for and on behalf of the Government of New South Wales or for and on behalf of anybody else. It is the legal owner of the property leased. It, and it alone, has the rights of a legal owner of that property. It alone could maintain an action for rent, or an action for breach of covenant, or exercise a right of re-entry. The Crown could maintain no such action, or exercise any such right. The rights which are not to be affected by the Landlord and Tenant (Amendment) Act are rights of the Crown, and the rights asserted in these proceedings are not rights of the Crown. They are, therefore, qualified by the provisions of the Landlord and Tenant (Amendment) Act.
It may well be that for other purposes the provisions of s. 19 of the Government Savings Bank Amendment Act, 1913-1945 N.S.W. affect the rights and liabilities of the plaintiff corporation in important respects.
One other thing I would mention. I was a party to the decision in Victorian Railways Commissioners v. Herbert [1] (which was cited in argument in this case), and I notice that in the course of the judgment in that case there was a reference to Marks v. Forestry Commission [2] . I think I should say that the question of the correctness of that decision did not appear to me to arise in Herbert's Case [1] , nor does it seem to arise in the present case.
1. (1949) V.L.R. 211.
2. (1936) V.L.R. 344.
3. (1949) V.L.R. 211. |
high_court_of_australia:/showbyHandle/1/8653 | decision | commonwealth | high_court_of_australia | text/html | null | Edwards v The Queen [1993] HCA 63 | https://eresources.hcourt.gov.au/showbyHandle/1/8653 | 2024-09-13T22:57:39.362456+10:00 | High Court of Australia
Brennan, Deane, Dawson, Gaudron and McHugh JJ.
Edwards v The Queen
[1993] HCA 63
ORDER
Appeal allowed. Set aside the order of the Court of Criminal Appeal of Queensland and in lieu thereof order that the appeal to that Court be allowed and that the appellant's conviction be quashed and a verdict of acquittal be entered.
Cur. adv. vult.
The following written judgments were delivered:—
Nov. 17
Brennan J.
On 9 October 1989, nineteen prisoners were transported in the back of a prison van from Woodford Correctional Centre near Brisbane to the Rockhampton Correctional Centre at Etna Creek. This was a day's journey, the first stage of a journey to Townsville. The prisoners were to stay overnight at Etna Creek. The van was divided into two by a partition, ten prisoners on one side of the van, nine on the other. Some of the prisoners were handcuffed individually, some were handcuffed to another prisoner. They were to sit on benches along either side of the van. The van was equipped with a portable toilet and a box containing some food and drink. The mode of transportation was barbarous: there were no means of supervising the prisoners in the van, nor were the prisoners let out of the van en route to Etna Creek. However, the Court was informed that the mode of transportation of prisoners in Queensland has since been changed and the present arrangements afford continuous supervision of prisoners being transported and frequent stops on lengthy journeys.
The appellant Edwards, who was one of the prisoners in the van, was convicted of procuring another of the prisoners, Glen Edward Williams, to commit an act of gross indecency upon him, the consent of Williams being obtained by threats and by fear of bodily harm. Williams gave evidence that he was hit by other prisoners and forced to commit acts of gross indecency upon them in the course of the journey. Then, he said, Edwards procured him to put Edwards' penis in his mouth by promising that he, Edwards, would protect Williams from further assaults. When the van arrived at Etna Creek, Williams was taken to the Rockhampton Base Hospital where he was found to be suffering from multiple soft tissue injuries, particularly of the head. There was no other evidence in the prosecution case which corroborated the evidence given by Williams.
Edwards gave evidence in his defence, denying that he had hit Williams during the journey to Etna Creek or that he had had anything at all to do with Williams during that journey. In the course of his evidence, this passage appears:
Did you see anything happen in relation to Mr. Williams? — There were things going on, but I just didn't worry about it.
Why is that? — I didn't want to get involved in it. If I had seen something I probably would have got the same treatment.
In cross-examination Edwards said:
You say that things were going on in the van during the journey. That was over quite some considerable distance, wasn't it, that these things were going on? — Yes
What was going on? — I just didn't look. I looked the other way.
Mr. Edwards, you have said that you didn't want to say anything because you might get beaten up? — Yes. If you say anything in there you are classed as a dog and that means you get flogged, so that's why prisoners just mind their own business in there.
It is difficult to look the other way for such a substantial time of the journey, isn't it? — I looked over once or twice when it stopped. I shook my head and looked away.
What did you see? — He was just sitting there crying, that was it.
Was he displaying any injuries? — It looked like it.
Who was striking him? — I wouldn't have a clue.
you agreed that over a substantial distance things were going on? — Yes.
Do you mean by that that the complainant was being assaulted? — I don't really know.
What do you mean, that things were going on? — Well, he would get — Williams would get pushed and Martin would lean up against me. I asked Martin to move up a little bit more. Every time I would turn around I would just see Williams crying or something.
So, at no stage along that entire trip did you actually see any blows struck at all? — No.
You weren't curious at all? — Seen too many beatings in gaol. I just don't look at them.
Well, presumably you didn't put your hand over your ears? — No.
What did you hear? — I just heard them calling him a dog and stuff like that.
Who was calling him a dog? — I couldn't tell you who it was.
Later in his cross-examination he gave evidence of having seen and heard something. He said:
Do you still say that at no stage over several hours did you ever see anybody touch Mr. Williams? — No.
Is that the truth or are you simply not wishing to be a dog? — That is the truth — at one stage I seen Wallace, but that was about it. That was the only person.
This might be something fresh. What did you see about Wallace? — I just seen him push him. That was it.
Why didn't you tell us that before? — I don't know.
Why didn't you tell us that before that Wallace pushed Williams? — It only come back to me.
And the sound that you heard, was that sound like a punch or a slap? Do you know the difference in the sound? — Yes.
Which did it sound like? — It sounded like a slap.
And Wallace was leaning across? — Yes.
What about Williams at that time? Was he still seated on the bench? — He was half and half.
And I suggest you heard Wallace call out to him in these terms, or call out in these terms, "Anyone who wants a head job, go down and see him"? — No.
And he said to Williams, "You had better do it or you'll get bashed"? — No.
I am not suggesting those are the exact words but along that line? — I don't — couldn't really say if it was Wallace or not.
Did you hear the words being said? — Yes.
Tell us about this now. What did you hear there? — I just heard the words.
What did you hear? — "Whoever wants a head job, just come down here."
Who said that? — I'm not sure.
So you were listening to what was being said? — Parts.
In the course of the summing up the learned trial judge gave the jury a direction that it was dangerous to convict Edwards on the uncorroborated testimony of Williams alone but he went on to direct them that if they were satisfied beyond reasonable doubt that Williams was telling the truth they were entitled to convict. It is arguable that, although a corroboration warning has ordinarily been given in the case of a sexual offence allegedly committed between adult males [1] , there was no necessity for such a warning to be given in the circumstances of the present case. However that may be, the case has been conducted throughout on the footing that a corroboration warning was necessary. The prosecution submitted that Edwards told lies in the witness box and that the telling of those lies corroborated Williams' evidence. The issue for determination on this appeal is whether the jury were properly directed as to the corroborative effect of Edwards' evidence.
1. Reg. v. Burgess (1956), 40 Cr. App. R. 144.
The learned trial judge directed the jury that a lie told in the witness box is capable of corroboration if it fulfils four tests, being the tests stated by Lord Lane C.J. in Reg. v. Lucas (Ruth) [2] :
To be capable of amounting to corroboration the lie told out of court must first of all be deliberate. Secondly it must relate to a material issue. Thirdly the motive for the lie must be a realization of guilt and a fear of the truth. The jury should in appropriate cases be reminded that people sometimes lie, for example, in an attempt to bolster up a just cause, or out of shame or out of a wish to conceal disgraceful behaviour from their family. Fourthly the statement must be clearly shown to be a lie by evidence other than that of the accomplice who is to be corroborated, that is to say by admission or by evidence from an independent witness.
Although Lord Lane's observations relate to "the lie told out of court", a lie told in court may also provide corroboration [3] . In principle, there is no basis for distinguishing between the effects of testimonial and non-testimonial lies. In either case, the falsity must be proved by evidence other than the evidence to be corroborated. In the case of conflict between the evidence to be corroborated and a testimonial statement by an accused which the prosecution asserts to be false, the conflict may appear to resolve itself into a mere question of credibility of opposing witnesses. Yet it would be wrong to hold that the evidence of one witness is corroborated because it induces the tribunal of fact to believe that the contrary evidence of the other is false and the falsity of the latter evidence affords corroboration. A witness cannot corroborate his or her own evidence [4] .
1. [1981] Q.B. 720, at p. 724.
2. ibid., at p. 725; Reg. v. Perera , [1982] V.R. 901, at p. 904.
3. Lonergan v. The Queen , [1963] Tas. S.R. 158, at p. 164.
Counsel for the appellant accepted Lord Lane's four tests but attacked the manner in which the learned trial judge applied those tests to the facts of the case. If Lord Lane's four tests were to be applied — a question to which I shall shortly turn — there was no legitimate ground for attacking the application of the first two tests. If Edwards was telling a lie in denying what he had seen and heard in the narrow confines of the van, the jury had ample grounds for concluding that the lie was both deliberate and related to a material issue, namely, the violence being done or offered to Williams. The appellant's first substantial objection to the summing up was to the alleged omission by the trial judge to draw the jury's attention to all the innocent explanations which might have accounted for the telling of a lie by Edwards. The trial judge did draw the jury's attention to Edwards' stated desire not to "dob people in" but he did not embellish that observation. No embellishment by the learned trial judge was needed. Nor was there any request at the trial for a further direction to be given about those explanations.
The chief argument advanced by the appellant was that the jury should have been directed not only that they had to be satisfied by evidence other than Williams' evidence that Edwards had told a deliberate lie in his evidence because of a realization of guilt and a fear of the truth, but also that they had to be so satisfied beyond a reasonable doubt. If a lie is to be treated as corroboration, so the argument ran, it had to amount to an implied admission of guilt and no admission of guilt should be acted on unless it be proved beyond a reasonable doubt. To consider this argument, it is necessary to determine whether Lord Lane's four tests provide the appropriate approach to the evaluation of evidence that is said to contain a lie and that is relied on to corroborate the evidence of another witness.
There is some inherent circularity in the third of Lord Lane's tests. If the jury must be satisfied that the motive for the lie is a realization of guilt and a fear of the truth, the jury must be satisfied that there is guilt to be realized before it decides whether to treat the supposed lie as corroboration of other inculpatory evidence. If the jury is satisfied of the accused's guilt, it would be unnecessary to consider whether his evidence is corroborative of evidence tending to prove his guilt. The third test is inappropriate. The relevant inference is not that the accused realized his guilt but that, in making his statement, he was unable to account innocently for the evidence that has been given against him. That approach appears in Eade v. The King [5] , where Knox C.J., Gavan Duffy and Starke JJ. said:
Now, if a jury be of opinion that the prisoner's statements are false, then they may properly come to the conclusion that his falsehood indicates that the child's story is true, and that he is telling lies in order to discredit the evidence of the other witnesses because he is unable to account for what they say they saw, in any way consistent with his own innocence. Corroboration may be found in independent evidence or in admissions of the prisoner, or in inferences properly drawn from his conduct and statements. And it is, in our opinion, for the jury in the present case to say what complexion the conduct and statements of the prisoner bear.
1. (1924) 34 C.L.R. 154, at p. 158.
When a jury places an adverse complexion on the conduct and statements of an accused and comes to the view that he is unable to account innocently for the evidence given against him, the jury may act with more confidence on the evidence which is sought to be corroborated. They are entitled to say: although it would otherwise be dangerous to convict on the evidence to be corroborated, the accused is unable to account innocently for the facts revealed by that evidence and it is therefore safe to act on it. In Reg. v. Mullins [6] , Maule J. pointed out that evidence might "be confirmed by the absence of contradiction, when if untrue, contradiction might be easily afforded". Of course, this is not to say that some evidentiary onus is placed on an accused to give evidence to contradict the case against him but, if he chooses to give evidence in contradiction of the evidence to be corroborated and his contradiction is a lie, the jury may regard the telling of the lie as confirming the credibility of the witness whose evidence is to be corroborated.
1. (1848) 3 Cox C.C. 526, at p. 531.
In considering whether an accused has lied because he is unable to account innocently for the evidence of the witness to be corroborated, the jury are engaged in assessing the credibility of that witness as a preliminary to the finding of the material facts. No question of proof to a particular standard governs the assessment of credibility. The jury are not then using the accused's evidence as conduct which is itself probative of guilt. In Doney v. The Queen [7] this Court said:
It is not necessary that corroborative evidence, standing alone, should establish any proposition beyond reasonable doubt. In the case of an accomplice's evidence, it is sufficient if it strengthens that evidence by confirming or tending to confirm the accused's involvement in the events as related by the accomplice.
Standards of proof become relevant to the finding of the facts on which the verdict depends — the facts constituting the elements of an offence or, in the case of insanity and some other exceptions, the elements of a defence and, where those facts are matters of inference, the facts from which the inference might be drawn. But the jury should not be directed that the corroborative effect of the making of a false statement by an accused depends on a finding beyond reasonable doubt either of its falsity or of the reason for making the false statement.
1. (1990) 171 C.L.R. 207, at p. 211.
It is sufficient that the jury be told that, if they form the view on the evidence other than the evidence to be corroborated that the accused has told a deliberate and material lie and that he did so because he was unable innocently to account for the facts revealed in the evidence to be corroborated, the jury is entitled to regard the telling of the lie as corroboration of that evidence. It then remains for the jury to find the facts upon which the verdict depends. It is at that stage that the question of standard of proof arises.
However, if the prosecution seeks to rely on the telling of the lie as an admission of guilt and invites the jury to treat that evidence as an independent proof of guilt, the prosecution bears the same onus as it bears whenever it relies on an alleged confession as an independent proof of guilt. It must prove beyond reasonable doubt that a confession of guilt was made.
Whether the making of a statement proved to be false is capable of amounting to a confession depends on the terms of the statement, the circumstances in which it is made, the nature of the offence charged and the other evidence in the case. It may be that in some cases the falsity of a statement which is exculpatory in terms could give to the accused's conduct the character of a confession, but such a confession would be an admission by conduct. When the supposed admission consists in the making of a false denial of guilt, the prosecution is hard put to turn the denial into an admission. As Lowe J. said in Edmunds v. Edmunds and Ayscough [8] :
[B]y no torturing of the statement "I did not do the act" can you extract the evidence "I did do the act."
Burbury C.J. was equally cautious in Lonergan v. The Queen [9] :
The jury must clearly understand that it is only within strict limits that false statements and denials may be relied upon as independent proof of the affirmative of the issue.
1. [1935] V.L.R. 177, at p. 186.
2. [1963] Tas. S.R., at p. 160.
If the prosecution were to rely on the telling of a lie as an independent proof of guilt, the jury would have to be directed that, in order to convict on that basis, they must be satisfied beyond reasonable doubt that the true inference to be drawn from the accused's conduct is that he has confessed his guilt. In such a case, the jury would have to be satisfied beyond reasonable doubt as to Lord Lane's third test, for the accused's conduct could not otherwise amount to a confession of guilt. It would surely be a rare case in which it would be permissible to infer beyond reasonable doubt that an accused, by telling a lie, has confessed his guilt. Generally, the jury is directed that the accused should not be convicted merely because he has told a lie.
The telling of a lie by an accused is frequently relied on as a piece of evidence tending to inculpate the accused in the offence charged. The jury must consider the weight to be given to that evidence, but the weight of particular pieces of evidence does not involve a standard of proof. The relevant standard of proof governs the making of a finding of material fact on the pieces of evidence which logically, if not chronologically, the jury has already evaluated. The standard directions given by judges to juries in criminal cases distinguish (perhaps without consciously adverting to the distinction) between the evaluation of evidence and the finding of material facts. Recognition of this distinction goes a long way towards avoiding whatever misunderstanding there may be about the majority judgments in Chamberlain v. The Queen [No. 2] [10] relating to the drawing of an inference of guilt.
1. (1984) 153 C.L.R. 521.
The drawing of an inference is part of the process of finding material facts: if it be right to say that no inference of guilt can be drawn unless the jury is satisfied that reasonable hypotheses consistent with innocence are excluded, the jury must be satisfied beyond reasonable doubt as to the facts from which the inference is drawn and on which the validity of the inference necessarily depends. It is logically impossible to be satisfied beyond reasonable doubt that an inferred fact exists without being satisfied beyond reasonable doubt of the existence of those facts from which the inference is drawn. If the emergence of an accused from the scene of the murder holding a smoking gun is the only evidence offered in proof of guilt, the case against him fails if there be a reasonable doubt about the identity of the person seen or the place where the fatal shot was fired or that the thing held by the accused was a smoking gun. There can be no superstructure erected without the foundations needed to support it. That is what the majority in Chamberlain [No. 2] said, but the proposition embraced by the majority was a proposition of logic rather than of law. To apply the proposition, precision in identification of the inference to be drawn and of the facts from which it can be drawn is essential, especially in a case where an inference of guilt is said to arise from a number of facts which are not themselves established beyond reasonable doubt. In such a case, it is essential to identify the foundation of fact from which such an inference might be drawn. It cannot be drawn from particular facts the existence of which is established only on the balance of probabilities, for it is a reasonable hypothesis that some or all of the facts on which the inference depends do not exist. If a guilty inference is to be drawn, it must be based on the concatenation of probabilities itself. The existence of a concatenation of probabilities may exclude an innocent hypothesis — it depends on the nature, number and relationships of the probabilities — but the concatenation of probabilities is the fact on which the guilty inference must be based. Chamberlain [No. 2] was not a case of this kind: there the prosecution contended for an inference of guilt based on one or more discrete facts (such as the presence of foetal blood in the accused's car or the cutting of the baby's clothing by human hand). The inference of guilt could not have been drawn if the fact or facts on which it had to be based were not proved to the jury's satisfaction beyond reasonable doubt.
The problem of an absence of a uniform nomenclature by which to distinguish between a fact to be inferred, the facts from which the inference is drawn and the evidence was addressed in the analysis of the Chamberlain [No. 2] judgments which Dawson J. made in Shepherd v. The Queen [11] . His Honour referred to a passage in the judgment of Gibbs C.J. and Mason J. in Chamberlain [No. 2] [12] in which their Honours were considering the sufficiency of evidence safely to establish that there was foetal blood in the accused's car. Dawson J. said [13] :
There were various items of evidence upon which the Crown relied to establish the intermediate fact — their Honours refer to it as a primary fact — that the blood, if any, in the car was foetal blood. Their Honours do not suggest that each of those items was required to be proved beyond reasonable doubt. But the intermediate fact, if it was to be the basis of an inference or inferences leading to a verdict of guilty, was required to be proved beyond reasonable doubt. I do not understand their Honours to have said any more than that.
His Honour thus distinguished between evidence, intermediate facts, and inference based on intermediate facts. After citing a passage from my judgment in Chamberlain [No. 2] [14] , Dawson J. said [15] :
In that passage the reference to "the primary facts from which the inference of guilt is to be drawn" is clearly a reference to such intermediate conclusions of fact as are necessary for the drawing of the inference of guilt and is not a reference to each basic fact — each individual item of evidence — upon which those conclusions may be based. The term "primary facts" is apt to confuse if it is used to refer to the basic facts — the individual items of evidence — as well as to the factual conclusions from which inferences may be drawn. (Emphasis added.)
Adopting his Honour's nomenclature, Chamberlain [No. 2] requires that no element of the offence be inferred adversely to an accused unless the intermediate facts from which the inference is drawn be proved beyond reasonable doubt. But, as Shepherd holds, Chamberlain [No. 2] imposed no requirement that the jury accept beyond reasonable doubt every piece of inculpatory evidence relevant to the existence of an intermediate fact. The evaluation of evidence is a matter for each juror to approach in the light of his or her experience of life but the standard of proof beyond reasonable doubt governs the finding of facts essential to the guilt of the accused on the offence charged. The pieces of evidence are "strands in a cable" tending to establish a material fact, but intermediate facts established by evidence are links in the chain of proof of the fact to be inferred [16] . The standard of proof applies to links; it says nothing about the strands.
1. (1990) 170 C.L.R. 573.
2. (1984) 153 C.L.R., at p. 559.
3. (1990) 170 C.L.R., at p. 583.
4. (1984) 153 C.L.R., at p. 599.
5. (1990) 170 C.L.R., at p. 584.
6. ibid., at p. 579.
If the ultimate facts — those which constitute the elements of the offence charged — are to be inferred from intermediate facts, the standard governs both the finding of the intermediate facts and the drawing of the inference from them. Again, this is a proposition of logic flowing from the legal rule that the prosecution bears the onus of proving guilt beyond reasonable doubt. The logical proposition must control what is said in a summing up by the trial judge, but the trial judge does not have to expound the proposition to the jury in every case. Sometimes it is necessary to direct the jury to apply the standard of proof specifically to the finding of the intermediate facts (as in Chamberlain [No. 2]) or to the drawing of an inference from them (as in Peacock v. The King [17] ) but it is often sufficient to give a direction that applies the standard of proof to the general finding of guilt. What is erroneous is a direction that the standard of proof governs the jury's evaluation of pieces of evidence [18] .
1. (1911) 13 C.L.R. 619, at pp. 634, 651-652, 662.
2. Shepherd (1990), 170 C.L.R., at p. 585.
Where the telling of what the prosecution alleges to be a lie is not relied on as a confession of guilt, the accused's conduct in making the statement in which the alleged lie is told nevertheless may be evidence relevant to his guilt. The jury may be able to infer guilt from the making of the statement and from the surrounding circumstances. In such a case, the making of the statement is not necessarily advanced as corroboration of another witness — it may be a case where no question of corroboration arises — but it is advanced as one piece of evidence among others from which the jury is invited to act in finding facts adverse to an accused. That was the kind of case to which Lord Devlin's remarks in Broadhurst v. The Queen [19] were directed:
It is very important that a jury should be carefully directed upon the effect of a conclusion, if they reach it, that the accused is lying. There is a natural tendency for a jury to think that if an accused is lying, it must be because he is guilty, and accordingly to convict him without more ado. It is the duty of the judge to make it clear to them that this is not so. Save in one respect, a case in which an accused gives untruthful evidence is no different from one in which he gives no evidence at all. In either case the burden remains on the prosecution to prove the guilt of the accused. But if upon the proved facts two inferences may be drawn about the accused's conduct or state of mind, his untruthfulness is a factor which the jury can properly take into account as strengthening the inference of guilt. What strength it adds depends, of course, on all the circumstances and especially on whether there are reasons other than guilt that might account for untruthfulness.
1. [1964] A.C. 441, at p. 457.
In the present case, the jury were entitled to conclude on the basis of Edwards' evidence and demeanour in the witness box that his evidence about what he had seen and heard in the van was false. The jury might have come to the view that his motive for telling a lie was a fear of "dobbing people in", but they were entitled to come to the view that that was not Edwards' reason for making a false statement. However, if the jury came to the latter view, in what way was the telling of a lie material to proof of Edwards' guilt? There was nothing in the evidence which would have entitled the jury to find beyond reasonable doubt that Edwards, in telling the lie, had confessed that he had procured Williams to commit an act of gross indecency upon him. Nor was the making of a false statement by Edwards advanced as a fact from which, in conjunction with other facts, an inference of guilt could be drawn. The telling of a lie in evidence was advanced merely as corroborative of Williams' evidence. The case against Edwards rested entirely on the jury's assessment of the credibility of Williams and Edwards' alleged lie was advanced to strengthen Williams' credibility.
The direction given by the learned trial judge to the jury was a direction as favourable to the appellant as the appellant might have received on the question of corroboration. The jury were told that, even though they were satisfied that Edwards had lied in refraining from disclosing initially what he had seen and heard in the van, the third test propounded by Lord Lane might not be found to be satisfied. His Honour said:
if you are again left with that reasonable possibility that his motive was one of not dobbing people in, then it is a matter where the Crown have not established whether the motivation was a realization of guilt and an endeavour to hide guilt.
In other words, the jury were told that if it was reasonably possible that Edwards had refrained from disclosing what he had seen and heard in the van because he did not want to dob people in, there was no evidence to corroborate Williams' evidence. Although the direction based on Lord Lane's third test was inappropriate to the question of corroboration, a direction in the terms stated could not have produced any miscarriage of justice.
On the directions given them by the trial judge, the jury must have been satisfied beyond reasonable doubt of Edwards' guilt on one of two bases: either it was safe to act on the uncorroborated evidence of Williams or Williams' evidence was corroborated by Edwards' conduct in the witness box. If the jury were of the view that Edwards' conduct was not possibly to be explained by a desire not to dob people in, the inference was irresistible that Edwards could not account innocently for what had happened to Williams in the van. On that hypothesis, the jury were entitled to act on the basis that Williams' evidence was corroborated by Edwards' conduct. On either basis the jury were entitled to convict.
The appeal should be dismissed.
Deane, Dawson and Gaudron JJ.
The appellant, Travice Allan Edwards, stands convicted of procuring Glen Edward Williams to commit an act of gross indecency upon him "by threats and by fear of bodily harm". The act of gross indecency was particularized in the indictment as "bringing into contact the mouth of the said Glen Edward Williams and the genitalia of the [appellant]".
The charge arose out of events which occurred during the transportation, in a prison van, of about nineteen prisoners from Woodford Correctional Centre near Brisbane to the Rockhampton Correctional Centre at Etna Creek. The disturbing details of that journey are set out in the judgment of Brennan J.
The prosecution case was that Williams had been beaten by several prisoners in the van and forced to commit various acts of indecency upon them, when Edwards procured the act of indecency charged by promising Williams that, in return for oral sex, he would protect him from further bashings. The only prosecution evidence of these events was that given by Williams.
The only evidence in the defence case was that of the appellant. He gave evidence denying the offence and, as well, denying anything but a vague, general knowledge of the events in the van. He said that "[t]here were things going on, but [he] just didn't worry about it", explaining that he "didn't want to get involved" because "[i]f [he] had seen something [he] probably would have got the same treatment."
During cross-examination, the appellant said that he "just didn't look" or "looked the other way" during the beatings of Williams, but then admitted that he "looked over once or twice when it stopped". He said that he then saw Williams "just sitting there crying". He denied that he saw any blows struck, again explaining that he "didn't want to get involved" because he had "[s]een too many beatings in gaol" and he "just [did not] look at them". He admitted, however, that he heard various things and "heard them calling [Williams] a dog and stuff like that". He said that he heard thumps and "when the thumps stopped [he] would turn around and have a quick look and then [he] would turn back".
Towards the end of his cross-examination, the appellant was asked whether he had seen "anybody touch Mr. Williams". Initially he said that he had not, but immediately afterwards said that he had "seen Wallace, but that was about it". On further questioning he said that he had "just seen [Wallace] push him. That was it." He said he had not told anyone that before because "[i]t only come back to me". He then remembered that he had heard two thumps, "[j]ust like slaps", when he looked around and saw Wallace. He admitted also that he heard someone say, "Whoever wants a head job, just come down here", but could not say that the speaker was Wallace. He said he was not sure who it was.
The trial and subsequent appeals, including the appeal to this Court, were conducted on the basis that it would have been dangerous for the jury to convict on the uncorroborated evidence of Williams. The trial judge gave a warning to that effect and instructed the jury that they could regard the lies told by the appellant in the witness box on oath as "capable of corroborat[ing] the complainant's evidence". His Honour indicated that the lies were told "when he first went into the witness-box [and] said that things were going on but he took no notice and could give no more information than that" and that they were established by his later admissions during cross-examination "that he saw and heard what must have been physical aggression towards the complainant and the words", "Whoever wants a head job, just come down here". The jury were further instructed that they could only consider the lies to be corroboration if they satisfied the four requirements identified in Reg. v. Lucas (Ruth) [20] , namely, that the lies must: (1) be deliberate; (2) relate to a material issue; (3) spring from "a realization of guilt and a fear of the truth"; and (4) be clearly shown to be lies by evidence other than that to be corroborated.
1. [1981] Q.B. 720, at p. 724.
There is a difference between the mere rejection of a person's account of events and a finding that a person has lied [21] . A lie is a deliberate untruth. To conclude that a statement is a lie is to conclude that the truth lies elsewhere. In some circumstances, a finding that a person lied will necessarily involve acceptance of the contrary [22] . However, the fact that a person has lied does not of itself establish a specific contrary proposition [23] .
1. Smith v. N.S.W. Bar Association (1992), 176 C.L.R. 256, at p. 268. See also Jack v. Smail (1905), 2 C.L.R. 684, at p. 698; Scott Fell v. Lloyd (1911), 13 C.L.R. 230, at p. 241; Reg. v. Chapman , [1973] Q.B. 774, at p. 780.
2. Steinberg v. Federal Commissioner of Taxation (1975), 134 C.L.R. 640, at p. 694, per Gibbs J., cf. p. 684, per Barwick C.J. See also Broadhurst v. The Queen , [1964] A.C. 441, at p. 457.
3. See Edmunds v. Edmunds and Ayscough , [1935] V.L.R. 177, at p. 186, where Lowe J. said that "by no torturing of the statement "I did not do the act" can you extract the evidence "I did do the act" ".
Ordinarily, the telling of a lie will merely affect the credit of the witness who tells it. A lie told by an accused may go further and, in limited circumstances, amount to conduct which is inconsistent with innocence, and amount therefore to an implied admission of guilt. In this way the telling of a lie may constitute evidence. When it does so, it may amount to corroboration provided that it is not necessary to rely upon the evidence to be corroborated to establish the lie. At one time it was thought that only a lie told out of court could amount to an implied admission [24] , but the distinction is not logically supportable and is no longer drawn [25] . When the telling of a lie by an accused amounts to an implied admission, the prosecution may rely upon it as independent evidence to "convert what would otherwise have been insufficient into sufficient evidence of guilt" [26] or as corroborative evidence.
1. Tumahole Bereng v. The King , [1949] A.C. 253, at p. 270; Reg. v. Chapman, [1973] Q.B., at pp. 783-784.
2. Eade v. The King (1924), 34 C.L.R. 154, at p. 158; Reg. v. Tripodi , [1961] V.R. 186, at pp. 193-194; Reg. v. Perera , [1982] V.R. 901, at pp. 904-905; Reg. v. Heyde (1990), 20 N.S.W.L.R. 234, at pp. 236, 241; Director of Public Prosecutions v. Boardman , [1975] A.C. 421, at pp. 428-429; Reg. v. Lucas (Ruth), [1981] Q.B., at pp. 724-725; Heydon, Can Lies Corroborate?, Law Quarterly Review, vol. 89 (1973) 552.
3. Dearman v. Dearman (1908), 7 C.L.R. 549, at p. 555, per Griffith C.J.
But not every lie told by an accused provides evidence probative of guilt. It is only if the accused is telling a lie because he perceives that the truth is inconsistent with his innocence that the telling of the lie may constitute evidence against him [27] . In other words, in telling the lie the accused must be acting as if he were guilty. It must be a lie which an innocent person would not tell. That is why the lie must be deliberate. Telling an untruth inadvertently cannot be indicative of guilt. And the lie must relate to a material issue because the telling of it must be explicable only on the basis that the truth would implicate the accused in the offence with which he is charged. It must be for that reason that he tells the lie. To say that the lie must spring from a realization or consciousness of guilt is really another way of saying the same thing. It is to say that the accused must be lying because he is conscious that "if he tells the truth, the truth will convict him" [28] .
1. Eade v. The King (1924), 34 C.L.R., at p. 158.
2. Reg. v. Tripodi, [1961] V.R., at p. 193.
It was argued by the appellant that the requirement laid down in Reg. v. Lucas (Ruth) that the motive for the lie must be "a realisation of guilt and a fear of the truth" involves circular reasoning. It was said that, in satisfying the requirement, the jury must conclude that the accused was guilty before it can use the telling of a lie by him as evidence against him. Since a conclusion of guilt can only be reached if it is proved beyond all reasonable doubt, it was said that the ultimate question must be answered before the jury come to consider the lie and that would render its consideration unnecessary [29] . By a similar process it might be argued that the requirement that the lie must relate to a material issue involves circular reasoning.
1. cf. Reg. v. Evans (1985), 38 S.A.S.R. 344, at pp. 347-348; Reg. v. Heyde (1990), 20 N.S.W.L.R., at p. 244, now qualified by Reg. v. Meskers (unreported; N.S.W. Court of Criminal Appeal; 13 June 1991; p. 40, per Wood J.) in the light of Shepherd v. The Queen (1990), 170 C.L.R. 573.
But in truth there is no circularity of the kind suggested. It is convenient to confine ourselves to the requirement that there be a consciousness of guilt, but the same analysis is applicable to the requirement that the lie relate to a material issue. Although guilt must ultimately be proved beyond all reasonable doubt, an alleged admission constituted by the telling of a lie may be considered together with the other evidence and for that purpose does not have to be proved to any particular standard of proof. It may be considered together with the other evidence which as a whole must establish guilt beyond reasonable doubt if the accused is to be convicted [30] . If the lie said to constitute the admission is the only evidence against the accused or is an indispensable link in a chain of evidence necessary to prove guilt, then the lie and its character as an admission against interest must be proved beyond reasonable doubt before the jury may conclude that the accused is guilty. But ordinarily a lie will form part of the body of evidence to be considered by the jury in reaching their conclusion according to the required standard of proof. The jury do not have to conclude that the accused is guilty beyond reasonable doubt in order to accept that a lie told by him exhibits a consciousness of guilt. They may accept that evidence without applying any particular standard of proof and conclude that, when they consider it together with the other evidence, the accused is or is not guilty beyond reasonable doubt.
1. See Shepherd v. The Queen (1990), 170 C.L.R. 573.
There is, however, a difficulty with the bare requirements in Reg. v. Lucas (Ruth) that a lie must be material and that it must be told from a consciousness of guilt. Again it is convenient to confine ourselves to that last requirement. A bare direction that consciousness of guilt is required does not provide sufficient guidance as to what matters indicate its presence. Unexplained, such a direction allows the jury to decide, in the light of all the evidence, that a lie was told with a consciousness of guilt and then to use that finding to corroborate some part of the evidence that led to the finding of a consciousness of guilt.
A lie can constitute an admission against interest only if it is concerned with some circumstance or event connected with the offence (i.e. it relates to a material issue) and if it was told by the accused in circumstances in which the explanation for the lie is that he knew that the truth would implicate him in the offence. Thus, in any case where a lie is relied upon to prove guilt, the lie should be precisely identified, as should the circumstances and events that are said to indicate that it constitutes an admission against interest [31] . And the jury should be instructed that they may take the lie into account only if they are satisfied, having regard to those circumstances and events, that it reveals a knowledge of the offence or some aspect of it [32] and that it was told because the accused knew that the truth of the matter about which he lied would implicate him in the offence, or, as was said in Reg. v. Lucas (Ruth), because of "a realization of guilt and a fear of the truth".
1. See M. v. R (unreported; S.A. Court of Criminal Appeal; 18 August 1993; pp. 4-5).
2. See, e.g., Credland v. Knowler (1951), 35 Cr. App. R. 48; Tripodi v. The Queen (1961), 104 C.L.R. 1, at p. 10; Reg. v. Buck (1982), 8 A. Crim. R. 208, at p. 214; Reg. v. Preval , [1984] 3 N.S.W.L.R. 647, at pp. 650-651; Reg. v. Evans (1985), 38 S.A.S.R., at pp. 348-349; People v. Showers (1968), 440 P. 2d 939, at p. 942.
Moreover, the jury should be instructed that there may be reasons for the telling of a lie apart from the realization of guilt [33] . A lie may be told out of panic, to escape an unjust accusation, to protect some other person or to avoid a consequence extraneous to the offence. The jury should be told that, if they accept that a reason of that kind is the explanation for the lie, they cannot regard it as an admission. It should be recognized that there is a risk that, if the jury are invited to consider a lie told by an accused, they will reason that he lied simply because he is guilty unless they are appropriately instructed with respect to these matters. And in many cases where there appears to be a departure from the truth it may not be possible to say that a deliberate lie has been told. The accused may be confused. He may not recollect something which, upon his memory being jolted in cross-examination, he subsequently does recollect.
1. See, e.g., Lonergan v. The Queen , [1963] Tas. S.R. 158, at p. 160; Broadhurst v. The Queen, [1964] A.C., at p. 457.
If the telling of a lie by an accused is relied upon, not merely to strengthen the prosecution case, but as corroboration of some other evidence, the untruthfulness of the relevant statement must be established otherwise than through the evidence of the witness whose evidence is to be corroborated. If a witness required to be corroborated is believed in preference to the accused and this alone establishes the lie on the part of the accused, reliance upon the lie for corroboration would amount to the witness corroborating himself. That is a contradiction in terms.
One troubling aspect of the direction given by the trial judge in this case is that it is difficult, if not impossible, to regard the appellant's evidence-in-chief as involving a deliberate lie. True it is that towards the end of his cross-examination, the appellant indicated a knowledge of some particular events in the van which had not been mentioned in his evidence-in-chief. But that seems to have been the result of the questions asked. Certainly, questions directed to beating, bashing or the striking of blows, as asked in his evidence-in-chief, do not necessarily invite the same answer as does a question about touching, as asked in the last part of his cross-examination. And the acknowledgment by the appellant in that last part of his cross-examination that he saw Wallace touch and push Williams is the only matter that, we think, is even arguably inconsistent with the appellant's account that he deliberately refrained from ascertaining what was going on and, thus, did not know who said or did what.
Even if the matter is approached on the basis that the answers given by the appellant during his cross-examination revealed that he lied in his evidence-in-chief, the lie thus revealed was not a lie with any probative value. The lie, if it was one, was not about the occurrence of the beatings and acts of indecency between Williams and other prisoners in the van, but about precisely what the appellant saw and heard of those events and his knowledge as to who participated in them and in what way. If the appellant had falsely denied that the events about which he was asked had occurred, that might have amounted to a lie about a material issue. And because the prosecution would appear to have relied upon the violent treatment of the complainant by others as the means by which the appellant procured the complainant's consent to the act of gross indecency, the appellant's knowledge of that violence may have been a material issue. But the matter was not put by the trial judge in this way. As it was put, the answers given by the appellant amounted at most to a lie about the extent of his observation or recollection and that was something that went to his credit and nothing else.
Furthermore, the reluctance of the appellant to recall any more than he was compelled to do in cross-examination occurred in a situation in which the appellant had been in custody and did not wish to inculpate others who were in custody with him — to be a "dog" in prison terminology. That was not questioned by the prosecution as a motive for withholding the truth, indeed the prosecution suggested it. Whilst in many cases it must be a question for the jury whether a lie was told because the truth was perceived to be inconsistent with innocence or for some other reason, if it was established that there was a deliberate lie in this case about a material matter (and we do not think that it was), the innocent explanation for that lie was so plausible that the lie could not have been probative of guilt. Quite apart from our concerns about the existence of the lie and its materiality, this should have prevented the trial judge from concluding that the telling of the lie was capable of amounting to corroboration of the complainant's evidence.
On a proper analysis of the evidence, the appellant denied neither the occurrence of the events in the van nor his knowledge of the nature of those events. His cross-examination was not directed to those matters. The most that was established by his cross-examination was that, contrary to his evidence-in-chief that he turned away and did not look to see what was going on, on a few occasions he did look around and, on one occasion, saw Wallace push Williams and, at or about the same time, heard thumps or slaps.
The precise details of what the appellant saw and heard and the identity of those who participated in particular events had no significance at all in relation to what was alleged against him. Because the lie went only to those matters, it was not capable of revealing anything of the events constituting or bearing on the offence. More particularly, it was not capable of revealing anything of the appellant's knowledge or state of mind with respect to those events.
In assessing the weight to be given to the appellant's testimony vis-à-vis that of Williams, the jury was, of course, fully entitled to take account of any reluctance on the part of the appellant to answer questions responsively and of any variations or perceived inconsistencies between his answers. But they should not have been invited to use the evidence of the appellant either as independent evidence of guilt or as evidence corroborating the account given by Williams. In the circumstances, there was a serious miscarriage of justice. The appeal must be allowed and the conviction quashed. The appellant has served the term of imprisonment to which he was sentenced (the non-parole period having expired at the time of the hearing of the appeal) and there is no occasion for a retrial.
McHugh J.
In my opinion, the appeal should be dismissed.
In assessing the effect of the various statements in the accused's evidence, it should not be forgotten that the learned trial judge and the jury had an opportunity, denied to an appellate court, of judging the demeanour of the accused. When that advantage is borne in mind and the evidence of the accused is read as a whole, I think that it was open to the jury to conclude, in the words of Thomas J. in the Court of Criminal Appeal, that the accused's evidence "changed from a profession of complete ignorance of any relevant detail to an admission of knowledge of a number of relevant details". I also think that it was open to the jury to conclude that the statements initially made by the accused were not simply incautious statements "which the accused was later forced to qualify" as in Reg. v. Heyde [34] .
1. (1990) 20 N.S.W.L.R. 234, at p. 236.
The jury were entitled to conclude that the accused lied about his knowledge of some of the relevant details including the statement "Whoever wants a head job, just come down here". If the jury concluded that he lied about these details, it would have been open to them to conclude that he lied because he was unable to give any innocent explanation or account for what happened after the incidents occurred and those words were said. The statement "Whoever wants a head job, just come down here" was an invitation to the accused and other prisoners to engage in sexual activity with the complainant. The jury could conclude that the only reason that the accused lied about his knowledge of that invitation was because he was conscious of the fact that he had accepted the offer. Similarly, the jury could conclude that the only reason that he had lied about his knowledge of seeing any incidents concerning the complainant was that he was conscious of the fact that he had taken advantage of what had occurred to the complainant to procure the performance of an act of oral sex on himself.
The words and incidents which the accused ultimately admitted were material facts which were part of the chain of proof against him. Standing by themselves, they did not implicate the accused even though they were alleged to be part of an escalating course of conduct which culminated in the accused accepting the invitation and procuring the complainant to perform oral sex on him. The accused could have admitted to knowledge of the incidents and the invitation without implicating himself. But once he lied about his knowledge of them, they wore a different and incriminating complexion so far as he was concerned. Of course, the case of corroboration would have been much stronger if the accused had denied, and later admitted, that the incidents occurred or the invitation had been made. If that had happened, it would have been open to the jury to hold that he lied in order to discredit the complainant's evidence because he was unable to offer any innocent account of what occurred after the statement [35] . But even though the accused did not positively deny the occurrence of the incidents or the making of the invitation, I think that the jury was entitled to conclude that he lied about his knowledge of them and that his lie or lies gave the incidents and the invitation a "suspicious or sinister character" [36] which made them corroborative of the evidence of the complainant.
1. Eade v. The King (1924), 34 C.L.R. 154, at p. 158.
2. Popovic v. Derks , [1961] V.R. 413, at p. 429.
But did the learned trial judge misdirect the jury as to the tests for determining whether the lies of the accused constituted corroboration of the complainant's evidence? The learned judge substantially directed the jury in accordance with the law as it was laid down in Reg. v. Lucas (Ruth) [37] . In Lucas, Lord Lane C.J., giving the judgment of the Court of Appeal, said that to constitute corroboration a lie must satisfy four conditions [38] : 1. It must be deliberate. 2. It must relate to a material issue. 3. The motive for the lie must be a realization of guilt and a fear of the truth. 4. The statement must be clearly shown to be a lie by admission or by evidence from a person other than the person whose evidence has to be corroborated.
1. [1981] Q.B. 720.
2. ibid., at p. 724.
The chief submission of counsel for the accused was that the accused's lies were "a species of admission by conduct" and that his Honour had failed to direct the jury that the Crown had to prove the admission beyond reasonable doubt. However, the lies were not relied on as an admission of guilt but as corroboration of the complainant's evidence. It is settled doctrine in this Court that it is "not necessary that corroborative evidence, standing alone, should establish any proposition beyond reasonable doubt" [39] .
1. Doney v. The Queen (1990), 171 C.L.R. 207, at p. 211.
Counsel for the accused also submitted that there was no evidence which was capable of constituting corroboration. In particular, he contended that the only reasonable explanation for the lies was the accused's fear of being labelled as a "dog" (i.e. an informer) and the consequences for him in prison if he was believed to be a "dog". It was clearly open to the jury to find that this was the reason for his lie or lies. But it was not the only explanation. The motivation for the lie was a matter for the jury; it was open to them to be satisfied that the motive was "a realization of guilt". In my opinion, there was a case to go to the jury on corroboration.
Throughout his argument, counsel for the accused made no criticism of Lord Lane's tests. Indeed, if I understood his argument correctly, he maintained to the end that the third of Lord Lane's tests could not be satisfied unless the jury were satisfied beyond reasonable doubt that the accused had a realization or consciousness of guilt. In these circumstances, I do not propose to examine the correctness of Lord Lane's tests. Any examination of those tests would be best done by a Bench of all justices of the Court in a case which was a suitable vehicle for examining the whole doctrine of corroboration by lies. |
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